The trade department slightly increased the safeguard duty imposed on imported cement for the second year of implementation
The Cement Manufacturers’ Association of the Philippines’ (CeMAP) requested postponement of reduction of safeguard duty as cement imports bounced back this year
DTI Department Administrative Order (DAO) 20-08, which raises the safeguard duty on cement, notes how the significant increase in volume imports of cement has adversely affected the local industry
For the second year of implementation, the Department of Trade and Industry (DTI) has slightly increased the amount of definitive safeguard duty it will impose on imported cement for the period October 22, 2020 to October 21, 2021.
The increase is intended to help the local cement industry, whose operations have been affected by the coronavirus (COVID-19) pandemic.
Under DTI Department Administrative Order (DAO) 19-13 issued last year, the safeguard duty was originally P225 per metric ton (MT) or P9 per 40 kilogram (kg) bag of imported cement.
Now, according to DTI DAO 20-08 dated October 26 and released on November 20, the definitive safeguard duty will be P245 per MT, or P9.80 per 40-kg bag, for the second year of implementation.
The duty will be applied to cement classified under Association of Southeast Asian Nations Harmonized Tariff Nomenclature (AHTN) Codes 2523.29.20 and 2523.90.00.
DAO 20-08 amends DAO 19-13, which ordered a definitive safeguard duty on imported cement for three years starting 2019, to encourage and challenge the local cement industry to become globally competitive. All other terms and provisions of DAO 19-13 remain in full force and effect.
DTI is mandated by Republic Act No. 8800 (the Safeguard Measures Act) to protect the domestic industry from serious injury caused by a surge in imports. A yearly review of the definite safeguard measure is conducted to determine the appropriateness of the safeguard duty.
Local industry seeks higher duty
DTI in DAO 20-08 notes that on July 28, 2020, the Cement Manufacturers’ Association of the Philippines (CeMAP) requested DTI to postpone the reduction of safeguard duty of P10 per bag imposed during the first year of the safeguard measure.
CeMAP appealed instead for DTI to consider adding P1 per bag or increasing the duty to P12 per bag, equivalent to the provisional safeguard duty and within the recommendation of the Tariff Commission.
CeMAP said that while implementing the safeguard measure slowed down cement imports and helped level the playing field during the second half of 2019, “it was observed that cement imports seem to be bouncing back in the first half of 2020.”
It further said this is due to the higher surplus from countries like Vietnam, lower prices of cement and clinker exports during the second quarter of 2020, lower freight cost because of lower demand of maritime transport.
Moreover unlike the Philippines, Vietnam did not impose any hard lockdown and continued cement manufacturing operations through the pandemic, it said.
The Philippine economy sank into deep recession in the second quarter of 2020, with the manufacturing, mining, quarrying, and construction sectors at the forefront of this decline, DAO 20-08 notes.
The DAO also finds indications that the significant increase in the volume of imports of cement, based on its investigation, “affected the performance of the local industry.” Import volumes of cement increased in 2019 despite the imposition of the safeguard duty in the second half of the year, and volumes from January to August 2020 are already 73% of the total 2019 volumes.
“The condition of competition shows that the market share of locally produced cement was displaced even with the imposition of the definitive safeguard of P250/MT or P10/40 kg bag as the shares of imports in the Philippine market significantly increased resulting to domestic industry’s increased inventory, reduced capacity utilization and incurred decline in profitability,” DAO 20-08 states.
It adds that the pandemic aggravated the overall operation of the cement industry for the first half of 2020 which resulted in the closure and slowdown of operations due to quarantine measures implemented and low market demand. The scheduled adjustment plan of the industry was also delayed due to business disruptions resulting from quarantine measures.
DAO 20-08 takes effect upon the issuance of the relevant Bureau of Customs memorandum order or 15 days after the DAO is published in two newspapers of general circulation, whichever comes first.