Safeguard Measure (R.A. 8800, s. 2000): Primer PDF

A. Overview 1. What are safeguard measures? Safeguard measures are trade remedy measures adopted by the government to provide affected domestic industries relief against imports. The purpose for the application of safeguard measures is to give the affected domestic industry time t...

A. Overview 1. What are safeguard measures? Safeguard measures are trade remedy measures adopted by the government to provide affected domestic industries relief against imports. The purpose for the application of safeguard measures is to give the affected domestic industry time to prepare itself for and adjust to increased import competition resulting from the reduction of tariffs or the lifting of quantitative restrictions agreed upon in multilateral trade negotiations. 2. What are the two types of safeguard measures? a. General safeguard measure – imposed against imports if the products at issue are being imported in such increased quantities, either absolute or relative to domestic production, and under such conditions as to cause or threaten to cause serious injury to the domestic industry; and b. Special safeguard measure – imposed against importations of agricultural products whose quantitative import restrictions were converted (tariffied) into ordinary customs duties and agricultural products designated with the symbol “SSG” in the GATT Schedule of Concessions. It may be invoked if (i) the volume of imports exceeds a trigger level; or, but not concurrently, (ii) the price of imports falls below a trigger price. In either case, injury to the domestic industry need not be established. B. The Legislation 3. What is the Safeguard Measures Act? Republic Act (RA) No. 8800, otherwise known as the “Safeguard Measures Act” was signed on July 19, 2000 and took effect on August 9, 2000. It provides for:  General safeguard measures to relieve domestic industries suffering from serious injury as a result of increased imports; and  Special safeguard measures on agricultural products marked “SSG’ in Schedule LXXV-Philippines when the import volume exceeds its trigger level or when the import price falls below a trigger price level. The provisions of RA 8800 were adopted in Section 712 of the Customs Modernization and Tariff Act (CMTA). 4. What other issuances were promulgated to implement RA 8800?  Joint Administrative Order No. 03, s. 2000 - Implementing Rules and Regulations of RA 8800 which took effect on October 11, 2000.  Tariff Commission (TC) Order No. 00-02 - prescribes the internal rules and regulations governing the conduct of formal investigation by the Tariff Commission pursuant to RA 8800. Page 2 / Revised July 2016 5. Which government agencies administer the Safeguard Measures Act? a. General safeguard measure:  Department of Trade and Industry-Bureau of Import Services (DTI-BIS) or Department of Agriculture (DA) – receives the application/petition (DTI for industrial goods and DA for agricultural products) and conducts preliminary investigation to ascertain whether or not to impose provisional measure. The Secretary of either Department decides on the form of safeguard measure to impose and issues a Department Order on the results of the investigation and implementation thereof.  Tariff Commission - conducts formal investigation and submits recommendation to DTI or DA Secretary on the form of definitive safeguard measure to be imposed; monitors the domestic industry’s progress and its efforts to make a positive adjustment to import competition; conducts investigation on any legitimate request for the extension and re-application of safeguard measures; the reduction, modification and/or termination of safeguard action; and evaluates the effectiveness of the safeguard actions taken by the domestic industry to facilitate its positive adjustment to import competition after the termination of safeguard measure  Bureau of Customs – implements the imposition of the safeguard measures b. Special safeguard measure:  Department of Agriculture – receives the application/petition for safeguard measure on sensitive tariffied agricultural products (marked “SSG” in Schedule LXXV-Philippines); conducts verification whether (i) volume of imports exceeds a base trigger level, or (ii) c.i.f. import price falls below a trigger price level and makes its finding within 5 working days from receipt of the petition; and issues a Department Order for the imposition a special safeguard duty on subject product. C. Procedures 6. Who may file a petition for safeguard measures? a. General safeguard measure:  Domestic producers as a whole, of like or directly competitive products manufactured or produced in the Philippines, or those whole collective output of like or directly competitive products constitute a major proportion of the total domestic production of those products;  The President, or the House or Senate Committee on Agriculture, or the House or Senate Committee on Trade and Commerce; or  The DTI or DA Secretary, motu proprio, provided there is evidence of increased imports of the product under consideration. Page 3 / Revised July 2016  b. Special safeguard measure: ▪ Any person, whether natural or juridical may request a verification if a particular agricultural product can be imposed a special safeguard duty; or ▪ The DA Secretary may, motu proprio, initiate the imposition of a special safeguard measure following the satisfaction of the conditions for imposing the measure. 