Legal basis; amendments to Tariff Code
- Section 1 amends Section 302 of Presidential Decree No. 1464 (Tariff and Customs Code).
- The amended Section 302 authorizes countervailing duty imposition when subsidized imports cause or threaten material injury or materially retard growth or prevent establishment of a domestic industry.
- Section 4 repeals, amends, or modifies inconsistent laws, decrees, ordinances, rules, regulations, executive or administrative orders, and other presidential issuances.
Policy and purpose
- Republic Act No. 8751 strengthens mechanisms for imposing countervailing duties on imported subsidized products, commodities, or articles to protect domestic industries from unfair trade competition.
- The amended Section 302 uses countervailing duties to offset ascertained subsidy causing or threatening material injury.
Countervailing duty rule under amended Section 302
- A countervailing duty is imposed whenever a product, commodity, or article is granted directly or indirectly by the government of the country of origin or exportation with any kind or form of specific subsidy upon production, manufacture, or exportation, and importation has caused or threatens to cause material injury, or has materially retarded growth or prevented establishment of a domestic industry.
- The Secretary must impose a countervailing duty equal to the ascertained amount of the subsidy, via a department order, when:
- the product is nonagricultural and the Secretary of Trade and Industry issues the order, or
- the product is agricultural and the Secretary of Agriculture issues the order.
- The countervailing duty is imposed in addition to ordinary duties, taxes, and charges imposed by law.
- The same levy applies to like products thereafter imported to the Philippines under similar circumstances.
- The countervailing duty is imposed only after the sequence of initiation, investigation, and determinations established in the amended Section 302.
Initiation, petition thresholds, and notices
- A countervailing action may be initiated by:
- any person, natural or juridical, with an interest to protect, by filing a verified petition, by or on behalf of the domestic industry; or
- the Secretary of Trade and Industry or the Secretary of Agriculture, in special circumstances, where there is sufficient evidence of existence of subsidy, injury, and causal link.
- A petition filed with the Secretary must be accompanied by documents, if any, reasonably available to the petitioner, containing information supporting essential elements and must state, among others:
- the domestic industry and the particular domestic product/commodity/article or class prejudiced;
- employment number, total capital invested, production and sales volume, and aggregate production capacity of the materially injured/threatened industry or the industry whose growth/establishment is retarded or prevented;
- known importer, exporter, or foreign producer, country of origin/export, estimated aggregate or cumulative quantity, port and date of arrival, import entry declaration, and nature, extent, and estimated amount of the subsidy; and
- other particulars, facts, or allegations necessary to justify imposition.
- “By or on behalf of the domestic industry” means petition support by domestic producers whose collective output constitutes more than fifty percent (50%) of total production of the like product by that portion of the domestic industry expressing support or opposition.
- An investigation is initiated only when domestic producers supporting the application account for at least twenty-five percent (25%) of the total production of like product by the domestic industry.
- In cases with an exceptionally large number of producers, support/opposition may use statistically valid sampling techniques or consulting representative organizations.
- Within ten (10) days from receipt of the petition or information, the Secretary reviews accuracy and adequacy to decide if there is sufficient basis to initiate an investigation; if none, the Secretary dismisses the petition and notifies the Secretary of Finance, the Commissioner of Customs, and other concerned parties.
- Upon receipt of the petition, the Secretary must furnish the Secretary of Finance a summary of essential facts without delay and request immediate instruction to the Commissioner of Customs to gather and secure all import entries covering the allegedly subsidized product without liquidation; the Commissioner of Customs must submit within ten (10) days a complete report on number, volume, and value, and then submit similar reports every ten (10) days thereafter.
Interested parties; answers; confidentiality controls
- Within five (5) days from finding basis to initiate an investigation, the Secretary must notify all interested parties and provide them a copy of the petition and annexes, if any.
- Interested parties must submit their answer within thirty (30) days from receipt of notice, including relevant evidence or information reasonably available to controvert petition allegations.
- If interested parties fail to submit an answer, the Secretary makes a preliminary determination based on available facts and/or information.
- The Secretary must avoid publicizing the petition unless a decision has been made to initiate an investigation.
- Before proceeding to initiate an investigation, the Secretary must notify the exporting country government about the impending investigation if the petition is properly documented.
Preliminary determination; cash bond; investigation timeline
- Within twenty (20) days from receipt of answers, the Secretary makes a preliminary determination on whether a prima facie case exists for provisional countervailing duty in the form of a cash bond equal to the provisionally estimated amount of the subsidy.
- When a prima facie case exists, the Secretary issues through the Secretary of Finance a written instruction to the Commissioner of Customs to collect the cash bond in addition to corresponding ordinary duties, taxes, and charges.
- The cash bond posting is required not earlier than sixty (60) days from the date of initiation of the investigation.
- The cash bond must be deposited with a government depository bank and held in trust for the respondent importer.
