Title
Comprehensive Motor Vehicle Development Program
Law
Executive Order No. 877
Decision Date
Apr 23, 2010
Gloria Macapagal-Arroyo's Executive Order No. 877 establishes the Comprehensive Motor Vehicle Development Program to enhance the competitiveness of the local motor vehicle industry through investment incentives, strict regulations on used vehicle importation, and the creation of a Motor Vehicle Industry Development Council.
motor vehicle
executive order
industrial policy

Legal basis, purpose, and policy

  • EO 877 is anchored on Executive Order No. 226, which empowers the Board of Investments (BOI) to formulate and implement rationalization programs for certain industries.
  • EO 877 is intended to enhance Executive Order No. 156 (series of 2002), which provided a comprehensive industrial policy and directions for the Motor Vehicle Development Program.
  • EO 877 targets a balanced transition to open trade while minimizing risk to the local motor vehicle industry.
  • EO 877 aims to increase competitiveness in the ASEAN region and globally, and to strengthen the local supply base and parts manufacturing capacity.
  • EO 877 promotes technology development in the motor vehicle industry and support infrastructure.
  • EO 877 establishes an integrated transport policy approach to optimize the motor vehicle industry’s growth and sustainable transportation development.

Program coverage and vehicle classifications

  • Article 1, Section 1 covers the manufacture and assembly of motor vehicles in knocked-down (KD) condition only.
  • Article 1, Section 1 requires the KD scheme to promote high value added in manufacturing and a high degree of vehicle production operations.
  • Article 1, Section 1 defines Classification I (Passenger Cars) as any four (4)-wheel motor vehicle propelled by gasoline, diesel, electricity or any other motive power, principally designed to transport persons and not primarily to transport goods.
  • Article 1, Section 1 defines Classification II (Commercial Vehicles) as any four (4) or more wheeled motor vehicle propelled by gasoline, diesel, electricity or any other motive power, principally designed to transport goods/cargoes and/or persons, including utility vehicles, sports utility vehicles, commuter vans, pick-ups, light/medium/heavy trucks, buses, and special purpose vehicles (among others listed).
  • Article 1, Section 1 defines Classification III (Motorcycles) as any two (2) or three (3)-wheel vehicle propelled by gasoline, electricity or any other motive power, with or without sidecars.
  • Article 1, Section 1 defines Classification IV (Other Vehicle Assemblies) as commercial vehicle platforms, major vehicle assemblies, and bodies for commercial vehicles.
  • Article 1, Section 1 limits KD parts import eligibility to brand-new Original Equipment Manufacturer (OEM) KD parts and components for assembly purposes, subject to limitations that the BOI may impose.

MVDP participants, new participant investments, and registration

  • Article 1, Section 2 qualifies as participants entities organized under Philippine laws that engage in the manufacture and/or assembly of brand new motor vehicles.
  • Article 1, Section 2 requires participants to:
    • assemble and/or manufacture brand new quality motor vehicles; and
    • establish a new manufacturing/assembly facility or use an existing facility that is idle or in operation, provided there is investment in the manufacturing of parts and components.
  • Article 1, Section 2 requires participants to either:
    • obtain a Technical Licensing Agreement with the foreign OEM supplying KD parts/components and providing technology transfer, technical/production assistance, and support services; or
    • secure a Long-term Supply Agreement for locally-developed vehicles using major parts and components.
  • Article 1, Section 2 requires the manufacturing/assembly operation to include at least basic assembly processes of welding, painting, trimming, and quality testing/inspection.
  • Article 1, Section 3 defines a new participant as a local manufacturer/assembler not registered under EO 156 or its predecessor programs.
  • Article 1, Section 3 requires new participants, within one (1) year from the date of registration, to invest at least US$2 million for motorcycle assembly (subject to periodic BOI review).
  • Article 1, Section 3 authorizes allowed investment schemes for new participants:
    • in-house motor vehicle parts and components manufacturing; or
    • equity investment in new or existing parts/components manufacturing companies (minor or major stockholdings); or
    • cost-sharing schemes for tooling, modernization, and/or facility/technology upgrades with existing parts and components companies.
  • Article 1, Section 3 requires investments under the equity and cost-sharing schemes to result in increased capacity or improved production efficiency.
  • Article 1, Section 3 subjects purely assembly operations to BOI conditions, and authorizes the BOI to set investment requirements for parts/components manufacture for new participants using idle or operating existing assembly facilities, subject to BOI conditions.