7. What are the stages of investigation for the imposition of a general safeguard measure? a. Prima Facie Determination. The DTI-BIS or DA, upon acceptance of a properly documented petition from a domestic industry, has five calendar days to decide whether a prima facie case exists to merit the initiation of a preliminary investigation. If no prima facie case exists, the application is rejected. b. Preliminary Determination. Once a prima facie case has been established, DTI or DA initiates the preliminary investigation to include notification to all known interested parties and the government of the exporting country, and distribution of questionnaire to all concerned parties. DTI or DA has 30 calendar days from receipt of the response to questionnaire to make its preliminary determination whether or not to impose a provisional safeguard measure. If affirmative finding, the Secretary of either DTI or DA issues a Department Order (DO) for the imposition of the provisional safeguard measure. In case of a negative finding, the DTI or DA Secretary terminates the investigation. c. Final Determination. The Commission has 120 calendar days (or 60 days if the Secretary certifies the case as urgent) from receipt of the endorsement from the Secretary to conclude its formal investigation and submit its report of findings and recommendations to the Secretary on whether or not to impose a definitive safeguard measure. d. Decision. The Secretary has 15 calendar days from receipt of the Commission’s report to make a decision. If the determination is affirmative, a Department Order is issued to implement the imposition of the general safeguard measure. In case of a negative determination, the Secretary issues a DO for the termination of the case as well as a written instruction to the Commissioner of Customs, through the Secretary of Finance, authorizing BOC the return of the cash bond previously collected. D. Elements 8. What are the elements for the imposition of safeguard measures? ▪ General safeguard measure: a. Like product, as defined, or directly competitive product, i.e., domestically- produced substitute product; b. Increased imports – either in absolute terms or relative to domestic production. Increase should be recent, sharp and significant; c. Injury or threat thereof – means serious injury which is the overall impairment in the position of a domestic industry, e.g., loss of profit, reduction in production, under-utilization of capacity, cut in labor force, etc.; and Page 4 / Revised July 2016  d. Causality – refers to the overall assessment that the serious injury suffered by the domestic industry is the direct result of increased imports of the product under consideration.  Special safeguard measure: a. Volume of imports exceed a base trigger level; or b. Price of imports fall below a trigger price level. Injury to the domestic industry is not element in the imposition of a special safeguard measure. 9. What are the factors in determining serious injury?  Rate and amount of the increase in imports of the product under consideration in absolute or relative terms;  Share of the domestic market taken by the increased imports;  Changes in the level of sales, prices, production, productivity, capacity utilization, inventories, profits and losses, wages and employment of the domestic industry;  Significant idling of productive facilities in the domestic industry including the closure of plants or underutilization of production capacity;  Inability of a significant number of firms to carry out domestic production at a profit; and  Significant unemployment or underemployment within the domestic industry. 10. What are the factors considered in determining the existence of a threat of serious injury?  Significant rate of increase in imports into the Philippines indicating the likelihood of substantially increased importation, evidenced inter alia by the existence of letters of credit, supply or sales contract, the award of a tender, an irrevocable offer or other similar contracts;  Sufficient freely disposable, or an imminent, substantial increase in, production capacity of the foreign exporters including access conditions they face in third country markets, indicating the likelihood of substantially increased exports to the Philippines;  Decline in sales or market share, and a downward trend in production, profits, wages, productivity or employment (or increasing underemployment) in the domestic industry and its inability to generate capital for modernization or to maintain existing levels of expenditures for research and development; and  Growing inventories of the product being investigated whether maintained by Philippine producers, importers, wholesalers or retailers. Page 5 / Revised July 2016 E. Measures 11. What general safeguard measures can be imposed against injurious import surges? a. Provisional measure - takes the form of a tariff increase either ad valorem or specific, or both, to be paid through a cash bond set at a level sufficient to redress or prevent serious injury to the domestic industry. In the case of non- agricultural products, the Secretary shall first establish that the imposition of the provisional safeguard measure would be in the public interest. In the case of agricultural products, where the tariff increase may not be sufficient to redress or to prevent serious injury to the domestic producer or producers, a quantitative restriction may be applied. b. Definitive safeguard measure - may take any of the following forms:  Increase in, or imposition of, any duty on the imported product;  Decrease in or the imposition of a tariff-rate quota (Minimum Access Volume) on the product;  Modification or imposition of any quantitative restriction on the importation of the product into the Philippines;  One or more appropriate adjustment measures, including the provision of trade adjustment assistance; or  Any combination of actions described in subparagraphs (i) to (iv). The Commission may also recommend other actions, including the initiation of international negotiations, to address the underlying cause of the increase in imports of the product to alleviate the injury or threat thereof to the domestic industry and to facilitate positive adjustment to import competition. 