- Application of the cash bond may not exceed four (4) months.
- The Secretary must transmit preliminary findings with records of the case immediately to the Tariff Commission for formal investigation.
Termination; formal investigation; causation and injury
- The Secretary or the Commission must motu proprio terminate the investigation at any stage if:
- the amount of subsidy is de minimis as defined in existing international trade agreements to which the Philippines is a party; or
- the volume of subsidized imports (actual or potential) or the injury is negligible.
- Upon receipt of records, the Commission must commence formal investigation, notify interested parties in writing, and give public notice in two (2) newspapers of general circulation.
- In formal investigation, the Commission determines:
- the nature and amount of the specific subsidy enjoyed by the imported product/commodity/article;
- the presence and extent of material injury or threat, or material retardation of growth/prevention of establishment of affected domestic industry; and
- causal relationship between subsidized imports and material injury/threat/retardation/prevention.
- Interested parties may be required by the Commission to allow access to, or provide, necessary information to expedite investigation.
- If an interested party refuses access or does not provide necessary information within a reasonable period or significantly impedes investigation, a final determination is made based on facts available.
- Formal investigation is conducted in a summary manner; no dilatory tactics or unnecessary/unjustified delays are allowed; technical rules of evidence are not applied strictly.
- A subsidy is deemed to exist when a government/public body extends financial contribution in listed forms, including direct transfers, potential direct transfers/assumption of liabilities, foregone/uncollected revenue, provision of goods/services other than general infrastructure, purchases, payments to a funding mechanism, other financial contributions to a private body to carry out specified activities, and direct or indirect income or price support; and when there is a benefit conferred.
- Exemption of an exported product from duty or tax imposed on like products when destined for consumption in the country of origin and/or refunding such duty or tax is not deemed a grant of subsidy; if drawback is allowed, only the ascertained or estimated amount by which total duties and/or internal revenue taxes was discounted or reduced constitutes a subsidy.
- Subsidy specificity is determined using principles requiring:
- explicit limitation of access to certain enterprises makes it specific;
- objective criteria and conditions governing eligibility and amount prevent specificity if eligibility is automatic and criteria are strictly adhered to, neutral, do not favor certain enterprises, and are economic in nature and horizontal in application;
- where it appears non-specific but there are reasons to believe it may be specific, factors include limited number of enterprises for a relatively longer period, disproportionately large amounts to certain enterprises, or wide and unwarranted discretion in granting; and
- limitation to enterprises in designated geographical regions makes it specific.
- Injury determinations require positive evidence and objective examination of volume, price effects, and impact on domestic producers, including specified economic indices (output, sales, market share, profits, productivity, return on investments, utilization of capacity, factors affecting domestic prices, cash flow, inventories, employment, wages, growth, ability to raise capital or investments, and for agriculture increased burden on national support programs) and other factors injuring the domestic industry simultaneously (non-subsidized import volumes/prices, demand contraction/consumption pattern changes, trade restrictive practices and competition, technology developments, and export performance/productivity).
- Threat of material injury determinations must rely on facts, not mere allegation/conjecture/remote possibility, and must clearly foresee and find imminent the change in circumstances considering factors including nature of subsidy and likely trade effects, significant rate of increase of subsidized imports, exporter capacity and likelihood of substantially increased imports, pricing effects (depressing/suppressing domestic prices and increasing demand for further imports), and inventories.
- Where effect materially retards growth or prevents establishment of a domestic industry, employment, capital investments, production, sales, and production capacity may be augmented/substituted by factual studies or reports showing adversely affected potential to grow domestically.
- For this purpose, the Department of Trade and Industry conducts continuing studies for non-agricultural products and the Department of Agriculture conducts continuing studies for agricultural products to identify industries with potential to grow or be established domestically and whose growth/establishment will be retarded or prevented by subsidized imports.
Cumulation; public notices; undertakings
- When imports from more than one country are simultaneously subject of an investigation, the Secretary or Commission may cumulatively assess effects only if:
- subsidization for each country exceeds de minimis;
- volume from each country is not negligible; and
- cumulative assessment is warranted in light of conditions of competition among imports and between imports and like domestic products.
- The Secretary or Commission must make public notices and conduct consultation with the exporting country government when:
- initiating an investigation;
- concluding or suspending an investigation;
- making a preliminary or final determination;
- making a decision to accept an undertaking or terminate an undertaking; and
- terminating a definitive countervailing duty.
- Voluntary undertakings are available when an exporter offers to revise its price or when the exporting government agrees to eliminate/limit the subsidy or take other measures.
- The Commission determines if the undertaking is acceptable and makes the necessary recommendation to the Secretary.
- If accepted, the Secretary may advise the Commission to terminate, suspend, or continue the investigation; the Secretary may also advise continuation upon request of the exporting government.
- The voluntary undertaking lapses if there is a negative finding of subsidy or material injury.
