While the increased safeguard measure of P12 per bag of imported cement may protect local cement producers from serious injury due to increasing imports, a higher safeguard duty ranging from P18 to P20 per bag that should be considered as a progressive tariff for the commodity, industry sources said.
Trade figures showed that cement imports in the first half of this year increased by an alarming 48.2 percent to 3.4 million MT from 2.29 million MT in the same period last year.
The higher safeguard measure of P12 per bag of imported cement may protect local manufacturers from serious injury posed by the surging importation of the commodity, according to the Tariff Commission, but many are saying the tariff is not enough.
The P12 safeguard duty is the difference between the weighted average landed cost of imported cement and the average domestic ex-plant selling price of the local cement industry for the most recent year of the period of investigation in 2018.
Recent data also showed that the volume of cement imports even increased by 64 percent in the first quarter of 2019 despite the P8.40 duty imposed since Feb. 9. DTI monitored 1.77 million metric tons of imported cement brought into the country from January to March 2019, compared to 1.06 million MT in the first quarter of 2018.
“The Commission finds the existence of an imminent threat of serious injury and significant overall impairment to the position of the domestic cement industry in the near future,” the TC said in its final report on the formal investigation on the imposition of safeguard measure against importations of cement released on Aug. 9.
In the said decision, the TC recommended to increase the P8.40 provisional safeguard duty per bag of imported cement imposed by the Department of Trade and Industry starting February for a period of three years.
“Since it addresses the extent of price undercutting by cement imports based on the latest available data, the Commission believes that this level of safeguard may prevent the occurrence of serious injury to the domestic cement industry and will facilitate said industry’s adjustment to the adverse effects of increasing cement imports,” the Commission’s report explained.
The counsel of the domestic industry represented by the Cement Manufacturers Association of the Philippines, the petitioner for a higher and permanent safeguard measure on imported cement, lauded the TC’s decision for being based on facts and evidence.
“What they did is based on the case merits and is highly courageous,” said lawyer Jose Salvador M. Rivera Jr.
DTI Secretary Ramon Lopez also welcomed the TC’s findings.
“That little duty adds some revenues to the Department of Finance, to the government,” Lopez said. “But I think the more important thing is, at least, there’s a level playing field with the local manufacturers.”
When investors come to a country and that country allows other nations to flood it with cheap and substandard commodities like cement, that’s already “unfair competition,” Lopez said.
He pointed out that a balance must be struck between quality and right pricing so local manufacturers can compete and investors would be enticed to come in.
The Trade Secretary took the bold and unprecedented move of initiating the safeguard measure last year as provided under the Safeguard Measure Act in view of the surging importation of cement hurting the industry.
From 3,558 MT in 2013, total volume of cement imports reached 5 million MT in 2018. The import surge started in 2016 and cement manufacturers' earnings fell sharply by 49 percent in 2017 while aggregate net income slid by 29 percent in 2017 and 78 percent in 2018, the DTI found.
Subsequently, the DTI brought the issue to the TC which verified and confirmed the Department’s findings during its formal investigation and public hearings in May.
The TC had 120 days from the imposition of DTI’s provisional safeguard measure or until September to complete its investigation and issue its final report containing its recommendation.
In its final report, the TC said its affirmative recommendation preserves consumers’ right to choose between locally manufactured and imported cement.
The TC assured that competition between the industry and importers will return to normal level in due time.
“The domestic industry will be afforded time to complete implementation of the efficiency measures in its adjustment plans,” said the TC.
The definitive safeguard measure will also allow the domestic industry to adjust its selling prices to be able to absorb production costs and operating expenses and generate reasonable margins.
“With improved price competitiveness, the domestic cement industry will remain a reliable partner in the national government’s Build, Build, Build program,” said the TC.
With the domestic industry’s commitment to upgrade facilities to improve production efficiency, consumers are assured of a better and wider range of products at competitive prices,” it added.
Moreover, the expected increase in the domestic industry’s production and sales will generate additional employment not only in the cement manufacturing businesses but also in the allied industries (e.g. mining and quarrying, logistics, ready-mixes, construction), according to the Commission.
The increase in the operations of the cement manufacturing industry will spur economic activity in communities, especially in rural areas where the plants are located.