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Tuesday, May 16, 2006
Arroyo allows reduction of import tariffs on oil
MANILA -- President Gloria Macapagal-Arroyo has ordered the lowering of import duties on crude and refined petroleum products from the present three percent to two percent, one percent, and zero percent once world oil prices hit certain "trigger levels."
Arroyo, through Executive Order (EO) 527, said the automatic tariff mechanism, which would be based on certain triggers indexed to global oil prices, "would soften the impact of high and rising world prices on the economy and on the consuming public, without necessarily draining government revenues."
Under the order, Arroyo subjected the crude and refined petroleum products to the Most Favored Nation (MFN) rate of three percent and ordered them reduced based on triggers indexed to world oil prices.
The Department of Energy (DOE) was supposed to make public Monday the trigger price levels, which will be contained in the order's implementing rules and regulations (IRR).
The MFN rates shall take effect once the energy office notifies the Department of Finance (DOF) that a trigger price has been reached. The tariffs shall be automatically restored as international prices drop based on the same trigger prices. The Bureau of Customs (BOC) will then issue a memorandum order.
EO 527 shall be effective for six months subject to review.
Arroyo also issued EO 528, which extended for another five years the zero and one percent tariff on imports of certain capital equipment, spare parts, and accessories of registered new and expanding enterprises in order to reduce the cost of business start up operations.
The two-year effectivity of the import tariff rates is supposed to expire on June 6, 2006.
Arroyo said there is a need to extend the duty-free importation of capital equipment, spare parts, and accessories by enterprises in economic zones and freeports for the Philippines to attract more foreign direct investments.
Under EO 528, the zero percent duty shall be granted to expanding enterprises and businesses that are newly registered with the Board of Investments (BOI) upon the BOI's issuance of a certificate of authority.
However, the imported machinery or equipment must not be manufactured domestically in sufficient quantity, comparable quality, and at reasonable prices. The imported equipment should also be "reasonably needed" and used by the business in its registered activity, unless the BOI's prior approval is secured.
The registered enterprise also cannot sell, transfer, or dispose of the equipment without prior BOI approval within five years. Otherwise, the enterprise will have to pay twice the foregone duty without prejudice to applicable penalties.
Arroyo signed EO 527 and EO 528 last May 12, or two days before Congress resumed session. The 1987 Constitution provides that all appropriations and tariff laws should emanate from the House of Representatives.
However, the President may fix the tariff rates if Congress is not in session. (JMR/Sunnex)
(May 16, 2006 issue)
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