It seems that there's no stopping the safeguard tariffs on imported vehicles. First, it was the Department of Trade and Industry (DTI) that mandated it, and now, the Bureau of Customs (BoC) got the memo too.

READ: Customs memo on DTI

Known as Customs Memorandum Order (CMO) 6-2021, it is titled, “Order from The Department Of Trade and Industry for the Imposition of Provisional Safeguard Duties on Imported Vehicles in the form of Cash Bond”. That means the BoC will also impose the additional duties alongside the DTI. Also, the imposition of the tariff shall be recognized by the issuance of the said CMO. Also, the enforcement of this levy will last for 200 days upon the CMO's issuance (February 1, 2021).

READ: Customs memo on DTI

There is one rather interesting rule. Provision C of CMO 6-2021 states, “that for the purposes of computing excise tax, the provisional safeguard duty shall be deducted from the net importer's selling price and suggested retail price”. On top of that, Provision B says the cash bond is not part of the vehicle's landed cost to compute for its value-added tax (VAT).

READ: Customs memo on DTI

To simplify, importers must calculate for the excise tax but they cannot add the safeguard duty when paying for the taxes. In essence, the government wants the importers to absorb the duty and not pass it off as a taxable amount. Either way, importers and distributors can't escape the safeguard duty. They can spread out its cost by other means, but not declare it as the tax expense.

READ: Customs memo on DTI

Vehicles that are subject to the tariff are classified under AHTN codes 8703, 8704.21.19, and 8704.21.29. That said, almost everything you see in showrooms is covered by those AHTN codes, but not everything gets slapped by the safeguard duty. 10-seater vans, EVs, and special service vehicles are exempt from the bond, and so are luxury passenger cars and LCVs (light commercial vehicles) with FOB prices above $ 25,000 and $28,000, respectively. Vehicles imported from select countries are also exempted.

Of course, it doesn't mean that the full PHP 70,000 or PHP 110,000 bond will automatically be added to the SRPs of all affected imported vehicles. But what can our local importers and distributors to offset some of the cost? One option is to add a little more to the list price to maintain their profits. Another way is retaining the SRP at the expense of slimmer profit margins in the hopes they can make up for it in volume.

Either way, vehicle prices are expected to go up this year, and it's the consumer and private entities that will bear the brunt of the cost.