12. What special safeguard measures are imposed on SSG-denominated agricultural products? a. Provisional measure – not applied b. Definitive safeguard measure:  Under the volume test, additional duty should not exceed one-third (1/3) of the applicable out-quota customs duty on the agricultural product under consideration.  Under the price test, the additional duty is computed as follows: i) Zero, if the price difference is, at most, 10% of the trigger price; ii) Thirty percent (30%) of the amount by which the price difference exceeds ten percent (10%) of the trigger price, if the said difference exceeds ten percent (10%) but is at most 40% of the trigger price; iii) Fifty percent (50%) of the amount by which the price difference exceeds 40% of the trigger price, plus the additional duty imposed under paragraph ii, if the said difference exceeds 40% but is, at most, 60% of the trigger price; iv) Seventy percent (70%) of the amount by which the price difference 60% of the trigger price, plus the additional duties imposed under paragraphs ii Page 6 / Revised July 2016  and iii, if the said difference exceeds 60% and is, at most, 75% of the trigger price; or v) Ninety percent (90%) of the amount by which the price difference exceeds 75% of the trigger price; plus the additional duties imposed under paragraphs ii, iii, and iv, if the said difference exceeds 75% of the trigger price. 13. What is the duration for the imposition of safeguard measures? a. General safeguard measure:  Provisional measure - not exceed 200 calendar days from the date of imposition.  Definitive safeguard measure - The maximum initial period for the application of a safeguard measure is four (4) years, including the period in which provisional measure is impose. The initial period may be extended up to a maximum of eight (8) years, or ten (10) years for developing countries. b. Special safeguard measure:  Definitive safeguard duty – effective only until the end of the year in which the measure is imposed. 14. Are there limitations in the application of general safeguard measures? Yes. The general safeguard measures should be limited to: i) extent of redressing or preventing serious injury to the domestic industry; and ii) to facilitate the domestic industry’s adjustments from the adverse effects directly attributed to the increased imports. When quantitative import restrictions are used, such measures shall not reduce the quantity of imports below the average imports for the three (3) preceding representative years, unless clear justification is given that a different level is necessary to prevent or remedy a serious injury. General safeguard measure shall not be applied to a product originating from a developing country, if that country’s share of total imports of the product is less than 3%, provided that the developing countries with less than 3% share collectively account for not more than 9% of the total imports. 15. Are there limitations in the application of special safeguard measures? To safeguard and enhance the interest of farmers and fisherfolk, the provisions of RA 8435, otherwise known as the Agriculture and Fisheries Modernization Act, will not be affected by the provisions of the special safeguard measures prescribed under RA 8800. There shall be no recourse to the use of special safeguards measures concurrently with the general safeguard measure. The special safeguard provisions of RA 8800 shall lapse with the duration of the reform process in agriculture as determined in the World Trade Organization (WTO). Thereafter, recourse to safeguard measures shall be subject to the provisions on general safeguard measures as provided in RA 8800. Page 7 / Revised July 2016 16. Can the Commission recommend the application of general safeguards on a bilateral or selective basis? No. One of the major guiding principles of the WTO Agreement on Safeguards is that such measures be applied on a non-selective or Most-Favoured-Nation (MFN) basis. Safeguard measures shall be applied to a product being imported irrespective of its source. Thus, a WTO Member may not choose specific countries against whose exports it applies the measures. 17. Does the Philippines have to pay compensation when it applies a general safeguard measure? Yes. The Philippines, when applying safeguard measures, must generally pay for them through compensation which is substantially the equivalent level of concessions and other obligations with respect to affected exporting WTO members. Any adequate means of trade compensation may be agreed upon by the affected Members through consultation. In the absence of such agreement on compensation within 30 days, the affected exporting Members may individually suspend substantially equivalent concessions and other obligations (i.e., retaliate) unless the Council for Trade in Goods disapproves. However, this right to retaliate may not be exercised for the first three (3) years that a safeguard measure is in effect, provided that the measure has been taken as a result of an absolute increase in imports, and conforms to the provisions of the Agreement. F. Adjustment Plan 18. What is an adjustment plan? An adjustment plan is the action plan indicating a set of quantified goals, specific programs, and timetables that a concerned industry commits to undertake in order to facilitate the industry’s positive adjustment to import competition (e.g., adoption of improve technology, rationalization of production structures). 19. To whom and when does a domestic industry submit its adjustment plan? The domestic industry submits its adjustment plan to the Commission within 45 calendar days (or 30 calendar days if the investigation is certified as urgent) upon receipt of the notice of submission. 