MVDP applications, BOI decisions, certificates, and vested rights

  • Article 1, Section 4 requires that applications for registration be submitted to the BOI, together with an undertaking to invest in the manufacture and/or assembly of motor vehicles and parts/components.
  • Article 1, Section 4 requires the BOI to decide on the application within thirty (30) working days from the date of official acceptance.
  • Article 1, Section 4 provides that approved participants receive a Certificate of Registration from the BOI including:
    • the commitments made in the proposal; and
    • the terms and conditions imposed by the BOI.
  • Article 1, Section 4 requires participants to present proof of investments within one (1) year from the date of registration.
  • Article 1, Section 4 provides that failure to present proof of investments within one (1) year results in automatic cancellation of the Certificate of Registration after due process, and imposes penalties such as refund of incentives availed of, if any.
  • Article 1, Section 5 preserves continuity: existing participants under EO 156 and its predecessor programs remain members of the MVDP and continue availing the privileges, provided they are in good standing.

MVDP model rules and participation privileges

  • Article 1, Section 6 allows participants to assemble and/or manufacture any number of models, provided the models are registered with the BOI.
  • Article 1, Section 6 directs the BOI as a general rule not to register the same models under two (2) participants.
  • Article 1, Section 6 allows a participant to register multi brands of motor vehicles.
  • Article 1, Section 7 grants MVDP participants privileges including:
    • tariff rates for KD parts and components for assembly under the MVDP tariff lines of the Tariff and Customs Code, subject to issuance of Certificates of Authority (CA) by the BOI for importation;
    • inclusion of motor vehicle assembly and/or manufacture of parts/components in the annual Investments Priorities Plan (IPP) for five (5) years from the date of effectivity of the order; and
    • other privileges and benefits allowed under the program framework.

Used vehicle importation prohibition and categories

  • Article 2, Section 1 sets definitions for determining allowed imports of motor vehicles, including:
    • “Vehicle imported under the no dollar import program” (a motor vehicle personally owned by a returning resident or immigrant with GVW not exceeding 3 tons under the program’s guidelines);
    • Truck (heavy-load/general-freight/special-purpose vehicles, excluding pick-ups for this EO);
    • Bus (mass transport or carrying passengers);
    • Special Purpose Vehicles (vehicles constructed/adapted for non-transport functions or specialized transport of persons/goods, including examples such as fire trucks, crane lorries, ambulances, hearses, mobile drilling derricks, and mobile radiological units);
    • Fire truck, Crane lorry, Mobile drilling derrick, Ambulance, Hearse, Truck tractor/tractor head, Concrete-mixer lorry, Mobile radiological unit, Pickup truck (with pick-up truck defined as a vehicle with gross weight of up to 3 tons for purposes of this EO).
  • Article 2, Section 2 allows importation of brand new motor vehicles pursuant to Executive Order No. 264 series of 1995 and Monetary Board Circular No. 92 series of 1995, and defines brand new eligibility as:
    • vehicles of current or advance year model in the country of origin and/or manufacture; or
    • vehicles of the year model immediately preceding year in the country of origin and/or manufacture,
    • provided the vehicle has mileage of not more than 200 kilometers, and was acquired by the importer from the dealer as the first owner.
  • Article 2, Section 3 prohibits importation into the customs territory or Philippine territory outside the secured fenced-in Freeport zones of all types of used motor vehicles, except for allowed categories.
  • Article 2, Section 3 allows used motor vehicle importation when the vehicle is:
    • owned and for the personal use of a returning resident/immigrant and covered by an authority to import under the No-Dollar Importation Program, and the vehicle cannot be resold for at least three (3) years;
    • for use of an official of the Diplomatic Corps and authorized to be imported by the Department of Foreign Affairs;
    • a truck with GVW of 2.5 tons and above covered by an authority to import issued by DTI;
    • a bus with GVW of 6 tons and above covered by an authority to import issued by DTI;
    • a Special Purpose Vehicle including enumerated types such as fire trucks, ambulances, funeral hearses/coaches, crane lorries, tractor heads or truck tractors, boom trucks, tanker trucks, tank lorries with high pressure spray gun, reefers or refrigerated trucks, mobile drilling derricks, transit/concrete mixers, mobile radiological units, wrecker or tow trucks, concrete pump trucks, aerial/bucker flat-form trucks, street sweepers, vacuum trucks, garbage compactors, self loader trucks, man lift trucks, lighting trucks, trucks mounted with special purpose equipment, and other types designed for a specific use;
    • a motorcycle covered by an authority to import issued by DTI.
  • Article 2, Section 4 requires used vehicles exempted from the general prohibition to secure an authority to import from DTI.
  • Article 2, Section 5 requires an authority to import issued by DTI for importation of used engines and parts and components for all motor vehicles.