- If there is a positive finding of subsidization and material injury, the undertaking continues consistent with its terms and the section’s rules.
Final determination; imposition; cash bond disposition
- The Commission must complete the formal investigation and submit its report to the Secretary within one hundred twenty (120) days from receipt of case records.
- Before a final determination, the Commission must inform all interested parties of essential facts forming the basis for decision to impose countervailing duty, in sufficient time for parties to defend their interests.
- The Secretary must issue a department order imposing the countervailing duty within ten (10) days from receipt of an affirmative final determination by the Commission.
- The Secretary furnishes the Secretary of Finance a copy of the order and requests direction to the Commissioner of Customs to levy, collect, and pay the countervailing duty in addition to other duties, taxes, and charges.
- If the final determination is affirmative, the cash bond is applied to the countervailing duty assessed.
- If the cash bond exceeds the assessed countervailing duty, the remainder is returned to the importer immediately and no interest is payable by government on the returned amount.
- If the cash bond is less than the assessed countervailing duty, the difference is not collected.
- If the Secretary’s order is unfavorable to the petitioner, and after lapse of the period for appeal to the Court of Tax Appeals, the Secretary issues through the Secretary of Finance a department order for immediate release of the cash bond to the importer.
Duration, reviews, termination, and judicial review
- As a general rule, countervailing duty remains in force only as long as and to the extent necessary to counteract subsidization causing or threatening material injury.
- The Commission may review the need for continued imposition motu proprio or upon direction of the Secretary.
- Any interested party may petition for review if at least six (6) months have elapsed since imposition and the petition includes positive information substantiating the need for review.
- Review requests require examination of whether continued imposition is necessary to offset subsidization and/or whether injury will likely continue or recur if countervailing duty is removed or modified.
- If the Commission determines countervailing duty is no longer necessary or warranted, the Secretary issues a department order terminating the duty immediately upon recommendation and notifies all parties concerned, including the Commissioner of Customs through the Secretary of Finance.
- A countervailing duty must be terminated on a date not later than five (5) years from the date of imposition (or from the date of the most recent review if that review covered both subsidization and material injury), unless the Commission has determined in a review initiated at least six (6) months prior to the termination date upon direction of the Secretary or a duly substantiated request by or on behalf of the domestic industry that termination will likely lead to continuation or recurrence of subsidization and material injury.
- Procedures and evidence governing disposition of petitions for imposition apply equally to reviews.
- Reviews must be concluded not later than ninety (90) days from the date of initiation of the review.
- Judicial review: an interested party adversely affected by the Secretary’s department order imposing countervailing duty may file with the Court of Tax Appeals a petition for review within thirty (30) days from receipt of notice.
- Filing a petition for review does not stop, suspend, or toll imposition and collection of the countervailing duty.
Definitions and key parties
- Domestic industry means domestic producers as a whole of the like product/commodity/article, or those whose collective output constitutes a major proportion of total domestic production of those products; if producers are related to exporters/importers or are themselves importers of the allegedly subsidized product or a like product from other countries, “domestic industry” refers to the rest of the producers.
- If the Philippines market is divided into two or more competitive markets, domestic industry refers to producers within each market if subsidized imports are concentrated into that separate market and are causing injury to producers of all or almost all production within such market.
- Interested parties include:
- an exporter or foreign producer or importer of a product subject to investigation, the government of the exporting country, or a trade or business association with a majority of members that are producers/exporters/importers of the product;
- a producer of the like product in the Philippines or a trade and business association with a majority of members that produce the like product in the Philippines; and
- labor unions representative of the industry or coalitions of producers and/or labor unions.
- Like product means a product, commodity, or article identical in all respects, or in absence of such, another product/commodity/article with characteristics closely resembling those of the imported product/commodity/article under consideration.
- Inter-agency committee: Secretaries of Trade and Industry, Agriculture, and Finance, the Chairman of the Tariff Commission, and the Commissioner of Customs shall promulgate all rules and regulations necessary for effective implementation.
Administrative support; specialized units; earmarking
- Upon effectivity, the Department of Trade and Industry, Department of Agriculture, and Tariff Commission must ensure efficient and effective implementation by creating a special unit within each agency to undertake functions relative to disposition of countervailing cases.
- Countervailing duties collected must be earmarked for strengthening the capability of the Departments of Trade and Industry and Agriculture and the Tariff Commission to undertake their responsibilities under the Act.
- Additional funding comes from fees and charges the government agencies are authorized to collect under the Act.
Separability and repealing rules
- If any provision of Republic Act No. 8751 is declared invalid by a competent court, the remainder of the Act or provisions not affected by such declaration remain in force.
- All laws, decrees, ordinances, rules and regulations, executive or administrative orders, and other presidential issuances inconsistent with any provision of the Act are repealed, amended, or otherwise modified accordingly.