AICO is a cooperative arrangement that involves at least two member countries of ASEAN. The scheme includes not only the physical movements of products between the two countries but also resource sharing, industrial complementation and other industrial cooperation activities.
It also aims to provide multinational companies preferential terms on inter-regional trade in preparation for the Asian Free Trade Area (AFTA) in 2003.
Exchange of goods under the AICO scheme translates into minimal tariffs of zero percent to five percent.
Government sources said that an effective zero tariff on AICO projects would bring down the cost of doing business within ASEAN.
Local car manufacturers, led by industry giants Ford Motor Co. Philippines, Toyota Motor Philippines Corp., and Honda Cars, are now engaged in AICO arrangements with their counterparts in Southeast Asia.
Earlier, the government granted special preferential tariff privileges "in favor" of certain importations of Toyota Motors, Honda Cars and Philippine Automotive Components (PAC).
The special tariff privileges entitle these manufacturers modified rates for certain imported articles as provided under the Tariff and Customs Code of 1978 as amended on certain products under the AICO scheme.
Under the scheme, Toyota Motor Philippines Corp. will supply auto parts and components to Toyota companies in Malaysia and Thailand while these companies, in turn, will supply parts to Toyota Philippines for manufacture of the Camry and Corolla models.
Honda Cars Philippines Inc., on the other hand, will import auto parts for the Honda Civic from a company in Thailand while exporting parts and components for the City and Civic models to Honda Thailand.
Toyota Philippines has established an advantage in such products as transmissions, body panels and other auto sub assemblies, while Honda Philippines has recently opened a new transmission plant in the country and plans to eventually export completely built up units (CBUs) to other Asian nations.
PAC’s preferential trade agreement would involve the export of fuel pump assembly to Thailand, while Denso Thailand Co. Ltd will export evaporator and radiator parts to the Philippines.
Under the scheme, Toyota, Honda and PAC enjoy a preferential tariff rates ranging from three to five percent.