PH seriously considering safeguard duty on imported cars

Thailand, Indonesia, Korea major sources of CBUs

The Philippine government is seriously evaluating the possibility of slapping safeguard duty on automobile imports in light of the surge in the importation of completely built-up (CBU) cars, which have caused injury to the domestic industry, and to protect of what is left of the local car manufacturing in the country.

This moved stemmed from a petition filed in August this year by the Philippine Metal Workers Alliance, a broad alliance of automotive, iron and steel, and electronics and electrical sectors, for the Department of Trade and Industry (DTI) to impose safeguard measure on imported brand new cars.

In its filing, the group made assertions of the causal link between the influx of CBU importation and the decline in the number of car models assembled in the Philippines.

The DTI is already set to convene the technical working group (TWG) on trade remedies to look at PMA’s and notify all interested parties about the preliminary investigation for them to submit evidences and answers to questions.

The TWG is expected to complete its preliminary investigation within three months and submit its recommendation to the DTI secretary. Once a prima facie evidence of surge and injury has been established, the DTI secretary will impose a preliminary safeguard duty and transmit its positive findings to the Tariff Commission for the imposition of permanent safeguard measure.

Data showed that the volume of imported CBU cars grew from only 153,000 units in 2014 to 270,000 units in 2018. Total importation for the period 2014-2018 reached more than a million units.

These imported brand new CBU packs are mostly under HS Code 8703, or a tariff line for passenger cars. Major sources of imported CBUs are Thailand, Indonesia, Korea, Japan, India, US, China, Germany, Belgium, Malaysia, among others.

Thailand exported more than 428,000 units followed by Indonesia with 312,000 units and Korea with more than 100,000 units. Together these three countries account for more than 80 percent of

total importation within the five-year period covered in the DTI safeguard measure investigation.

Japanese car manufacturers with production hubs in Thailand and Indonesia are seen to be hit the hardest. Toyota Motor Philippines, the Philippines largest car company, imports Camry, Corolla, Yaris, Hi-Lux, and Wigo from Thailand. It also imports Fortuner, Avanza and Rush. From Japan, TMP imports LC200, Prado FJ, Alphard, Prius, Prius C, 86, Supra, Coaster, RAV4, All Lexus.

Meantime, TMP assembles only two models in the country – Vios and Innova.

Mitsubishi Motors Philippines, the country’s second largest car company, imports Montero and Strada from Thailand and Expander from Indonesia. It imports Pajero from Japan. Mitsubishi assembles two models here – Mirage and L300.

Nissan Philippines imports three CBU car models from Thailand including Sylphy, Terra, and Navara. It imports Gtr, Juke, Xtrail, Patrol and Urvan from Japan. Nissan assembles on CKD basis its Almera model at its Laguna plant.

Hyundai Asia Resources Inc. and Kia Philippines imports most of its CBU vehicles from Korea.

CBU car imports from ASEAN are also at zero duty, while Korea is still at 5 percent. Under the PhilippinesJapan Economic Partnership Agreement, CBU car imports from Japan with more than 3-liter engine displacement and vehicles with 10 seats and above are already at zero duty. But other vehicles are slapped with 20 percent duty.

A study by the BOI showed that in 2013, the industry estimates that it has directly employed 8,000 workers in automotive manufacturing, whereas approximately 68,000 jobs have been generated in auto parts manufacturing. An estimated 340,000 are employed in autos-supporting industries.

Because of the surge in CBU car imports, the Philippines lost its car assembly industry and closure of automotive parts manufacturers and pose further threat to what is left of the local auto manufacturing. So far, there are only a handful of car models being produced in the country, on CKD basis.

A 2018 Board of Investments study showed that in 2018, there were a total of 15 vehicle manufacturers with operating plants in the country, seven of which are equipped with electrodeposition painting systems. There are a total of 272 parts and components manufacturers also.

The industry has an annual capacity of 250,000 units all vehicle types included. In 2011, the auto industry generated prodcuition valued at ₱368 billion equal to 4 percent in GDP.

The move to protect the local car manufacturing industry came on the heels of the full implementation of the Comprehensive Automotive Resurgence Strategy (CARS) program.

When asked about this move, DTI Undersecretary Ceferino S. Rodolfo commented that the Philippines has been very prudent in its right to exercise the trade remedies allowed by the WTO to protect its domestic industries.

So far, the Philippines has imposed only two safeguard measures and anti-dumping cases each.

Comparatively, for the period 2010-2017 Indonesia and Thailand have already imposed 28 each anti-dumping, Malaysia has 23, Vietnam 7. On safeguard measure, Indonesia has imposed 14, Thailand and Vietnam with 4 each and Malaysia 3.

The move to protect the local car manufacturing industry came on the heels of the full implementation of the Comprehensive Automotive Resurgence Strategy (CARS) program.

Notably, this is the first time in the Philippines that a labor union initiated a safeguard measure petition. But, it could be recalled that in the WTO US-China Dispute Settlement case 399 on tires, the petition to file safeguard duty came from the steel, paper and forestry, rubber, manufacturing, energy, allied energy and service workers’ international union. This labor union filed their petition before the US International Trade Commission for trade remedy before the WTO.