Ban or business as usual?

BY FELIPE F. SALVOSA II, BusinessWorld Senior Reporter Confusion greeted Wednesday’s Supreme Court ruling on used motor vehicle imports, with Customs officials viewing it as an outright ban on local use and importers and auto rebuilders saying "it’s business as usual." Customs Commissioner Napoleon L. Morales said he has yet to officially receive a copy of the court decision, but said his initial reading is that imported used cars cannot be brought outside of the Subic Freeport. "If used cars are brought to Subic, there is still no importation into the Philippines. When you bring them out of Subic [and into Philippine territory], that’s considered importation," Mr. Morales said. Based on the court ruling, used cars cannot be brought into Philippine customs territory even if all duties and taxes are paid, he said. It’s a different viewpoint, however, for the Subic used vehicle industry. Jaime C. Vicente, secretary-general of the Automotive Rebuilding Industries of Subic, agreed that used cars can only be brought into Subic. But if importers want to sell the units elsewhere, they only need to pay the required taxes and duties. The Supreme Court on Wednesday upheld the Executive’s right to proscribe the importation of used vehicles via Executive Order 156, but said the Palace exceeded its authority in including the Subic Bay Free Port Zone, which is said is outside customs territory by virtue of the law creating the freeport. The decision, in part, reads "Used motor vehicles that come into the Philippine territory via the secured fenced-in former Subic Naval Base area may be stored, used, or traded therein, or exported out of the Philippine territory, but they cannot be imported into the Philippine territory outside of the secured fenced-in former Subic Naval Base area." EO 1546, signed by President Gloria Macapagal Arroyo on Dec. 12, 2002, sought to protect the domestic industry and provide a comprehensive policy for the motor vehicle development program. Supreme Court officials refused to comment, and said the court would only issue a clarificatory ruling if a motion is filed . Other government officials declined to say whether the state would take renewed action against the use of used vehicle imports outside of Subic. But the court order, Trade Undersecretary and Board of Investments Managing Head Elmer C. Hernandez said, now allows the government to proceed with its comprehensive motor vehicle development program. "The whole of EO 156 is about this program. The ban on used motor vehicle imports is just one provision in the order," Mr. Hernandez said. The motor vehicle development program, he explained, is geared at transforming the Philippines into a hub for the production of motor vehicles, components and parts. Carmakers have differing opinions on the court ruling, with an industry group calling it an affirmatiion of the ban on used vehicle imports. An official of a Japanese car manufacturer, however, called it a setback. Mr. Vicente, meanwhile, cited Republic Act (RA) 7227 or the Bases Conversion Development Act which created the Subic Special Economic Zone as allowing used car imports to be legally used outside the freeport. Section 12 states: "The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. "However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines." Previous legal opinions by the Justice department, the Office of the Government Corporate Counsel, the Office of the President, and a joint congressional resolution have affirmed this and have allowed Subic importers to bring used cars out of the freeport, he added. The same situation also applies to the Cagayan Economic Zone Authority, which has its own charter, RA 7922, and the Zamboanga freeport although there is little activity there, he said. "They’ll have to amend RA 7227 if they want a ban on used motor vehicles," Mr. Vicente said. A 30% tariff is slapped per imported unit, followed by a variable excise tax starting at 2%, and the 12% value-added tax. Sans an import permit, Customs can also levy a 30% penalty. The industry official also said a Malacañang order slapping an additional P500,000 specific duty per used car to discourage demand is not in effect in Subic by virtue of a local court injunction. "When this judicial intervention is no longer in effect, importers will have to pay that amount as well," Mr. Vicente said. Right-hand drive vehicles, which are banned by law, can also be brought to Subic, he pointed out, because of its freeport status. However, they will have to be converted to left-hand drive first and then pay the corresponding taxes and duties before they are brought out. "If they are brought out of Subic, they submit to Philippine jurisdiction. You can bring right-hand drive vehicles to Subic, but never through South Harbor [in Manila, for example]." The previous Customs chief, Alberto D. Lina, had ordered ships and other common carriers not to carry right-hand drive vehicles. But as far as ships are concerned, Mr. Vicente said, they are not violating any law if the right-hand drive cars are unloaded in Subic, because it is outside of Philippine jurisdiction. Used cars are needed, he said, because of a deficiency in mobility among Filipinos. Citing statistics, Mr. Vicente said the Philippines is second to the last in terms of number of inhabitants per registered car. There are 19.6 Filipinos per registered vehicle, much better than Myanmar’s 101.2. But this is worse than Cambodia’s 16.3 or India’s 15.8, he said. "In the Philippines, only one-half of 1% of families can buy a brand-new car," he said. -Judy T. Gulane/BusinessWorld