Monitoring, reporting, emission compliance, and implementing duties

  • Article 2, Section 6 directs DTI to monitor all importations of used motor vehicles.
  • Article 2, Section 6 requires DTI monitoring to include a monthly report submitted to DTI on results and impact of imports.
  • Article 2, Section 6 authorizes DTI, when necessary and after due public consultation, to issue an order suspending or restricting the entry of certain types of motor vehicles.
  • Article 2, Section 6 directs the Bureau of Customs (BOC) to submit monthly information to DTI, including the importer’s name and address, quantity and invoice values, make/model/year and identification numbers, date of importation, assessed values, tariff classification and rate of duty per vehicle, total taxes and duties paid, and other relevant information.
  • Article 2, Section 6 directs the LTO to submit monthly registration information to the Council, including registrant’s name and address, quantity and invoice values, make/model/year and identification numbers, date of registration, and other relevant information.
  • Article 2, Section 6 sets the timing: the monthly submissions must be made not later than fifteen (15) days after the end of the reference month.
  • Article 2, Section 6 authorizes DTI through the BOI, in coordination with BOC and LTO, to issue additional guidelines to effectively implement the directives.
  • Article 2, Section 6 requires emission compliance consistent with Republic Act No. 8749 (Clean Air Act of 1999) by providing that imported motor vehicles shall not be sold nor allowed to operate unless they comply with emission standards, and the LTO shall only register imported motor vehicles upon compliance.
  • Article 2, Section 6 assigns implementation responsibilities to relevant agencies (including DOF and DOTC), and directs agencies instructed under the EO to issue additional directives, circulars, or orders within fifteen (15) days from effectivity to implement the provisions.

Import violations and penalties

  • Article 2, Section 7 provides that all vehicles imported found to violate EO 877 are subject to seizure and re-exported at the expense of the importer/consignee immediately.

Tariff restructuring, excise tax restructuring, and export incentives

  • Article 3, Section 1 requires the tariffs for motor vehicle products to be restructured at rates comparable to neighboring countries with similar motor vehicle development programs, consistent with MVDP objectives.
  • Article 4, Section 1 requires the excise taxation system for motor vehicles to be restructured to create a fair, simple, transparent and stable taxation system and promote development of the motor vehicle industry.
  • Article 5, Section 1 provides for an incentive package for exports of motor vehicles, other vehicle assemblies, and their parts/components to encourage greater participation and diversification in automotive exports.

Standards, mutual recognition, and support infrastructures

  • Article 6, Section 1 requires establishing standards and technical regulations for quality, safety, and environmental performance of motor vehicles, among others.
  • Article 6, Section 2 directs efforts toward adoption of a Mutual Recognition Agreement (MRA).
  • Article 6, Section 3 provides that privileges and benefits shall be extended to support infrastructures as may be allowed under the Article framework.

Parts manufacturing and auto-supporting industries

  • Article 7, Section 1 requires implementing support measures to ensure development, competitiveness, and capacity utilization of parts manufacturing and auto-supporting industries.

