The Bureau of Customs (BOC) has ordered the collection of safeguard duties in the form of cash bond on imported completely built up (CBU) passenger cars and light commercial vehicles (LCVs) effective February 1 this year.
Customs Memorandum Order (CMO) No. 6-2021 signed by BOC Commissioner Rey Leonardo B. Guerrero took effect upon signing on February 1, 2021 and will last for 200 days from issuance. All BOI districts and sub-port collectors were directed to impose the CMO.
The CMO is pursuant to the order from the Department of Trade and Industry for the imposition of provisional safeguard duties of P70,000 per unit of imported CBU passenger cars and P110,000 per unit of imported CBU LCVs.
Finance Secretary Carlos G. Dominguez instructed BOC on the provisions that will govern the computation of the taxes levied on the imported motor vehicles that are subject to safeguard duties.
Dominguez said that the provisional safeguard duty imposed and collected shall not form part of the landed cost that is used as basis for the value-added tax to be paid upon importation.
For purposes of computing excise tax, the finance chief said that the provisional safeguard duty shall be deducted from the net importer’s selling price and suggested retail price.
It could be recalled that DTI Secretary Ramon M. Lopez issued Administrative Order (AO) No. 20-11 on December 29, 2020 slapping provisional safeguard duty of P70,000 per unit of imported CBU passenger cars under AHTN Code 8703 and P110,000 per unit for imported CBU under AHTN Codes 8704.21.19 and 8704.21.29.
Any four-wheeled passenger cars designed to transport less than 10 persons and not primarily to transport goods will be subject to the provisional duty of P70,000. Imported cars that are completely knocked down, semi-knocked down, used, with electric motors, and those designed for a special purpose such as ambulances and hearses are excluded from the coverage of the provisional duty. Also excluded from the provisional duty are luxury cars that have a freight on board (FOB) value of $25,000 or higher.
For LCVs, these are four-wheeled drives designed to carry both passenger and cargo. Imported LCVs that are completely knocked down or semi—knocked down, used, with electronic motors, and those designed for a special purpose such as ambulances, hearses, are excluded from the coverage of the provisional duty. Also exempted are LCVs that have FOB value of $28,000 or higher.
The right to impose the punitive tariff and to exercise the trade remedy is provided under Section 8 of Republic Act No. 8800, otherwise known as the “Safeguard Measure Act.”
The decision came after DTI’s determination of an existence of causal link between the increased imports of these vehicles from 2014-2019 caused serious injury to the domestic industry. The objective of the AO is to protect the declining motor vehicle manufacturing sector and save jobs.
The safeguard measure is expected to level the playing field to enable the domestic motor vehicle assemblers to compete with the imported vehicles and pave the way for the expansion of the country’s car manufacturing and employ more Filipinos in their factories.
For the duration of the provisional safeguard measure, the Tariff Commission will conduct a formal investigation to determine if there indeed is a causal link between surge in importation and serious injury to the domestic industry. Once the TC comes up with a positive determination, the safeguard measure becomes permanent and could be implemented for more than 3 years.
Most affected sources of imported passenger cars and LCVs are Thailand, Indonesia and South Korea.