Philippines – Musings On Provisional Safeguard Measures.

2 September 2021
 

Even before the so-called “Ber” months came in, it appears Christmas had come early for vehicle purchasers with the recent order of the Department of Trade Industry (DTI) to recall the imposition of provisional safeguard duties. In its recently issued Department Administrative Order (DAO) 21-04 dated 6 August 2021, the DTI directed the release of all cash bonds that have been posted and amounts previously collected on shipments of motor vehicles that entered or were withdrawn from Philippine warehouses starting 1 February 2021.
 

The provisional safeguard duties amounted to P70,000 per unit for imported passenger cars, and P110,000 per unit imported for light commercial vehicles, which consumers posted by way of a cash bond on top of payment of the purchase price for the imported vehicles.
 

Central to this issue is RA 8800, the “Safeguard Measures Act”, which provides certain measures to promote the competitiveness of domestic industries and producers based on sound industrial and agricultural development policies. Under this law, the Sectary of the DTI, in the case of non-agricultural products or the Secretary of the Department of Agriculture, in the case of agricultural products, are empowered to provide safeguard measures to protect domestic industries and producers from increased imports, which caused or threaten to cause serious injury to those domestic industries and producers. The law applies to products being imported into the country irrespective of source.
 

Citing the provisions of RA 8800, the Philippine Metalworkers’ Alliance (PMA) filed a Petition with the DTI for safeguard measures on the importation of passenger cars or vehicles and light commercial vehicles from various countries. DTI issued DAO 20-11 on 29 December 2020, citing its preliminary finding of a causal link between the increased imports of the products under consideration and serious injury to the domestic industry.
 

Section 8 of RA 8800 provides basis for the issuance of a provisional general safeguard measure in critical circumstances, which would be difficult to repair, and pursuant to a preliminary determination that increased import substantially cause or threaten to substantially cause serious injury to the domestic industry. Note that RA 8800 defines “serious injury” as a significant impairment in the position of a domestic industry after evaluation by competent authorities of all relevant factors. In particular, the rate and amount of the increase in imports of the products concerned in absolute and relative terms the share of the domestic market take by increased imports, as well as change in the level of sales, production, productivity, capacity utilization, profit and losses, and employment, are taken into account.
 

The measure can be in the form of a tariff increase, either ad valorem or specific, or both, to be paid through a cash bond set at a level sufficient to redress or present injury to the domestic injury provided. The cash bond shall be deposited with a government depository bank and posted the bond.
 

RA 8800 provides that the duration of the provisional measure shall not exceed two hundred (200) days from the date of imposition during which period the requirements of RA 8800 on the initiation of a formal investigation notification and consultation shall have been met provided. Hence, the imposition took effect while the case was undergoing formal investigation by the Tariff Commission.
 

It was hoped that the provisional measures would provide relief to the domestic industry in the face of competing imports during the investigation. Eventually, however, the Tariff Commission found that locally produced passenger cars under 33 AHTN 2017 subheadings listed in the DAO and light commercial vehicles classified under AHTN 2017 subheading 8704.21.29 are directly competitive with similarly classified imported vehicles. The Tariff Commission also noted no increase in imports of such vehicles during the period of investigation. Hence, it recommended not to impose definitive general safeguard measures on the projects subject of the investigation.
 

The Safeguard Measures Act has a laudable objective of protecting our local industries from serious injury caused by increased imports. As shown in this Petition and the recent DAO from the DTI, the existence of serious injury or threat to the domestic industry, and the causal link between the increased imports and the serious injury or threat to the local industry must be duly established. After all, the imposition of safeguard measures is ultimately borne by the consumers.
 

As with any police power of government, the imposition of safeguard measures involves a delicate balancing act between protecting local industries while keeping in mind the consumers’ welfare.