DTI upholds TC recommendation to dismiss SG bond

Yesterday it was reported that Department of Trade and Industry (DTI) Secretary Ramon Lopez signed an order before the weekend that will finally put a stop to the provisional safeguard measure regarding imported vehicles. Now we have a copy of of that order.

DTI Department Administrative Order 21-04, which has been signed and approved by Trade Secretary Lopez, effectively junks the provisional safeguard duties that the government has imposed upon passenger cars and light commercial vehicles classified under AHTN codes 87.03 and 87.04.

If you recall, the DTI -pursuant to Republic Act 8800- had acted upon a complaint by a group known as the Philippine Metalworkers Alliance (PMA) which was claiming there is significant injury being caused by vehicle imports on domestic-made models. But the result of the investigation of the Tariff Commission over data from the last couple of years showed that models directly competing against locally assembled vehicles did not exhibit an unusual increase in relative or absolute terms. As such, the TC recommended the removal of the SG bond.

DTI DAO 21-04 also affirmed that the cash bonds will be returned to the importers immediately. The Bureau of Customs (BOC) has been collecting those cash bonds since February 1, 2021 which was the effectivity date of the Customs Memorandum Order (CMO). Now it is the BOC's turn again to issue another CMO to make the cessation of the SG bond effective.

The refunding process, however, will be the complication over the safeguard issue as the different brands opted to collect the SG bond in different ways. If the transaction is treated as a separate one (e.g. Toyota, Isuzu, Honda, Suzuki, etc.), then the refund should be relatively straightforward. If the SG is treated as part of the vehicle's MSRP/SRP, the importers are looking at a rebate scheme. The process can be quite complicated if the price was added to the amount to be financed; that would entail certain fees or negotiations with the financing bank.

We'll let you know more about how this could play out, depending on the brand and/or transaction.

Below is the DAO from the DTI in full.

DTI DAO image

DTI DAO image