Safeguard Measures

A.  EMERGENCY MEASURES AGAINST INJURIOUS IMPORTS  

What are safeguard measures?

             The WTO permits Member Countries to provide affected domestic industries relief against imports under circumstances specified in the General Agreement on Tariffs and Trade 1994 (GATT 1994). 

Under Article XIX (Emergency Action on Imports of Particular Products) of GATT 1994, as clarified and reinforced by the WTO Agreement on Safeguards, the importing government may take temporary (general) safeguard measures (higher tariffs, tariff quotas, or quantitative restrictions) against imports if the  products at issue are being imported in such increased quantities, either absolute or relative to domestic production, and under such conditions as to cause or threaten to cause serious injury to the domestic industry.

On the other hand, the WTO Agreement on Agriculture allows for the application of special transitional safeguards (additional duty not exceeding one-third of the level of the effective tariff) against importations of agricultural products whose quantitative import restrictions (QR’s) were converted (“tariffied”) into ordinary customs duties and agricultural products designated with the symbol “SSG” (Special Safeguard Measures) in the GATT Schedule of Concessions.  

Special safeguard measures may be invoked, if:

i       the volume of imports exceeds a trigger level; or (but not concurrently)

i     the price of imports falls below a trigger price.

In either case, injury to the domestic industry need not  be established.

The purpose for the application  of safeguard measures is to give the affected domestic industry time to prepare itself for and adjust to increased import competition resulting from the reduction of tariffs or the lifting of quantitative restrictions agreed upon in multilateral trade negotiations.

B.  SAFEGUARD ACTIONS  VIS-À-VIS DUMPING/COUNTERVAILING MEASURES

How do safeguard actions differ from anti-dumping and countervailing measures?

Comparison of Anti-Dumping, Countervailing, and Safeguard Measures

1. Relevant Agreement

2. Nature of Measure

3. Coverage of Measure

4.     Minimum Threshold of Support of Industry for Application

5.      Objective

6. Elements to be Established

7. Forms of Measure               

8.      Imposition of Provisional Measure

9. Duration of Definitive Measure

C.    THE PHILIPPINE LEGISLATION ON SAFEGUARD MEASURES

1.    What is the law on the application of safeguard measures?

Republic Act No. 8800, otherwise known as the “Safeguard Measures Act” provides for: 

-                    general safeguard measures to relieve domestic industries suffering from serious injury as a result of increased imports.

-                    special safeguard measures (additional duty not exceeding 1/3 of the existing rate of duty) on agricultural products marked “SSG’ in Schedule LXXV-Philippines, when the import volume exceeds its trigger level or when the actual c.i.f. import price falls below a trigger price level

2.   When was R.A. No. 8800 signed?  effective?

Former President Estrada signed the law on  July 19, 2000.  R.A. 8800 was published on  July 24, 2000 and took effect on  August 9, 2000, i.e., fifteen (15) days following its complete publication.

3.  Have the rules and regulations to implement R.A. 8800 been promulgated?

Yes, the Implementing Rules and Regulations (IRR) was signed by the concerned Secretaries/Agency Heads and published in  Manila Standard on October 4, 2000.  The IRR (Joint Administrative Order No. 03, s. 2000) took effect on  October 11, 2000, i.e., seven (7) days after publication 

4.  What government agencies administer the Safeguard Measures Act?

General safeguard measures

D.    PROCEDURES

1.   Who may file a petition for safeguard measures?

General safeguard measures

i.                    Domestic producers as a whole, of like or directly competitive products manufactured or produced in the Philippines, or those  whole collective output of like or directly competitive products constitutes a major proportion of the total domestic production of those products;

ii.                  The President, or  the House or Senate Committee on Agriculture, or the House or Senate Committee on Trade and Commerce; and

iii.                The  DTI or DA Secretary, motu proprio, if there is evidence of increased imports of the product under consideration.

                   Special safeguard measures

i.                    Any person, whether natural or juridical may request a verification if a particular agricultural  product can be imposed a special safeguard duty.

ii.                  The DA Secretary may, motu proprio, initiate the imposition of a special safeguard measure following the satisfaction of the conditions for imposing the measure.

2.   Where to file?

General safeguard measures

Petitions for safeguard action shall be filed with the DTI Secretary in the case of non-agricultural products, or with the DA Secretary in the case of agricultural products, who shall determine whether or not the petition is proper in form and substance and whether or not the documentary requirements are complied with.

                   Special safeguard measures

The request shall be filed with the Secretary of the Department of Agriculture.

3.   What are the stages in a safeguard investigation?

General safeguard measures

The general safeguard investigation has four (4) distinct stages:

i     Prima Facie Determination

    The DTI-BIS or DA, upon acceptance of the properly documented petition, has five (5) calendar days to decide whether a prima facie case exists to merit the initiation of a preliminary investigation.  In its determination, the BIS or DA undertakes an in-depth evaluation of the data submitted or provided, together with the information obtained independently.