20. What is the task of the Tariff Commission with regard to the adjustment plan? The Commission monitors the developments with respect to the domestic industry, including its progress and the specific efforts made by workers and firms in the domestic industry to effect a positive adjustment to import competition. Monitoring includes public hearing and on-site data verification to determine compliance by the domestic industry with its adjustment plan. Page 8 / Revised July 2016 G. Summary of Cases 21. What cases/products have been investigated by the Commission under RA 8800? Year of Description TC Final Determination (Original Case) Investigation 2000 Cement Negative Ceramic and wall 2000 Positive tiles Figured glass, clear Positive; measures on figured glass and and tinted float glass mirror were suspended and 2004 glass and glass terminated, respectively, due to non- mirror production of the domestic industry Sodium Positive; measure was not imposed for 2007 tripolyphosphates - reason of public interest Technical Grade 2009 Steel angle bars Positive 2010 Testliner board Positive 2014 Newsprint Positive H. Safeguard Measures Vis-À-Vis Anti-Dumping and Countervailing Measures 22. How do safeguard measures compare with anti-dumping and countervailing measures? Anti-Dumping / Safeguard Measures Countervailing Measures (General and Special) Relevant Agreement:  WTO Anti-Dumping Agreement (GATT  WTO Agreement on Safeguards Article VI) (GATT Article XIX)  WTO Agreement on Subsidies and  WTO Agreement on Agriculture Countervailing Measures ( GATT Article XVI) Nature of Measure: Address unfairly traded imports: Address fairly traded imports:  Export price is lower than the normal  Export price at the level of normal value value  Subsidized production or exportation of  Increased level of imports absolute the foreign merchandise or relative to production (general safeguards)  Volume of imports exceed a base trigger level or price falls below a trigger price level (special safeguards) Objective:  Dumping and countervailing duties seek  General safeguards will remove to level the playing field by providing injury and facilitate structural Page 9 / Revised July 2016  Anti-Dumping / Safeguard Measures Countervailing Measures (General and Special) remedies and protecting domestic adjustments that will enable an industries against the unfair trade industry to gain competitiveness. practices of dumping and/or subsidization.  Special safeguards will assist farmers whose products were previously protected by quantitative restrictions that have been tariffied. Coverage of Measure:  Limited to like products  All like or directly competitive products  Country specific and exporter specific  All countries exporting of like or directly competitive product  General safeguards apply to industrial and non-tariffied goods  Special safeguards apply to tariffied agricultural products denominated with the acronym “SSG” in the GATT Schedule of Concessions Minimum Threshold of Support of Industry for Application:  A domestic Industry which is supported  Industry filing the case should be a by domestic producers whose collective producer of the like or directly output constitutes more than 50% of the competitive product whose collective total production of the like product output constitutes a major proportion produced by other domestic producers of the total domestic production – that are expressing either support for or general safeguards opposition to the application. However, no investigation shall be initiated when  DA (motu proprio) for special domestic producers expressly safeguards supporting the application account for less than 25% of the production of the like product produced by the domestic industry. Elements to be Established:  Product comparability - like” product General Safeguards:  Product comparability - like or  Price difference / subsidy directly competitive product)  Material injury or threat of material injury  Increased imports  Causal link  Serious injury or threat of serious injury  Causal link Special Safeguards:  Product comparability - like product  Volume of imports exceed a base trigger level, or Page 10 / Revised July 2016  Anti-Dumping / Safeguard Measures Countervailing Measures (General and Special)  Price falls below a trigger price level Forms of Measure:  Provisional measure – anti-dumping General Safeguards: bond / countervailing bond  Provisional measure – tariff increase  Definitive anti-dumping duty /  Definitive safeguard measure - tariff countervailing duty increase; quantitative restrictions (e.g., import quota; import licensing) Special Safeguards:  Additional duty not exceeding one- third of the level of the ordinary customs duty in effect during the year in which the action is taken. Imposition of Provisional Measure:  Requires the conduct of a preliminary General Safeguards: investigation (affirmative preliminary  In critical circumstances where determination) prior to imposition of a delay may cause damage that is dumping or countervailing bond for a difficult to repair, safeguard measure period of 4 months or 120 days. in the form of tariff adjustment may be imposed for 200 days pursuant to a preliminary determination. Special Safeguards:  Not provisionally applied. Duration of Definitive Measure:  Five (5) years, subject to sunset review General Safeguards: to determine whether or not to extend  Four (4) years, extendable for the effectivity of the dumping / another 4 years provided the countervailing duty industry can show that structural adjustment is being implemented with an extension for another 2 years for developing countries. Special Safeguards:  Shall only be maintained until the end of the year in which it has been imposed. Page 11 / Revised July 2016