There is no surge in importation of both passenger cars and light commercial vehicles (LCVs) into the country and the increase in the volume of importation cannot be considered “recent, sudden, sharp, and significant,” according to the Tariff Commission Staff Report.
The report is a result of the analysis conducted by TC Staff and is a crucial component in the decision-making process of the TC on the current imposition of preliminary safeguard duty on imported completely built-up (CBU) passenger cars (P70,000 per unit) and CBU LCVs (P110,000) by the country by the Department of Trade and Industry since February this year.
The imposition of the preliminary safeguard duty was a result of the initial determination by DTI that the import surge in CBU passenger cars and LCVs have caused serious injury to the domestic motor vehicle industry and to save jobs based on the petition by the Philippine Metalworkers’ Alliance (PMA).
According to the TC Staff Report, during the period of investigation (POI 2014-2020) CBU passenger cars and LCVs “were not imported into the Philippines in increased quantities, both in absolute and relative to domestic production.”
It further said that the increase in the volume of imports for both CBU passenger cars and LCVs during the POI “cannot be considered recent, sudden, sharp and of such magnitude that can be deemed significant.”
The TC staff report also analyzed the increased volume of importation relative to domestic production, and the so-called “like and competitive products” that should be imposed with the safeguard duty.
On increased volume of importation relative to domestic production, the report said that while passenger car importation by traders have been increasing an annual average growth rate o 75 percent from 2014-2017, domestic production of passenger cars also increased at an average annual growth rate of 16 percent. Share of imports to production only peaked in 2017 (52%) when traders frontloaded their importation in anticipation of the TRAIN Law.
But this was reversed beginning 2018 until 2020 with importations decreasing at average rate of negative 35 percent while domestic production decreased at an average negative rate of 19 percent. Share of imports to production also went down downhill beginning 2018 from 53 percent to 45 percent in 2020.
Similarly, the TC report showed that importation of CBU LCVs by traders was on an increasing trend from 2014 to 2017 at the same time the domestic production is growing. Imports of CBU LCVs increased at an average annual growth rate of 20 percent from 2014 to 2017, slower than the increase in domestic production with average annual growth rate of 28 percent. But TC said that beginning 2018, domestic production significantly dropped by 63 percent with the stricter implementation of Euro 4 emission standards. The domestic industry was not able to easily shift its production of motor vehicles with Euro 2 engine to Euro 4 engine. Mitsubishi also started phasing out its L300 with Euro 2 engine in 2018.
With the limitation of the domestic industry, the requirement of the market was supplied through importation. This led to an increase in share of import to production to 243 percent. This trend continued in 2019 with domestic production further declining by 37 percent as production of Isuzu’s D-max was discontinued which led to 289 percent increase in share of imports to production. In 2020, share of imports to domestic production slightly reduced to 174 percent as imports by traders decreased while domestic production recovered.
On the issue of “like and competitive products”, the DTI submission listed a total of 193 tariff lines referring to CBU passenger cars and CBU light commercial vehicles that should be subjected to the safeguard duty.
The Commission differed with the DTI stating they only identified 35 tariff lines in to be considered imported products under consideration in the investigation because there are products that are alike and some are locally produced already so there is local competition to these products.
In addition, the TC Staff Report also dismisses the PMA’s claim to legal standing to represent the automotive industry. The reported only cited the 5 foreign-owned car companies Honda Cars Philippines Inc., Nissan Philippines Inc., Mitsubishi Motors Philippines Corp., Toyota Motors Philippines Corp., and Isuzu Philippines Corp. to constitute the domestic industry.
It should be noted however these firms constituting the domestic industry do not support the petition filed by PMA on safeguard measures.
“It should be noted however these firms constituting the domestic industry do not support the petition
filed by PMA on safeguard measures,” the TC report emphasized.
PMA is a trade union federation of metal workers in the Philippines. This includes workers in the automotive, electrical and electronics, iron, steel and shipbuilding sectors. PMA has a total of 13,000 members.
PMA said it has the right to represent the industry because Sec. 6 of the Safeguard Measures Act itself provides that any person, whether natural or juridical, belonging to or representing a domestic industry may file with the DTI Secretary a verified petition requesting that action be taken to remedy the serious injury or prevent the threat thereof to the domestic industry caused by increased imports of the product under consideration.
The labor union said they have sufficiently submitted documentary evidence supporting the facts that are essential to establish: an increase in import of like or directly competitive products; the existence of serious injury or threat thereof to the domestic industry ; and the causal link between the increased imports of the product under consideration and the serious injury or threat thereof.