If no prima facie case exists, the application is denied.

i                    Preliminary Determination

                Once a prima facie case has been established, DTI-BIS initiates the preliminary determination.

                Within two (2) calendar days after the decision to initiate the preliminary investigation is made, DTI-BIS or DA notifies all known interested parties and the government of the exporting country about the initiation of the investigation and sends a proforma respondent’s questionnaire to all the interested parties (importers, domestic manufacturers, exporters, etc.).

Not later than thirty (30) calendar days from receipt of the properly documented petition, the Secretary shall, on the basis of the petition, the answers of the respondents and the supporting documents or information, make a preliminary determination that increased imports of the product under consideration are a substantial cause of, or threaten to substantially cause,  serious injury to the domestic industry.

In case of preliminary affirmative findings, the Secretary of either DTI or DA advises, within three (3) calendar days from making a decision, the Secretary of Finance to instruct the Bureau of Customs to impose the provisional safeguard measure.  Such measure shall take the form of a tariff increase either ad valorem or specific, or both, to be paid through a cash bond.  In the case of agricultural products, where the tariff increase may not be sufficient to redress or to prevent serious injury to the domestic producers, a quantitative restriction may be applied.

The preliminary affirmative findings by the DTI-BIS or DA, together with the records of the case, shall be transmitted to the Commission for its immediate formal investigation of the case within three (3) calendar days from adopting the decision.  However, if the preliminary findings are negative, the DTI or DA Secretary shall terminate the investigation.

i                    Formal Investigation

The Commission shall conduct the formal investigation to determine:

a.                  if the domestic product is a like product or a product directly competitive to the imported product under consideration;

b.                  if the product is being imported into the Philippines in increased quantities (absolute or relative to domestic production);

c.                  the presence and extent of serious injury or  threat thereof to the domestic industry that produces like or directly competitive product; and

d.                  the existence of a causal relationship between the increased imports of the product under consideration and the serious injury or threat thereof to the affected domestic industry.

The Commission shall conclude its formal investigation and submit a report of its findings and conclusions to the Secretary within one-hundred-twenty (120) calendar days from receipt of the request from the Secretary, except when the Secretary certifies that the same is urgent, in which case the Commission shall complete the investigation and submit the report  within sixty (60) calendar days.

Upon its positive determination, the Commission shall recommend to the Secretary an appropriate definitive measure.

i       Decision

Within fifteen (15) calendar days from receipt of the Report of the Commission, the Secretary shall make a decision, taking into consideration the measures recommended by the Commission.

If the determination is affirmative, the Secretary shall issue, within two (2) calendar days after making his decision, a written instruction to the heads of the concerned government agencies to implement the appropriate general safeguard measure as determined by him.

In case of a negative final determination or if the cash bond is in excess of the definitive safeguard duty assessed, the Secretary shall immediately issue, through the Secretary of Finance, a written instruction to the Commissioner of Customs, authorizing the return of the cash bond or the remainder thereof, as the case may be, previously collected as provisional general safeguard measure within ten (10) days from the date the final decision had been made.

              Special safeguard measures

i                    Verification

The DA Secretary shall verify if  the cumulative import volume of an “SSG”-denominated agricultural product in a given year has exceeded its trigger volume or, but not concurrently, its actual c.i.f. import price is less than its trigger price.

i                    Findings

The Secretary shall come up with a finding within five (5) working days from the receipt of a request.

i                    Imposition of special safeguard measure

The Secretary shall issue a Department Order requesting the Commissioner of Customs through the Secretary of Finance to impose an additional special safeguard duty.

E.     DETERMINATION OF SERIOUS INJURY OR THREAT THEREOF

General safeguard measures

1.    What economic factors should the Commission take into account in determining serious injury?

The Commission shall consider all relevant economic factors, including:

i                  the rate and amount of the increase in imports of the product under consideration in absolute or relative terms;

i            the share of the domestic market taken by the increased imports;

i            changes in the level of sales, prices, production, productivity, capacity utilization, inventories, profits and losses, wages and employment of the domestic industry;

i            significant idling of productive facilities in the domestic industry including the closure of plants or underutilization of production capacity;

i            inability of a significant number of firms to carry out domestic production at a profit; and

i            significant unemployment or underemployment within the domestic industry.

              Special safeguard measures

Injury is not an element in the imposition of special safeguard measure.

