Question & AnswerQ&A (MEMORANDUM ORDER NO. 346)
The primary objective of the CDP is the development of a viable automotive parts manufacturing industry, with economies of scale achieved through increased exports.
SKDs (Semi-Knocked Down units) are semi-assembled parts imported in a partially-assembled condition, including vehicles without tires and batteries and are treated as CKDs for tariff purposes when authorized. CKDs (Completely Knocked Down units) are completely disassembled parts and components including sub-assemblies and assemblies like engine and chassis.
The Department of Trade and Industry (DTI) through the Board of Investments (BOI) is responsible for the effective implementation of the CDP.
There are three categories: Category I – engine displacement of 1,200 cc or below; Category II – above 1,200 cc but below 2,190 cc; Category III – 2,190 cc and above. Equivalent diesel engine displacements are also allowed.
No, there is no limitation on the number of models and variants provided they are registered with the BOI.
Participants in Categories I and II are no longer required to comply with a vehicle local content higher than 40%, but BOI may grant a foreign exchange award to participants achieving at least a 50% weighted local content average.
The BOI may impose fines for misrepresentation and fraud or non-compliance with terms and conditions and require erring assemblers to refund fraudulently earned foreign exchange awards.
Participants must earn foreign exchange credits through export of automotive products. The foreign exchange ratio for CKD import value varies by category and year, ranging up to 75% for some participants, recorded in the ledger without bonus.
The BOI may grant foreign exchange concessions amounting to 10% of the net foreign exchange earnings required during the first two years of operations for new joint-venture assembly or parts manufacturing operations with at least 30% local equity.
The Technical Review Committee, composed of representatives from dominant assembler and parts supplier associations and the BOI, may be deputized to determine and audit local content attainment and net foreign exchange earnings, as well as oversee related functions under the CDP, CVDP, and MDP.