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P8.40 per bag duty to be imposed on all imported cements

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In order to protect the local manufacturers and ensure the commodity’s stable supply and price, the Department of Trade and Industry (DTI) will be imposing a provisional P8.40 per bag duty equivalent to 4 percent of its cost in all imported cements.

DTI Secretary Ramon Lopez said, “Cement is a strategic industry in the Philippines because it is a critical input to infrastructure (Build, Build, Build) and decent homes for Filipinos.”

As such, we have to ensure its availability (right price, top quality, right place, sufficient volume) in both the short- and long-term. Having a vibrant domestic industry, under a contestable market where legitimate imports can freely enter, is important in ensuring this.

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. This will lead to a dependence on imports, leading to the perennial trade deficit.

Even if the cement industry is considered as strategic, it receives no tariff protection whatsoever, as imports currently enter at zero duty. However, safeguard duties are legitimate tools in trade remedies (i.e. allowed under our international commitments such as in the World Trade Organization) to assist industries that have experienced a surge in the importation and a decline in sales and profitability.

In the case of cement manufacturing, imports of cement increased from only 3,558 metric tons in 2013 to more than 3 million metric tons in 2017; and the share of imports (from non-manufacturer or “pure” traders) increased from only 0.02% to 15% during the same period. Equally important, the industry experienced a sharp decline in income (earnings before interest and taxes) of 49% in 2017.

With the elements of surge and injury clearly, established, the DTI is mandated to impose a safeguard duty. In determining the amount of duty, however, the DTI balances the interests of all stakeholders—and has given particular attention to ensuring that supply remains steady and that prices will not increase.

In the imposition of a provisional duty of Php 8.40 per bag, here are the rationale and levels to ensure price and supply stability of the cements in the country:

1) Imports will still continue, ensuring strong competition;

2) There is currently enough domestic capacity of 35 million MT, to meet demand estimate of 25 million MT, but must still be encouraged to increase, given continuous growth in demand; and

3) That we are requiring the cement manufacturers to maintain their current retail price levels. We will closely monitor the selling price of cement manufacturers and ensure that they will not increase their prices.

At the same time, the safeguards will encourage existing and new players to build additional facilities. New facilities will help us attain a healthy level of domestic capacity that will address our perennial trade deficit, ensure a long-run supply of needed for public infrastructure and homes for Filipinos, and generate more jobs here in the country.

This is a provisional duty, effective for 200 days, in the form of cash bond on imported cement, while the Tariff Commission undertakes and concludes its formal investigation.

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