Car companies are requiring starting today, March 1,“security deposit” from buyers of imported passengers and light commercial vehicles (LCVs) that are covered by the safeguard duties imposed by the Department of Trade and Industry (DTI).

In respective public advisories, Toyota Motor Philippines (TMP) and Isuzu Philippines Corp. said the security deposit would be higher than the safeguard duty slapped by DTI as it will include the value added tax. DTI Administrative Order No. 20-11 slapped a provisional safeguard duty of P70,000 per unit of passenger car and P110,000 per LCV on hopes to protect the declining domestic motor vehicle industry and save auto workers jobs.  

TMP said the security deposit for passenger car models 86, Yaris, Wigo, Rav4, Rush, Avanza, Cary G, FJ Cruiser, Corolla Altis, Corolla Cross and Fortuner V and G is P78,400 per unit while LCV models Hilux, Hilux Cab and Chassis, and Hiace Cargo will require P123,200, inclusive of VAT.

MB file photo

The security deposit will be collected simultaneous with the making of the down payment. The amount will be held in trust for the customer and an acknowledgment receipt will be issued, the company said. But, TMP said the provisional safeguard duty will not increase the current suggested retail prices of the affected vehicles.

TMP said the “security deposit” will be returned to the customer in case the Tariff Commission decides that there is no basis to impose the safeguard duties.  The TC is expected to come up with its decision within 120 days from the effectivity of the DAO. The Bureau of Customs has already started collecting the provisional safeguard duty last February 1, 2021. 

In the event that the DTI will impose a definitive duty rate, the deposit will be treated as additional payment for the vehicle. Otherwise, the dealer will be refunding the deposit to the customer.

Likewise, Isuzu Philippines said it will also require a security deposit of P78,400 for Isuzu Mud-X and P123,200 for Isuzu D-Max, inclusive of VAT. Nissan Philippines said they will also come up with a public advisory soon.   

A government official privy to the safeguard measure said they don’t see any legal impediment to the security deposit imposed by car firms, which he described as more transparent because if TC recommends to dismiss the case, buyers will get the bonds or the security deposit they posted. “The problem is if the security deposit is not returned if the case is dismissed,” he said.

He even called the imposition of security deposit creative. The source further said that just because there was no prior practice for  security deposit by companies in other industries does not make it illegal. He surmised that other industries with safeguard measures may have just directly passed on to the consumers the provisional duties.

He expressed hope the safeguard measure will encourage buyers to shift to locally assembled/manufactured vehicles.

Meanwhile, consumer advocate Victorio Mario Dimagiba said that safeguard duty is an indirect tax and the amount is tacked on to the purchase price of the vehicle and ultimately pass on to the buyer.

“This is not reasonable and fair application of the safeguard measure law vis-a-vis consumer right of choice. The consumer is penalized with a higher purchase price of an imported vehicle,” said the president of Laban Konsyumer Inc.

He said that while it is good to buy local products since consumers can help save local jobs, consumers who choose to buy imported vehicles also deserve to be protected since it is a fundamental right of consumers to choose and decide what kind of vehicle to buy.

“It is highly doubtful that traders, importers and manufacturers doubling as importers, will absorb for their own account the safeguard duty which is billed as a separate item from the price of the imported vehicle,” he noted.

In addition, Dimagiba questioned how can regulators monitor the effectiveness of the safeguard duty as a deterrent to imports under the present situation.

“Unless the car dealers absorb the safeguard duty or the law be amended to provide that at all times the safeguard duty should not be tacked on to the price of imported goods, the safeguard measure law is conveniently circumvented to the prejudice of the consumers,” he pointed out.

PCC defends DTI’s safeguard measures, but …

By Bernie Cahiles-Magkilat

The Philippine Competition Commission (PCC) has defended the Department of Trade and Industry’s imposition of safeguard measures and non-tariff barriers (NTBs) on certain imports to protect domestic industries, but the country’s anti-trust watchdog also equally stressed that such legitimate measures can be challenged if the injury caused is born out by inherent inefficiencies of processes that incumbents have gotten used to. 

