Philippines slaps new taxes on car imports to help local players

The Philippines is slapping new taxes on vehicle imports after finding enough evidence that cheap cars abroad caused "serious injury" to the local industry.

The Department of Trade and Industry (DTI) decided to impose provisional safeguard duties in the form of a cash bond amounting to P70,000 per unit of imported passenger cars and P110,000 per unit for light commercial vehicles.

The taxes were a result of a petition in 2019 by the Philippine Metalworkers Alliance, a national union of automotive, iron and steel, electronics, and electrical workers.

Trade Secretary Ramon Lopez said the move would "provide a breathing space" for the local industry, which has struggled to compete with cheap car imports.

"The Philippines has one of the most open markets relative to our ASEAN (Association of Southeast Asian Nations) neighbors. While we generally do not restrict products coming into the market, we also need to ensure the level playing field for our local industry," Lopez said. 

DTI data showed that passenger car imports have increased by 35% from 2014 to 2018, while the share of imports relative to production showed that imports exceeded domestic production from 295% in 2014 to 349% in 2018.

The market share of domestic passenger cars' sales contracted to 22% to 25%, while imports captured more than 70% of the market. 

Data also showed that the domestic industry lost sales even as the market grew.

"Safeguards are imposed to protect local manufacturers and producers and to prevent other companies from leaving the country. If we recall, the discontinuation of the production of Isuzu D-Max in July 2019 and the assembly plant closure of Honda Motors Philippines in the 1st quarter of 2020 affected local jobs and the Philippine economy," Lopez said.

"[Safeguards] may also attract vehicle manufacturers to operate in the country and create more jobs," he added.

The provisional safeguard measures take effect for 200 days from the issuance of an order by the customs commissioner and while the case is under formal investigation by the Tariff Commission. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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