The Tariff Commission (TC) on Monday started hearing a petition to make permanent a provisional safeguard duty imposed for 200 days by the Department of Trade and Industry (DTI) on imported cement to stop putting local producers at a disadvantage.
The safeguard duty of P8.40 per bag of imported cement was ordered last 17 January by the DTI, effective 9 February, to prevent further injury and protect a strategic industry which provides thousands of local employment.
A permanent tariff on imported cement will also temper the inflationary effects of unabated importation and while helping sustain the administration’s massive infrastructure undertaking through the P21 billion tax collected from the local cement manufacturing industry unlike imported cement which has zero tariff, sources said.
Local cement manufacturers contributed about P155 billion or 1 percent of the country’s gross domestic product in 2016 alone. Their plants directly employ 42,000 Filipinos while providing an additional 125,000 jobs throughout their value chain.
During the preliminary conference, Commission Chair Marilou Mendoza and Commissioner Ernesto Albano welcomed interested parties, including representatives of local cement manufacturers and pure importers.
Trade Secretary Ramon M. Lopez imposed the duty on imported cement under Administrative Order 19-02. The duty was based on DTI’s investigation which clearly established the elements of surge and injury, although local supply more than meets domestic demand for the construction material.
Sources in the construction sector have said that increased future demand for cement will also be covered by several local cement plants coming online starting this year.
DTI said the provisional duty will be in the form of cash bond and is not expected to raise cement prices. Based on latest monitoring, no significant increase in cement prices has been reported.
The department noted that from only 3,558 metric tons imported in 2013, the volume of cement imported into the country ballooned to more than 3 million metric tons in 2017 and reaching almost 5 milion metric tons in 2018.
The share of imports in the cement market also soared from 0.02 percent in 2013 to 15 percent in 2017 causing “injury to the cement industry,” according to the DTI.
The imposition of the safeguard duty is provided under Republic Act 8800 or the Safeguard Measures Act of 2000 to give affected industries time to prepare and adjust to increased import competition. In its decision, the DTI said, “Cement is a strategic industry in the Philippines because it is a critical input to infrastructure and decent homes for Filipinos. As such, we have to ensure its availability in both the short- and the long-term. But relying solely on imports and being at the mercy of global supply and demand is risky and irresponsible.”
The volume of imported cement continuously increased by 70 percent in 2014, 4,401 percent in 2015, 550 percent in 2016 and 72 percent in 2017, the DTI found in its investigation.
DTI noted the import surge has caused apparent injury to local cement manufacturing. Earlier, Lopez also said relying on imports would stunt the growth of local manufacturing and widen the growing trade deficit.
“We have to build capacities for the future, especially now that the government has embarked on an aggressive infrastructure development program. Growing capacities also create local jobs that help alleviate poverty. Imports do not create local jobs but help jobs in the source country,” he explained.
“Developing local industries is key to slowly wean the country off its dependence on imports and this is the long-term solution to the country’s perennial trade imbalance. Hence, the DTI is focusing on broadening the country’s manufacturing base to meet the local demand and eventually have the capacity to enter the export market,” said the Trade secretary.
Lopez added the DTI has to strike a balance between developing local industries and protecting consumers.
“Cement does not have any tariff duty protection, unlike many agriculture products. Imports are still allowed and do not require any import permit. So, we can be sure that imports will continue to play their role in providing alternative sources of cement supply,” he said.
He stressed the DTI will consistently monitor cement prices while the provisional duty is in force to ensure the stable price of the commodity.
During the TC conference, Mendoza and Albano laid out the procedure for the investigation that will last 120 days. They also informed the parties on the deadlines for the submission of evidence ahead of a public hearing it will conduct in May.
The commission said it will conduct ocular inspection and verification of evidence submitted by concerned parties from 18 February to 5 April and issue its report from 22 to 25 April. Comments of parties to the report must be submitted from 26 to 30 April.
The commission set the public hearing on the issue on 6 to 10 May and scheduled the release of its investigation report with recommendation on 21 May.
Albano assured that the investigation will be balanced and based on evidence.
“At the end of the day, there’s a balance at the way we look at things but evidence-based,” he said.
If unburdened by unfair competition from imported cement whose manufacture is subsidized by foreign governments, the local cement manufacturing industry is predicted to be able to create 400,000 jobs by 2030 and projects to increase its contribution to GDP from 1 to 2 percent.