Last night, the major players in the Philippine auto industry have been biting their respective fingernails over the new order from the Department of Trade and Industry (DTI) regarding the imposition of a safeguard bond on imported vehicles.
As you may have already read from our previous report, the DTI is taking action towards a petition filed by the Philippine Metalworkers Alliance (PMA) asking for safeguard measures against the dominance of fully imported automobiles versus locally assembled models. In their announcement and pursuant to Republic Act 8800 regarding “safeguard measures”, the DTI will start to require a bond on all passenger cars (PCs) and light commercial vehicles (LCVs) that are imported into the country.
The move is seen by the DTI as a means to level the playing field and protect the domestic auto assembly and manufacturing industry that has, in recent years, seen a significant stagnation versus the rise of imported models.
Today, however, the DTI has released the full Department Administrative Order (DAO) which we have published below for your perusal at your leisure. That also means the 15-day countdown for the implementation starts today.
There is one thing we'd like to point out though: it's the exempt list.
In DAO 20-11, Series of 2020 from the DTI, they made it clear that not all vehicles will be subjected to the safeguard measures. The DTI cited the ASEAN Harmonized Tariff Nomenclature using the AHTN codes; that means vehicles imported under AHTN Code 8703, AHTN Code 8704.21.19 and 8704.21.29 are covered by the safeguard measure.
Mind you, most vehicles in automobile showrooms are covered by either AHTN 8703, 8704.21.19, and 8704.21.29. These include cars, SUVs, MPVs and pick-ups. Vans that carry 10 or more persons (including driver) are also exempted because these are covered by AHTN 8702.
Vehicles like ambulances, electric motor vehicles, and special purpose vehicles are exempted. Curiously, luxury passenger cars with a USD 25,000 FOB price and luxury light commercial vehicles with a USD 28,000 FOB price (FOB meaning price at the port of origin, if we're reading correctly) are also exempted.
But the DTI also clarified that vehicles imported from certain “developing countries” that they have listed in Annex A and B will not be subjected to the safeguard measure. That means PCs and LCVs from these countries might not be charged PhP 70k to PhP 110k, respectively.
Looking at the list, it is clear that several major automobile producing countries have been omitted. Thailand is perhaps the most major one, as their vehicles constitute a bulk of our domestic sales. Japan is also excluded from the list, meaning Japanese made vehicles are also lumped together with Thailand. The United States of America, the United Kingdom, Germany, France, Spain, and many other countries are not in Annex A or Annex B.
If we're understanding the order correctly, any vehicle imported from those countries not on the list may not be affected by the safeguard measures under DAO 20-11. There are some curiosities about DAO 20-11 though. For instance other ASEAN nations such as Indonesia and Malaysia are on the list, meaning these may be exempted from the safeguard measure. That means a Thai-made pick-up (i.e. Hilux, Navara, etc) will have a PhP 110,000 bond levied upon it, while an Indonesian made LCV classified under AHTN 8704.21.19 or 8704.21.29 (LCV below 5 tons, like a pick-up) might be exempted from the safeguard measure.
But perhaps the most significant part is the exemption of the People's Republic of China and South Korea (as Korea, Rep. in the DAO), albeit partially. In terms of passenger cars, each PRC or ROK made vehicle may have PhP 70,000 levied upon it because PRC is omitted from Annex A. However, the PRC and ROK are included in the list of exempt markets in Annex B for light commercial vehicles. That means vehicles classified under AHTN 8704.21.19 or 8704.21.29 from mainland China and South Korea may not be affected by a PhP 110,000 bond, and there are very few of those kinds of vehicles.
Indonesian vehicles may also be partially exempt as Indonesia isn't in Annex A, but is included in Annex B. That means Indonesian-made LCVs classified under AHTN 8704.21.19 or 8704.21.29 and are exempted, while passenger cars are not. Interestingly, North Korean (Korea, Dem. Rep.) made vehicles are exempted too... not that we have any in our market.
If you noticed we are still unclear as to whether vehicles from these exempted countries are in fact, exempted from the safeguard measure. The reason is that there are some matters that need further clarification. For instance, the DAO says that imports originating from developing countries listed in Annexes “A and “B” covered by Rule 8.8 of the IRR of RA 8800 shall not be subject to the provisional safeguard measure.
We've been searching for a copy of the IRR of RA 8800 to verify what exactly Rule 8.8 is, but it seems even the Tariff Commission's own website is showing 404 Not Found, but the DTI site has it. Rule 8.8 says: The provisional safeguard measure shall not be applied to a product originating from a developing country if its share to total Philippine imports of the said product is less than three percent (3%): Provided, however, that developing countries with less than three percent (3%) share collectively account for not more than nine percent (9%) of the total Philippine imports of the product concerned.
That part may need further legal clarification. For now, you can check out the DAO for yourself below.