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Gov’t imposes cement safeguard duty

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THE DEPARTMENT of Trade and Industry (DTI) will impose a provisional safeguard duty on imported cement starting next month, citing the need to prevent putting local producers at a disadvantage.

“With the elements of surge and injury clearly established, DTI is mandated to impose a safeguard duty. DTI is thus imposing a provisional safeguard duty of P8.40 per [40 kilogram] bag, equivalent to about four percent,” Trade Secretary Ramon M. Lopez told reporters in a mobile phone message on Thursday, even as his department noted in a separate statement that cement “is a critical input to infrastructure.”

The administration of President Rodrigo R. Duterte has been implementing a more aggressive infrastructure development program in order to prod overall economic growth to a higher 7-8% clip up to 2022, when he ends his six-year term, from a 6.3% average in 2010-2016.

Citing findings of the investigation, he noted that imported cement surged to more than 3 million metric tons (MT) in 2017 from just 3,558 MT in 2013, while the share of imports by non-manufacturers or “pure” traders increased to 15% from only 0.02% during the same four-year period, he noted.

“Equally important, the industry experienced a sharp decline in income (earnings before interest and taxes) of 49% in 2017,” Mr. Lopez said.

The DTI asked cement manufacturers to maintain their current retail prices, saying it “will closely monitor the selling price of cement manufacturers and ensure that they will not implement increases.”

The order, will take effect Feb. 8, or 15 days after publication in two dailies which Mr. Lopez said is expected today. The safeguard duty will be in effect for 200 days. Mr. Lopez added that DTI has yet to relay its order in writing to the Department of Finance and the Bureau of Customs as the latter will issue the guidelines that will clear the way for actual imposition of the safeguard duty.

Sought for comment, Cristina S. Ulang, First Metro Investment Corp. head of research, said in a mobile phone message that the move would be “[g]ood for the cement companies”, explaining that it “will help them recover.”

She also cited “[p]ositive impact for ‘Build, Build Build’ as it will assure local cement industry financial viability and cement supply reliability by virtue of a level playing field for all local players and imported cement.”

Under Republic Act 8800, or the Safeguard Measures Act of 2000, a provisional duty is imposed under “critical circumstances where a delay would cause damage which would be difficult to repair, and pursuant to a preliminary determination that increased imports are a substantial cause of, or threaten to substantially cause, serious injury to the domestic industry.”

The tariff will be paid in the form of a cash bond that will be deposited with a government bank “while the Tariff Commission undertakes and concludes its formal investigation” within 60-120 calendar days.

Cement importers have opposed the P8.40 per bag tariff, arguing that they earn P8.25 profit from selling a bag of cement.

The Philippine Cement Importers Association, Inc. on Wednesday warned of a possible shortage should the safegard duty push through, saying that even local manufacturers have themselves been importing to fill supply gaps and accounted for about 36% of total cement imports in 2018.

Despite warnings of the new duty’s possible impact on the government’s infrastructure push, Mr. Lopez assured of sufficient supply, noting that domestic capacity amounts to 35 million MT a year against current demand of 25 million MT.

The Trade chief cited the need to increase capacity, given continuous growth of demand which is expected to double by 2025.

He encouraged existing and new players to build additional plants to ensure stable supply in the long-run.

“But relying solely on imports and being at the mercy of global supply and demand situation is risky and irresponsible considering changes in global demand and supply conditions, and will only lead to too much dependence on imports, leading to perennial trade deficit,” Mr. Lopez added. — Janina C. Lim