2.   In making a determination of the existence of a threat of serious injury, what should be considered?

i            Significant rate of increase in imports into the Philippines indicating the likelihood of substantially increased importation, evidenced inter alia  by the existence of letters of credit, supply or sales contract, the award of a tender, an irrevocable offer or other similar contracts;

i            Sufficient freely disposable, or an imminent, substantial increase in, production capacity of the foreign exporters including access conditions they face in third country markets, indicating the likelihood of substantially increased exports to the Philippines;

i            Decline in sales or market share, and a downward trend in production, profits, wages, productivity or employment (or increasing underemployment) in the domestic industry and its inability to generate capital for modernization or to maintain existing levels of expenditures for research and development; and

i            Growing inventories of the product being investigated whether maintained by Philippine producers, importers, wholesalers or retailers.

F.     MEASURES

General safeguard measures

What are the remedies/measures imposed against the injurious import surge?

i       Provisional measure (applied only after a preliminary affirmative determination by BIS or DA)

Such measure shall take the form of a tariff increase either ad valorem or specific, or both, to be paid through a cash bond set at a level sufficient to redress or prevent serious injury to the domestic industry.

In the case of non-agricultural products, the Secretary shall first establish that the imposition of the provisional safeguard measure would be in the public interest.

In the case of agricultural products, where the tariff increase may not be sufficient to redress or to prevent serious injury to the domestic producer or producers, a quantitative restriction may be applied.

The duration of the provisional measure shall not exceed two hundred (200) calendar days from the date of imposition.

i                   Definitive safeguard measure (following affirmative final determination by the Commission)

a.                  An increase in, or imposition of, any duty on the imported product (not subject or limited to the maximum levels of tariff as set forth in Section 401 (a) of the Tariff and Customs Code of the Philippines, as amended);

b.                  A decrease in or the imposition of a tariff-rate quota (MAV) on the product;

c.                  A modification or imposition of any quantitative restriction on the importation of the product into the Philippines;

d.                  One or more appropriate adjustment measures, including the provision of trade adjustment assistance;

e.                  Any combination of actions described in subparagraphs (a) to (d).

The Commission may also recommend other actions, including the initiation of international negotiations, to address the underlying cause of the increase in imports of the product to alleviate the injury or threat thereof to the domestic industry and to facilitate positive adjustment to import competition.

                        Special safeguard measures

1.  What special safeguard measures are imposed with respect to “SSG”-denominated agricultural products?

i Under the volume test, the special safeguard duty shall be set to a level not exceeding one-third (1/3) of the applicable out-quota customs duty on the agricultural product under consideration.

i On the basis of the price test, the additional duty shall be computed as follows:

i.                    Zero, if the price difference is, at most, ten percent (10%) of the trigger price; or

ii.                  Thirty percent (30%) of the amount by which the price difference exceeds ten percent (10%) of the trigger price, if the said difference exceeds ten percent (10%) but is at most forty percent (40%) of the trigger price; or

iii.                Fifty percent (50%) of the amount by which the price difference exceeds forty percent (40%) of the trigger price, plus the additional duty imposed under paragraph ii, if the said difference exceeds forty percent (40%) but is, at most, sixty percent (60%) of the trigger price; or

iv.                 Seventy percent (70%) of the amount by which the price difference exceeds sixty percent (60%) of the trigger price, plus the additional duties imposed under paragraphs ii and  iii,  if the said difference exceeds sixty percent (60%) and is, at most, seventy-five (75%) of the trigger price; or

v. Ninety percent (90%) of the amount by which the price difference exceeds seventy-five percent (75%) of the trigger price; plus the additional duties imposed under paragraphs ii, iii, and iv, if the said difference exceeds seventy-five percent (75%) of the trigger price.

2.  What is the duration of the safeguard measures?

Definitive general safeguard measures

General rule:

i       The maximum initial period for the application of the safeguard measure is four (4) years.

Note: Such four (4) year period shall include the period, if any, in which a provisional relief was in effect 

Exception to the general rule

i       The initial period may be extended up to a maximum of eight (8) years  (10 years for developing countries).

Special safeguard measures

The additional special safeguard duty shall be maintained only until the end of the year in which it is imposed.

3.  What are the limitations in the application of   safeguard measures?

i       Extent of redressing or preventing the injury;

i            To facilitate the domestic industry’s adjustments from the adverse effects directly attributed to the increased imports;

When quantitative import restrictions are used, such measures shall not reduce the quantity of imports below the average imports for the three (3) preceding representative years, unless clear justification is given that a different level is necessary to prevent or remedy a serious injury.

General safeguard measure shall not be applied to a product originating from a developing country, if that country’s share of total imports of the product is less than three percent (3%), provided that the developing countries with less than three percent (3%) share collectively account for not more than nine percent (9%) of the total imports.

Special safeguard measures

To safeguard and enhance the interest of farmers and fisherfolk, the provisions of Republic Act No. 8435, otherwise known as the Agriculture and Fisheries Modernization Act (AFMA), will not be affected by the provisions of the special safeguard measures under R.A. 8800.

