Preliminary Investigations on Glass Imports. Last month, the Department of Trade and Industry (DTI) initiated safeguard preliminary investigations against importations of Glass Mirrors and Figured Glass due to allegations of increased imports, which accordingly have contributed to serious injury to the local producers of similar products.
It will be remembered that last year, the Bureau of Customs (BoC) imposed safeguard duties against importations of ceramic tiles for 3 years as a result of a final ruling made by the Tariff Commission. For the period January 9, 2002 to January 9, 2003, the safeguard duty imposed was PhP5.40/kg. To illustrate, a 20-foot container of ceramic tiles with a net weight of 20 metric tons will have to pay an additional safeguard duty of at least PhP100,000 in addition to regular duties and taxes payable upon importation.
Two years ago, a similar safeguard investigation against cement imports was initiated. While the Tariff Commission ruled against the imposition of safeguard measures, the domestic industry elevated the case to the regular courts. To date, the case has yet to be finally resolved.
For importers and traders, the common questions asked are: what is a safeguard investigation, how is it applied and on what basis? The discussion below should provide a general understanding of the nature of safeguard measures and how it is applied.
What is a Safeguard Measure? In general terms, a safeguard measure is an additional duty imposed on certain imported articles in case there is a finding that substantial importation of said articles has directly caused injury to the domestic industry or the local producers. Safeguard measures may apply to agricultural as well as non-agricultural products.
Similar to dumping and countervailing measures, safeguard measures are one of the trade protection measures available under the World Trade Organization (WTO). In fact, safeguard measures were already provided under the 1947 General Agreement on Tariffs and Trade (GATT). Until recently, safeguards were seldom used as most governments previously preferred to protect domestic industries through bilateral negotiations with other countries. These negotiations normally resulted in one country voluntarily agreeing to lower its exports or agreeing to other market-sharing schemes.
Safeguard Measures under WTO and AFTA-CEPT. Safeguard measures are provided under the WTO Agreement on Agriculture (WAA) and Agreement on Safeguards (WAS). As regards agricultural products, GATT previously allowed export subsidies and import restrictions (e.g. import quotas). Under the WAA, reforms have been initiated in the areas of market access, domestic support and export competition. Part of the new system is the removal of non-tariff barriers through tariffication, i.e., replacing an import quota with an import tariff rate. However, countries are allowed to invoke special measures for the “tariffied” products.
The WAS, on the other hand, is a significant development in the WTO as it offers a basis for countries to undertake temporary measures to address any adverse impact of imports on their domestic industry. Countries are therefore allowed time for their domestic industries to adjust so long as there is sufficient evidence of injury to the industry. Similarly, the Agreement on the CEPT Scheme for the ASEAN Free Trade Area (AFTA) provides emergency measures in cases of increased importation, which injures or threatens to injure an industry in the importing member states.
Republic Act No. 8800. About three years ago or sometime July 2000, the Philippine government enacted Republic Act No. 8800. Otherwise known as “An Act Protecting Local Industries by providing Safeguard Measures to be Undertaken in Response to Increased Imports and Providing Penalties for Violation thereof”, RA 8800 effectively implemented both the WAS and the WAA.
Under RA 8800, the Secretary of Trade and Industry or the Secretary of Agriculture may apply a safeguard measure upon final determination by the Tariff Commission that “a product is being imported into the country in increased quantities, whether absolute or relative to the domestic production, as to be a substantial cause of serious injury or threat thereof to the domestic industry”. For agricultural products however, the Secretary of Agriculture shall first establish that the application of such safeguard measures will be in the public interest.
Preparing for a Safeguards Investigation. In case of safeguard application against a particular import, preliminary investigation is normally conducted by DTI. Upon positive finding, a formal investigation shall be conducted by the Tariff Commission for final determination. For the safeguard measure to be imposed, it must be shown that the increased imports have substantially caused serious injury or threat thereof to the domestic industry and that such increase imports were due to unforeseen developments and the effect of WTO obligations.
To prevent the imposition of a safeguard measure as in the case of glass imports, an importer must therefore be able to show in principle (a) that there are no increased imports; (b) that there is no injury to the domestic industry; (c) that assuming there is injury, the imports were not the cause of such injury; or (d) that the increased imports can be foreseen. The quantum of proof necessary to support the importer’s position will, however, be dependent on the investigating body (i.e., DTI or Tariff Commission).
The author is an international trade, indirect tax (customs) and supply chain expert. He is the Editorial Board Chairman of Asia Customs & Trade, an online portal on customs and trade developments affecting global trade and customs compliance in Asia. He was also Bureau of Customs Deputy Commissioner for Assessment and Operations Coordinating Group (2013-2016). For questions, please email at firstname.lastname@example.org and email@example.com