GMA signs EO imposing additional P.5-M specific duty on used imported cars

As the Court of Appeals lifted the ban on the importation of used vehicles, President Arroyo has issued an executive order imposing an additional P500,000 specific duty on second-hand cars citing the need to mitigate the impact of such trading on air quality and road safety.

Executive Order No. 418, signed by the President on April 4 or a few days before Congress resumed session on April 11, modifies the tariff nomenclature and rates of import duty on used motor vehicles under Section 104 of the Tariff and Customs Code of 1978.

"It is the policy of the state to maintain a balance between development and environmental protection and hence between motorization and air quality management (and) to protect the public against unreasonable risks to injury associated with consumer products," the EO read.

According to the EO, Article II:1 (b) of the 1994 General Agreement on Tariffs an Trade allows the unilateral imposition of other duties and charges on tariff allows the unilateral not previously the subject of concession and that motor vehicles are not covered by Philippine Schedule of Concessions and, therefore, do not have tariff bindings.

Based on the EO, Section 401 of the Tariff and Customs Code of 1978 as amended empowers the President to increase, reduce or remove existing rates of import duty as well as to modify the form of duty and the tariff nomenclature under Section 104 of the Code.

Except for trucks, buses and special purpose vehicles, other second-hand cars will be subject to additional specific duty of P500,000 in addition to the regular rates of import dues under the Tariff and Customs Code of 1978.

Under the EO, the following motor vehicles shall be considered used and shall be subject to the duties: Those that have been sold, registered and operated in the roads/highways of any foreign state or country; all imported vehicles with a mileage of more than 200 kilometers regardless of year model.

Upon the effectively of the EO, the articles specifically listed and which are entered and withdrawn from warehouses in the Philippines, shall be levied the rates of import and specific duties prescribed, the EO read.

The surcharge will be on top of existing taxes, such as the 30 percent most favored nation rate, the excise tax of two to 60 percent depending on the sticker price and the 10-percent value added tax imposed on the landed cost.

Besides environmental concerns, imported used vehicles dampen sales of local assemblers. An earlier study by the Japan International Cooperation Agency showed that local assemblers lost 20,000 units in potential sales due to the surge in used imports.

Imports of used cars are protesting the issuance of this EO saying this is prejudicial to their business.

Aside from EO 418, the President also signed on April 4, EO No. 419 temporarily increasing the rates of import duty of high engine displacement completely built up vehicles under Section 104 of the Tariff and Customs Cofe of 1978.

In February, the CA declared unconstitutional and illegal an executive order of the President banning the importation and entry of used motor vehicles in the country, including freeports.

In a 31-page decision penned by Justice Perlita Tria Tirona, the CA’s fourth division denied the government’s petition seeking to overturn a ruling of Olongapo City Regional Trial Court Branch 72 Judge Eiodoro Ubiadas allowing the importation of used motor vehicles.

The CA said the March 10, 2004 decision of Biadas would stand since there was no law granting the President the authority to prohibit such trade.

"We rule that Executive Order No. 156 has no constitutional and statutory basis and is, therefore, invalid," the CA said.

The President, through then Executive Secretary Alberto Romulo, issued the EO banning the importation of used motor vehicles on Dec. 12, 2002 to spur the growth of the local motor vehicle industry and improve the economy as a whole.