EU firms seek duty-free PH auto importation in proposed FTA

European businesses in the country would like the Philippine government to eliminate import duties for European automotive brands as part of the measures for adoption in the proposed EU-Philippine Free Trade Agreement (EU-PH FTA).

This forms part of various recommendations in the Automotive Advocacy Paper, one of the 11 Advocacy Papers that were handed over by ECCP Executive Director Florian Gottein to the government during the ECCP-Philippine Business Dialogue on Thursday, May 25. Government officials, who also delivered messages at the dialogue include Justice Lucas P. Bersamin, Executive Secretary Office of the President, Antonio Ernesto F. Lagdameo, Jr. Special Assistant to the President Office of
the President; and Benjamin Diokno, Secretary Department of Finance.

Under the Automotive Advocacy Paper, the ECCP noted that the ECCP strongly supports adopting measures in the EU-PH FTA that eliminate import duties for automotive vehicles and automotive parts from the EU with immediate effect upon ratification.

While there is a positive trend toward market increase according to industry players, European automobile brands tend to lose out in the Philippine market in terms of price competitiveness because their goods are generally in the high price-tiered segment.

“Adopting these measures will ensure that European automobile brands are more competitive in the local market,” the advocacy paper stated.
Since EU and Philippines have no FTA, imported EU cars are slapped with as much as 30 percent duty, including electric vehicles.
Furthermore, European vehicle companies in the Philippines are subject to several taxes and duties, including customs, value-added tax, and excise tax, which raises the cost of the vehicles by nearly 102 percent of their retail prices.

In contrast, the ECCP said their Asian counterparts benefit from more competitive and preferential tariff rates as a result of existing bilateral and multilateral trade agreements, particularly the country’s FTAs with Japan and South Korea through the Association of Southeast Asian Nations (ASEAN)-South Korea FTA as well as the Philippine-Japan Economic Partnership Agreement.

The Philippines, with only 10 FTAs, has one of the lowest numbers of trade agreements among the ASEAN-6 countries: Singapore [27], Malaysia [17], Thailand [15], Indonesia [15], and Vietnam [15].

“The ECCP and its Automotive Committee believe that an FTA between the EU and the Philippines will level the playing field for European firms to prosper in the country and offer consumers wider options that can compete in terms of high-quality sustainability and safety standards. With this in mind, we support the government’s renewed interest to resume talks on the Philippine FTA with the trade bloc,” the ECCP added.

Following the issuance of EO No. 12, which grants zero tariff on imported pure EVs from FTA countries only, the ECCP reiterates the call for the extended scrapping of EV tariffs coming from all countries over at least eight years allow both EVs and charging station infrastructure to be aligned.

Accordingly for hybrid vehicles, the tariff duties should be 15 percent for at least four years since the current excise tax for this type is half of the tax for petrol vehicles.
Aside from the extension of EV tariff exemptions, the ECCP automotive committee also calls for the inclusion of two wheelers–as the primary choice of transport for ordinary Filipinos, and more than four-wheelers in the zero duties scheme. The health and environmental gains of switching to EVs in the Philippines, apart from the economic benefits of the law, are more crucial than ever.

Moreover, the ECCP paper urged the government to further promote ease of doing business and streamline customs processes for automotive parts and products.
The advocacy paper also highlighted congestion of ports as one of the most pressing issues that the Philippines face over the years. It cited a report from the International Monetary Fund, which stated that not all congestion appears to be caused by rising demand.

A significant number of ports, notably since mid-2021, have longer wait times despite handling less cargo than pre-pandemic. In the Philippines, particularly in the automotive sector, port congestion can be addressed by streamlining processes for the release of imported vehicle parts and products.