PCC Commissioners led by Chairman Arsenio Balisacan, and Commissioners Johannes Bernabe and Emerson B. Aquende made this point during a press conference at the 4th Manila Forum on Competition in Developing Countries amid increasing number of safeguards and non-tariff measures being imposed by Asian countries, especially during the pandemic year. 

Philippine Competition Commission (PCC) Chairman Arsenio M. Balisacan

“We have to make a distinction between what is allowed under the law under given specific conditions and those which are lobbied for by business participants sometimes simply to protect their market share and their revenue stream,” said Bernabe.

Bernabe explained that if the conditions are such that there is really an increase or surge in imports that it is harming a domestic industry and that can establish a causality between the increase and injury suffered by domestic industry participants then the imposition of safeguard measure is justified. 

He said this as he called for caution in assessing whether or not the injury is really suffered because of the surge in imports and there is really causality.  “Sometimes the injury suffered is really borne out by inefficiencies inherent in the processes that domestic players have gotten used,” he observed. In that sense, he said, “Those safeguard measures can be rightfully challenged as impeding competition and is in fact not based on the intent of the law as well as international treaties. In this kind of instance, I think there is valid reason to challenge them, those safeguard measures may not be rightful.”  

“Technical barriers to trade, sanitary and phyto-sanitary measures are all in place for legitimate policy objectives, but the question is when those measures are used not to attain policy objectives but simply to protect existing incumbents then that is something contrary to competition principles and PCC, on all occasions advocated for which preserve competition in the market than simply protecting domestic incumbents,” he said.

Commissioner Aquende also stressed that safeguard and non-tariff measures are meant to protect legitimate economic interests of a country and in accordance with regulations, which may be pursued. 

But, he also emphasized, that if it is only for purposes of protecting incumbents then it does not match or align with competition law because the essence of the competition law does not distinguish domestic or foreign market participants. “That is going to the wrong direction to think that we should favor Philippine firms for the sake of favoring them. That does not bode well for competition law and it has been proven by experience that it does not result in consumer welfare, but benefit only a few, not spread, or not benefit the greater majority of Filipinos,” he pointed out.

Apart from non-tariff measures, Bernabe also noted of the increasing level of subsidization that has started to occur in the last 12 months in the region. While these are allowed in this pandemic period in the ASEAN framework on trade as well as the Regional Comprehensive Economic Partnership to allow subsidies in favor of local supplies to help weather the recession and economic difficulties, Bernabe urged the need to look into the timeframe of subsidies.

He said that if these subsidies that are meant to champion domestic industries would still continue in three to five years that could be detrimental to foreign competition. He explained that imposition of subsidies on a longer basis could mean “uneven playing field not only on the entry of subsidized competition harming domestic players but a situation where we cannot penetrate the markets of other trading countries because the market participants in those host countries are so entrenched that it becomes so difficult for us to compete on an equal playing field with those subsidized entities.”

Thus, he said, the PCC has advocated that whatever economic stimulus packages are passed it should ensure that subsidies that are being put forward are criteria-based and time-bound and to the extent possible take into account competition disciplines.

At the forum, Asian Development Bank Institute (ADB) Chief Executive Director Tetsushi presented the increasing number of safeguard measures, indicating a general tendency in Southeast Asia towards protectionism. As of 2020, non-tariff measures imposed on Asia have reached 12,000 from only 10,000 in 2015 and 6,000 in 2010. 

Although in some case these safeguards are accompanied by trade facilitation measures, he said that in general the number of safeguards exceeds the trade facilitation measures. There is general tendency is southeast Asia towards protectionism, he said.

Meantime, PCC Chairman Balisacan noted that compared to its neighbors, the Philippines over the last three decades has been  faster in liberalizing and integrating with the region.

The problem in the Philippines, he said, is not so much in tradable sectors of the economy but in the services sector or utilities where these are not governed so much by world prices but by domestic supply and demand. He cited competition issues in the telco, logistics, water that demand a lot of attention from Philippine leaders.


Source: Manila Bulletin (https://mb.com.ph/2021/03/01/car-firms-ask-buyers-security-deposit-for-safeguard-duty/?utm_source=rss&utm_medium=rss&utm_campaign=car-firms-ask-buyers-security-deposit-for-safeguard-duty)