Plug the loopholes of the Safeguard Measures Act

Over the past three years, there were three domestic industries that sought protection under an old law, Republic Act No. 8800 or the Safeguard Measures Act. The primary objective of that law is to save the economic viability of a domestic industry as well as save local jobs. The process s litigious, technical and involves the analysis and evaluation of economic data on supply and demand of the products subject matter of the investigation over the last 5 ears, as well as the forecast for the next 3 years.

Under the law, safeguard measures are in the form of customs duties which are imposed on imports as a deterrent to   serious injury, or a threat of an injury tothe viability of a domestic industry or local producers.

As an advocate of reasonable prices of consumer goods, I participated in the safeguard measures proceeding against the cement industry because cement is a prime commodity under the Price Act. After cement, ceramic floor and wall tiles and more recently,vehicles, were levied safeguard duties.

In the case of cement, I opposed the imposition of safeguard duty and took the position that the safeguard duty is a form of mandated price increase since the duty is simply passed on by the importers to theconsumers. In order to prevent such an action, I proposed that a suggested retail price be set for all cement, whether imported or locally manufactured.

Both proposals were ignored. When the cement importers sought review of the safeguard duty with the Court of Tax Appeals, the importers,among others, claimed that all safeguard duties paid on imported cement be refunded to them. As of this writing, the safeguard duty could be more than a billion pesos.

But why refundthe safeguard duty to the importers?

Shouldn’t the refund be paid back to the consumers who paid the safeguard duty as part of the purchase price?

I intervened in the Court of Tax Appeals on the sole issue thatany refund belongs to the consumers. The appeal is pending in the Court of Tax Appeals.

More recently, imported vehicles were imposed the safeguard measure of P70,000 per unit for passenger cars and P110,000 per unit for light commercial vehicles.

I want to be clear that I am not engaging in the technical and economic issues of injury or threat of injury to the domestic car industry. My primary concern is consumer protection when the consumers exercise their choice in buying a vehicle.

It is good to buy local productssince consumers can help save local jobs. On the other hand, the consumers who choose to buy imported vehicles also deserve to be protected since it is fundamental right of consumers to choose and decide which kind of vehicle to buy.

 In this regard, we are urging traders, importers and manufacturers doubling as importers, to absorb for their own account the safeguard duty which should be billed as a separate item from the price of the imported vehicle.

Likewise, we are advising consumers to refuse to pay the safeguard duty   that the car dealer may pass on as part of the purchase price.

Can this be done? It should be done. By doing so, the regulators can better monitor the effectiveness of the safeguard duty as a deterrent to imports and plug the loophole.

This is the first loophole of the Safeguard MeasuresAct. If necessary, the law can be amended to provide that at all times the safeguard duty should not be tacked on to the price of the imported goods, otherwise the objective of the law is conveniently circumvented to the prejudice of the consumers.

The second loophole that should be plugged in the Safeguard Measures Act is to disqualify domestic industries from seeking protection under the law when they are not 100 percent owned by Filipinos. There is a legal principle that “we can pierce the veil of the corporate existence when the objective is to promote public interest.”

I learned that in the case of the vehicles, the petitioners are local spare parts manufacturers. I am not aware of their equity ownership though it may not be far-fetched that foreign equity ownership exists in the matter of the supply of raw materials for spare parts manufacturing, as well as in the transfer of technical knowledge and continuing capacity buildup of workers.

In the case of cement and ceramic tiles, these industries are glaringly with foreign equity ownership. It looks unseemly that the foreign equity owners should benefit from the protection of the Safeguard Measures Act which is reserved for the Filipinos.

The third loophole in the law is the eligibility of domestic  manufacturers who are likewise importers of the same product, to initiate safeguard measure investigation against   pure importers and traders.

This is outright anomalous and should be immediately stopped by the implementing agencies.

Atty. Vic Dimagiba is President of Laban Konsyumer Inc.

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