Olongapo SubicBay BatangGapo Newscenter

Tuesday, October 03, 2006

Neda hikes tariff on used motor vehicles, parts

By Joyce Pangco Pañares -- Manila Stantard Today

President Gloria Maca–pagal Arroyo has approved the increase in the tariff rates imposed on imported motor vehicles and parts after the Board of Investments found some traders guilty of “technical smuggling” of used vehicles.

The tariff adjustment will be contained in an executive order containing the new comprehensive most favored nation tariffs program that has been approved by the National Economic Development Authority Board.

The last comprehensive tariff reform program, which was done in 2003 already expired in December 2005. This means that pending the issuance of the executive order, the old MFN tariff rates remain in effect.

Neda Director Brenda Mendoza said about 100 tariff lines, mostly on motor vehicles and motor parts, would be increased, while another 100 tariff lines on imported raw materials that could not be sourced from the Philippines would be reduced.

“The bulk of about 11,000 tariff lines will be maintained. There were several considerations, foremost of which was the input of domestic producers not to increase tariffs,” Mendoza said.

Mendoza said that the BoI has recommended the increase in motor vehicles and parts to avoid technical smuggling.

Technical smuggling usually happens in special economic zones and free ports such as Subic and Clark where a used Toyota Hi-Lux can go for as low as $860 even if its blue book value is $19, 000.

“That happens not just in the importation of the vehicles but even motor parts,” he said.

Last month, the Supreme Court affirmed its decision prohibiting the importation of used motor vehicles, except those brought in through economic zones.

In a six-page en banc resolution, the high tribunal dismissed for lack of merit the separate motions filed by Southwing Heavy Industries Inc., United Auctioneers Inc., Microvan Inc. and Subic Integrated Macro Ventures Corp., all members of the Motor Vehicle Importers Association of Subic Bay Freeport.

The importers sought a definite ruling from the high court on whether or not used motor vehicles may be imported in light of the issuance on April 4, 2005 of Executive Order 418, which imposed an import duty of P500,000 on used motor vehicles, except trucks, buses and special purpose vehicles.

They argued that EO 418 “impliedly repealed” EO 156 which prohibited the importation of used motor vehicles.

The other exemptions provided for the importation of used vehicles are as follows: if the vehicle is owned by a returning resident or immigrant and covered by an authority to import; and if the vehicle is for the use of an official of the diplomatic corps and authorized to be imported by the Department of Foreign Affairs.

“In the instant case, EO 156 is very explicit in its prohibition on the importation of used motor vehicles. On the other hand, EO 418 merely modifies the tariff and nomenclature rates of import duty on used motor vehicles. Nothing therein expressly revokes the importation ban,” the Court stressed.

After the CTRP expired last year, Neda and the Department of Trade and Industry undertook a joint review of all the tariff lines.

According to Trade Secretary Peter Favila, the proposed executive order is expected to be formally signed this week. It is proposed to be in effect until 2010.

Domestic industries have been pressuring the tariff and related matters committee to come up with the new MFN program, saying they could not move on with their plans until the government has made up its mind on the tariff levels.

In September last year, the Tariff Commission recommended to keep the tariff rates on some 5,000 tariff lines, representing almost 50 percent of the country’s total rates.


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