There shall be no recourse to the use of special safeguards measures concurrently with the general safeguard measure.

The special safeguard provisions of R.A 8800 shall lapse with the duration of the reform process in agriculture as determined in the WTO.  Thereafter, recourse to safeguard measures shall be subject to the provisions on general safeguard measures as provided in R.A. 8800.

4.  Can the Commission recommend the application of general safeguards on a bilateral or selective basis?

No.  One of the major guiding principles of the WTO Agreement on Safeguards is that such measures be applied on a non-selective or “most-favoured-nation” (MFN) basis.  Article 2(2) states, “Safeguard measures shall be applied to a product being imported irrespective of its source.” Thus, a WTO Member may not choose specific countries against whose exports it applies the measures.

5.  Does the Philippines have to pay compensation to apply a general safeguard measure?

Yes.  The Philippines, when applying safeguard measures, must generally “pay” for them through compensation which is substantially the equivalent level of concessions and other obligations with respect to affected exporting WTO members.  To do so, any adequate means of trade compensation may be agreed upon by the affected Members through consultation.  In the absence of such agreement on compensation within thirty (30) days, the affected exporting Members may individually suspend substantially equivalent concessions and other obligations (i.e. retaliate) unless the Council for Trade in Goods disapproves.  However, this right to retaliate may not be exercised for the first three years that a safeguard measure is in effect, provided that the measure has been taken as a result of an absolute increase in imports, and conforms to the provisions of the Agreement.

G.    ADJUSTMENT PLAN IN GENERAL SAFEGUARD ACTION

1.  What is the adjustment plan to be submitted by the concerned domestic industry or other concerned parties to facilitate positive adjustment to import competition?

The “adjustment plan” is the action plan indicating  a set of quantified goals, specific programs, and timetables that a concerned industry commits to undertake in order to facilitate the industry’s positive adjustment  to import competition (e.g., adoption of improve technology,  rationalization of production structures).

2.  When is the adjustment plan  submitted to the Commission?

i            Within forty-five (45) calendar days upon receipt of the notice.

i            Within thirty (30) calendar days upon receipt of the notice, if the investigation is certified as ”urgent.”

3.  What is the task of the Commission with regard to the adjustment plan?

The Commission shall monitor developments with respect to the domestic industry, including its progress and the specific efforts made by  workers and firms in the domestic industry to effect a positive adjustment to import competition.

The Commission shall submit to the Secretary a report on the results of the monitoring after hearing all interested parties including the Department of Labor and Employment.

H.    POST FORMAL INVESTIGATION ACTIVITIES OF THE COMMISSION

What tasks remain to be done by the Commission after its formal investigation of general safeguard cases?

i       Monitoring of the domestic industry’s progress and specific efforts to bring about a positive adjustment to import competition;

i            Conduct of investigation on the request for extension and re-application of safeguard measures;

i            Conduct of investigation on request for reduction, modification and termination of safeguard action; and

i            After the termination of the safeguard measure, evaluation of the effectiveness of the actions taken by the domestic industry in facilitating positive adjustment to import competition.

I.        COMPATIBILITY OF THE SAFEGUARD MEASURES ACT WITH THE WTO AGREEMENT ON SAFEGUARDS

Is R.A. 8800 aligned with the WTO Agreement?

            On the whole, the national legislation conforms with the Agreement except on the provision for quantitative restriction as a provisional measure for agricultural products.  The Agreement allows only for tariff adjustment as a form of provisional measure.

J.      ATTRACTION OF GENERAL SAFEGUARD MEASURES VIS-À-VIS ANTI-DUMPING AND COUNTERVAILING DUTIES

Will concerned domestic industries elect to petition for safeguard measures more than for anti-dumping and countervailing relief?

·                    Yes.  The grounds for the imposition of  general safeguard measure are less stringent.  All that has to be established is the existence of the seriously injurious increase in the volume of imports. In the case of anti-dumping and countervailing investigations, strict criteria are prescribed for determining dumping (i.e., export price is less than normal value in the exporting countries) and subsidization.  Moreover, countervailing cases necessarily involves the Philippine government and the subsidizing foreign government, a situation that may cause intra-state frictions. 

Since the enactment of the Safeguard Measures Act in 2000, six (6) safeguards cases (cement, float glass, figured glass, glass mirror, ceramic tiles, sodium tripolyphosphates technical grade) were investigated by the DTI-BIS and TC.

·              No.  The “serious” injury element in safeguard cases requires a more stringent test than the “material” injury as required in anti-dumping or countervailing investigation. 

In the case of special safeguard measures, injury need not be established.  Only the volume or price of imports will be verified to be exceeding a base trigger level or falling below a trigger price, respectively.