Car firms ask buyers ‘security deposit’ for safeguard duty

Published March 1, 2021, 7:00 AM

by Bernie Cahiles-Magkilat

Car companies are requiring starting today, March 1,“security deposit” from buyers of imported passengers and light commercial vehicles (LCVs) that are covered by the safeguard duties imposed by the Department of Trade and Industry (DTI).

In respective public advisories, Toyota Motor Philippines (TMP) and Isuzu Philippines Corp. said the security deposit would be higher than the safeguard duty slapped by DTI as it will include the value added tax. DTI Administrative Order No. 20-11 slapped a provisional safeguard duty of P70,000 per unit of passenger car and P110,000 per LCV on hopes to protect the declining domestic motor vehicle industry and save auto workers jobs.  

TMP said the security deposit for passenger car models 86, Yaris, Wigo, Rav4, Rush, Avanza, Cary G, FJ Cruiser, Corolla Altis, Corolla Cross and Fortuner V and G is P78,400 per unit while LCV models Hilux, Hilux Cab and Chassis, and Hiace Cargo will require P123,200, inclusive of VAT.

MB file photo

The security deposit will be collected simultaneous with the making of the down payment. The amount will be held in trust for the customer and an acknowledgment receipt will be issued, the company said. But, TMP said the provisional safeguard duty will not increase the current suggested retail prices of the affected vehicles.

TMP said the “security deposit” will be returned to the customer in case the Tariff Commission decides that there is no basis to impose the safeguard duties.  The TC is expected to come up with its decision within 120 days from the effectivity of the DAO. The Bureau of Customs has already started collecting the provisional safeguard duty last February 1, 2021. 

In the event that the DTI will impose a definitive duty rate, the deposit will be treated as additional payment for the vehicle. Otherwise, the dealer will be refunding the deposit to the customer.

Likewise, Isuzu Philippines said it will also require a security deposit of P78,400 for Isuzu Mud-X and P123,200 for Isuzu D-Max, inclusive of VAT. Nissan Philippines said they will also come up with a public advisory soon.   

A government official privy to the safeguard measure said they don’t see any legal impediment to the security deposit imposed by car firms, which he described as more transparent because if TC recommends to dismiss the case, buyers will get the bonds or the security deposit they posted. “The problem is if the security deposit is not returned if the case is dismissed,” he said.

He even called the imposition of security deposit creative. The source further said that just because there was no prior practice for  security deposit by companies in other industries does not make it illegal. He surmised that other industries with safeguard measures may have just directly passed on to the consumers the provisional duties.

He expressed hope the safeguard measure will encourage buyers to shift to locally assembled/manufactured vehicles.

Meanwhile, consumer advocate Victorio Mario Dimagiba said that safeguard duty is an indirect tax and the amount is tacked on to the purchase price of the vehicle and ultimately pass on to the buyer.

“This is not reasonable and fair application of the safeguard measure law vis-a-vis consumer right of choice. The consumer is penalized with a higher purchase price of an imported vehicle,” said the president of Laban Konsyumer Inc.

He said that while it is good to buy local products since consumers can help save local jobs, consumers who choose to buy imported vehicles also deserve to be protected since it is a fundamental right of consumers to choose and decide what kind of vehicle to buy.

“It is highly doubtful that traders, importers and manufacturers doubling as importers, will absorb for their own account the safeguard duty which is billed as a separate item from the price of the imported vehicle,” he noted.

In addition, Dimagiba questioned how can regulators monitor the effectiveness of the safeguard duty as a deterrent to imports under the present situation.

“Unless the car dealers absorb the safeguard duty or the law be amended to provide that at all times the safeguard duty should not be tacked on to the price of imported goods, the safeguard measure law is conveniently circumvented to the prejudice of the consumers,” he pointed out.