DTI May Impose Safeguard Measures Against CBU Vehicles

The sudden announcement of Honda Cars Philippines’s decision to shutter its local assembly effective March of this year underscores the frailty of the Philippine automotive industry; so much so that a worker’s group, made of employees from various automakers, has petitioned the Department of Trade and Industry (DTI) to reconsider the country’s position under the ASEAN Free Trade Agreement or AFTA.

The Philippine Metalworkers’ Alliance or PMA, which has members encompassing Toyota, Mitsubishi, and Isuzu among others (Honda isn’t included) is seeking protection under Republic Act 8800 or the “Safeguard Measures Act.”

According to the law:

The State shall promote the competitiveness of domestic industries and producer based on sound industrial and agricultural development policies, and technical resources. In pursuit of this goal and in the public interest the State shall 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.

As a duly recognized entity with the Department of Labor and Employment (DOLE), the PMA is seeking remedy under the guise that local automotive assembly is under threat from increased dependency by carmakers towards Completely Built-up Units (CBU) from ASEAN and elsewhere.

Data gathered by the DTI revealed that over the course of the last five years, vehicle imports have risen 35 percent from 153,531 units to 207,248 units, while local vehicle production fell to its lowest point in five years—some 33 percent lower.

Digging into the details, the top five source countries for the Philippine auto market are Thailand, Indonesia, South Korea, Japan, and India from 2014-2018. Even more interesting is that since the implementation of a free trade agreement with China, imports from there rose from 800 units annually to more than 6,000 in 2018.

By 2019, Indonesia climbed up as the Philippines’s leading source of imported vehicles (57 percent) followed by Thailand (17 percent), and surprisingly, China (12 percent). Japan accounts for just 6 percent, while South Korea is down to just 3 percent.

Through its research, the DTI found that when comparing imported vehicles (landed cost) versus their domestically produced counterparts, they’ve found that Thai produced vehicles undercut Philippine made ones by 18 percent, Indonesia by 24 percent, and South Korea, 24 percent. The overall average? Cars produced outside the country are 21.75 percent cheaper.

Based on these findings, the DTI finds merits in the PMA’s stance, and accepted the petition to initiate a more thorough investigation on whether the Philippines should initiate safeguard measures against CBU vehicles. While DTI did not outline what sort of action they can take to safeguard local assembly, they can recommend to Congress to enact laws or amend existing laws, particularly those dealing with the importation of CBU vehicles.