QuestionsQuestions (MEMORANDUM ORDER NO. 346)
To develop a viable automotive parts manufacturing industry, with economies of scale achieved through increased exports.
SKDs are semi-knocked down parts/components imported partially assembled (including certain semi-assembled vehicles and cars without tires and batteries when authorized), treated for tariff purposes as CKDs. CKDs are completely knocked-down parts/components imported disassembled, and the CKD pack may include sub-assemblies/assemblies such as engine, transmission axle assemblies, chassis, and body assemblies.
KD parts are parts forming part of the CKD pack that may have been left out of CKD importation; they may include warranty parts (replacement of defective parts) or parts of the CKD minus components to be locally sourced.
The Department of Trade and Industry (DTI) through the Board of Investments (BOI). The BOI may, after consultation with concerned parties, form/designate/deputize another body/committee/company to perform some tasks or monitor aspects, consistent with existing rules.
It must obtain a technical licensing agreement with the foreign CKD supplier; assemble established quality passenger cars; provide adequate parts and support services; and qualify under CDP rules and regulations.
Capability to invest/bring investments equivalent to US$10 million for manufacture of motor vehicle parts/components; ability to establish or use an idle/existing assembly facility; and the capability to post a performance bond or bank guaranty ensuring commitments for establishing a major automotive parts manufacturing facility, with proportional reduction upon proof of investments in plant build-up excluding land.
CDP categories are based on engine displacement: Category I (1,200 cc or below), Category II (above 1200 cc but below 2190 cc), Category III (2190 cc and above; equivalent diesel displacement allowed). BOI may re-classify models under Category I with engine displacement >1200 cc to Category II if a 1200 cc or below replacement model is registered under Category I.
New participants who will export at least 50% of their CBU car production (70% for foreign companies) may be authorized to import SKD units for the local market portion, initially for six months and extendable for another six months upon proof they are pursuing CKD assembly operations per the project timetable.
Participants no longer need a mandatory vehicle local content higher than 40% to qualify/remain in the CDP. However, BOI may grant a foreign exchange award to Categories I and II participants reaching a weighted local content average of at least 50%.
BOI may grant a foreign exchange award amounting to 50% of foreign exchange earned during the previous year to Categories I and II participants that achieve weighted local content average of at least 50% of all participating models/variants; BOI must issue guidelines executable 15 days after publication.
By the year 2000, based on the Agreement on Trade-Related Aspects of Investment Measures under GATT.
Category V covers trucks with gross vehicle weight greater than 18 tons and Special-Purpose Vehicles such as fire trucks.
They are no longer required to comply with vehicle local content higher than 45% to qualify/remain. BOI may instead grant a foreign exchange award for achieving weighted local content average of at least 55%.
Participation in the CVDP no longer requires the concurrence of the President due to program liberalization.
Category A no longer has a requirement higher than 45% to remain in the MDP; Category B must attain local content of 35%.
A foreign exchange concession amounting to 10% of net foreign exchange earnings (NFEE) required during the first two years of operation; local equity must be at least 30%.
It is a consultative body composed of representatives of dominant associations of motor vehicle assemblers/parts manufacturers and BOI/DTI with the BOI Managing Head as Chairman. It may oversee programs, and it is tasked to formulate/recommend measures requiring importers of used trucks and buses to comply with safety, roadworthiness, and emission standards, and may recommend measures to enhance global competitiveness of local parts suppliers.