TRADE REMEDIES AS A PROTECTIVE MEASURE
By: Mark Anthony P. Tamayo on April 25, 2019
(Last of three parts)
In last week’s article, we briefly discussed Republic Act (RA) No. 8752 (Anti-dumping Act) and RA No. 8751 (Countervailing Duty Act) as trade protection instruments, which can be used against unfair trade practices.
In this article, we define “subsidy” as an indispensable requirement in every countervailing protest case, as well as the forms of relief measures obtainable from the fact-finding authorities.
“Subsidy” must be present
For countervailing protest actions, a “subsidy”, as an element, must be present.
A “subsidy” refers to any specific assistance, directly or indirectly provided by the government of the country of export or origin, with respect to a product imported into the Philippines.
While a subsidy may raise the level of the economic development in one country, it may, on the other hand, produce adverse economic effects on another. This is particularly true when goods benefitting from the subsidy enter into the market of an importing country at prices with which domestic producers cannot compete.
An industry is deemed to have received a “subsidy” when a benefit is conferred as a result of, among others, 1) direct and/or potential transfer of government funds (e.g., grants, loans with non-commercial terms, equity infusion, loan guarantees) to an industry or producer; 2) revenue due from an industry or producer (e.g., tax credits) is foregone; or 3) goods or services provided by the government for an industry or a producer (e.g., government supplies raw materials to an entity).
A petition for countervailing measure may be rejected if 1) amount of subsidy is de minimis; 2) volume of subsidized imports is negligible; or 3) injury is negligible.
The threshold percentage to be considered “de minimis” or “negligible”, depends where the product under consideration originated from (i.e., whether from a developed or developing country).
Dumping and countervailing relief measures
After their preliminary determination that the essential elements of dumping or subsidizing have been established, the Department of Trade and Industry (DTI)-Bureau of Import Services (for industrial products) and Department of Agriculture (DA) (for agricultural products) are empowered to impose provisional measures (which shall be effective for four months). Such measures are needed to protect the domestic industry, pending the final resolution of the investigation.
The provisional dumping measure shall take the form of a provisional duty, or preferably, a security by cash deposit or bond, equal to the estimated difference between the normal value and the export price of the protested article, the former being higher than the latter.
On the other hand, the provisional countervailing measure shall take the form of a security, by cash deposit or bond, equal to the amount of provisionally calculated amount of subsidy.
Formal investigation is then conducted by the Tariff Commission (TC).
The TC, after concluding an affirmative finding, makes the final determination for the imposition of a protective tariff (definitive dumping or countervailing duty, as the case may be) on the protested product imported from a specific country (for dumping cases) or from a specific exporter (for countervailing duty cases).
The concerned agency shall then issue a department order for the imposition of a definitive duty. The effectivity period is five years from the date of imposition.
A dumping duty (which is imposed at the time of importation) has the effect of raising the price of the imported product to a level whereby the unfair advantage enjoyed by the exporter (or importer) of that product is eliminated.
A countervailing duty, on the other hand, has the effect of raising the price of the imported product to a level at which the domestic industry can compete.
Both dumping and countervailing duties are in addition to the regular duty and other charges on a protested product imported.
The Bureau of Customs then takes charge of the imposition of dumping duty.
Any aggrieved and/or interested party may file a petition for review with the Court of Tax Appeals within thirty days from receipt of notice of the final ruling on the imposition of a definitive duty. Under RA No. 9282, the Court of Tax Appeals has exclusive appellate jurisdiction to review by way of appeal, decisions of the DTI or DA on such matters.
The bottom line
Trade remedy measures, as a safety net to domestic industry, stemmed from the principle that free trade should be accompanied by free trade practices. These measures seek to ensure that such practices should not constitute an unjustifiable impediment to international trade.
A trade remedy action, though, must be carefully examined as it essentially represents an accusation of unfair trading against an exporter (or importer) or a particular country. The issues involved in every protest action are quite complex as they need to address international trade issues which include, among others, the determination of what is fair or unfair.
A successful protest action surely benefits the domestic industries as it may result to a reduction in competition due to tariffs. Unfortunately for consumers, higher import prices mean higher prices for goods and thus, resulting to lesser choices. In this sense, tariffs (and trade barriers) tend to be viewed as pro-producer and anti-consumer.
While protectionism provides competitive advantages, it may also lead to a possible decline of efficiency (due to lack of competition), as well as the emergence of substitutes for their products.)
In an open and fair-trading policy, competition seems no longer restricted to who can offer the lowest price. Far more critical and important is the adoption of a right mindset of producing products of excellent quality, that can exceed, or at least conform, with the most stringent standards of international markets. This is the formula for survival in today’s “new” global economy”.
From the The Manila Time website on April 25, 2019