ASEAN integration of agreements and programs

  • Article 8, Section 1 requires the MVDP to aggressively continue taking advantage of ASEAN free trade agreements and programs for the benefit of the automotive industry.

Motor Vehicle Industry Council creation and governance

  • Article 9, Section 1 creates a Council for the motor vehicle industry under the supervision of the DTI.
  • Article 9, Section 1 makes the Council the central policy coordinating body to ensure accelerated development of the Philippine motor vehicle industry in accordance with the EO.
  • Article 9, Section 1 specifies the Council composition as:
    • DTI Secretary as Chairman;
    • DTI Undersecretary for Industry and Investments as Vice Chairman;
    • DTI Undersecretary for Consumer Welfare and Trade Regulations as Member;
    • DENR Undersecretary as Member;
    • DOE Undersecretary as Member;
    • DOLE Undersecretary as Member;
    • Assistant Secretary, LTO as Member;
    • Chairman, LTFRB as Member;
    • Commissioner, BOC as Member;
    • Four (4) industry representatives appointed by the President upon recommendation of motor vehicle industry associations for a term of two (2) years.
  • Article 9, Section 1 provides that permanent representatives designated by government members must not be lower than the position of Assistant Secretary.
  • Article 9, Section 2 grants Council powers and functions including overseeing MVDP and related automotive programs, harmonizing policies and regulations, and coordinating government efforts toward investment attraction, innovative technology, high value-added manufacturing in niche areas, increasing automotive exports and production hub status, and strengthening parts/component manufacturers.
  • Article 9, Section 3 creates a Motor Vehicles Industry Department in the BOI headed by a Director, with the organizational structure drawn and approved by the BOI Board; the Department serves as the Secretariat of the Council.
  • Article 9, Section 4 authorizes the Council to require assistance and cooperation of any government agency or entity/association for effective implementation.
  • Article 9, Section 5 requires organizing the Council within thirty (30) days from promulgation and mandates it to meet at least once in every quarter or as needed; seven (7) members constitute a quorum.
  • Article 9, Section 6 authorizes the Council, in its discretion, to provide honoraria and allowances subject to existing rules and regulations.
  • Article 9, Section 7 requires the Council to submit a supplemental budget to the Department of Budget and Management setting aside an initial Twenty Million Pesos (P20 million) for organizational and operational expenses from any National Treasury fund not otherwise appropriated, and provides for subsequent regular line items in the General Appropriations Act under the BOI budget.

Industry Development Fund administration

  • Article 10, Section 1 establishes an Industry Development Fund (IDF) administered by the Council through the BOI to support research and development, acquisition/development/upgrading of equipment and facilities, and exporter-related support.
  • Article 10, Section 1 provides that the IDF is sourced from:
    • the Council’s budget; and
    • contributions from private sector stakeholders.
  • Article 10, Section 1 allows supplementation with grants and donations from any private or government office, agency, or corporation in the Philippines or abroad.
  • Article 10, Section 1 requires that the IDF be accounted for and disbursed in accordance with pertinent existing laws and accounting/auditing rules and regulations.

Penalties for participants and government officials

  • Article 11, Section 1 provides that in case of violation of EO 877 provisions or the registration terms and conditions, after due notice, Participants may be required to refund benefits they enjoyed including interests and monetary penalties and/or have registrations cancelled or suspended.
  • Article 11, Section 2 provides that any person/entity/government instrumentality/institution found violating or grossly negligent in executing the mandates results in expulsion from office of specified personnel (chief executive officer, responsible directors, responsible rank and file personnel, and other responsible operating officers).
  • Article 11, Section 2 imposes that those expelled are likewise prohibited from holding any government position for at least two (2) years notwithstanding any contrary law.

Implementing rules, repeals, and separability

  • Article 12, Section 1 repeals, amends, or modifies all other orders, rules, and regulations or portions inconsistent with EO 877.
  • Article 12, Section 2 requires the BOI, in consultation with concerned government agencies and the industry, to promulgate implementing rules and regulations within sixty (60) days from effectivity of the EO.
  • Article 12, Section 3 provides separability: if any provision is declared unconstitutional, the unaffected provisions remain in full force and effect.

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