Government lifts tariff shield on big wire, nail producers

Government has lifted the protection on big wire and nails manufacturers, with the Cabinet committee on Tariffs and Related Matters (TRM) approving a uniform three-percent tariff on low, medium and high-carbon wire rods used in the manufacture of wires and nails.

The decision drew mixed reactions from wire and nails manufacturers who have been using the tariff differential between low, medium and high-carbon wire rods (LCWR, MCWR and HCWR) to engage in trading activities.

TRM sources told reporters yesterday that the committee has approved the reduction of the seven- percent tariff on MCWR, a class of wire rods used specifically for the manufacture of wires and nails.

According to the source, the new three-percent tariff would align MCWR with LCWR and HCWR which have been covered with a three-percent tariff. The source said the committee made the decision since the lead manufacturer of MCWR is no longer producing this class of rods and therefore no longer needs protection from imports.

The source explained that Cathay Pacific Steel Co. (Capasco), the steel company owned by former presidential adviser John Ng, never actually started to manufacture MCWR.

According to the source, Capasco is instead importing the rods and selling them to small wire and nails manufacturers who do not have the volume to make the importation themselves.

The source explained that the original tariff schedule was defined under Executive Order 63 which made the distinction between LCWR, MCWR and HCWR because MCWR was being produced locally.

EO 63 also set a minimum volume requirement for importers within which they could import MCWR at a preferential tariff rate of three percent.

At the time, the source said big wire and nails manufacturers opposed the higher tariff on MCWR because of the minimum access volume and the tariff differential.

However, the source said the manufacturers now want to retain the seven-percent tariff because they generate incremental revenue from re-selling their MCWR imports to small wires and nails manufacturers.

The source explained that small nails and wires manufacturers import through the big manufacturers that have the volume to qualify under the three-percent minimum import volume requirement.

Now that the Cabinet has approved the uniform three-percent tariff, the source said wires and nails manufacturers can now import at three percent regardless of volume. Big wires and nails manufacturers that also trade in imported wire rods will lose a big source of income.