Government allows Transfarm to import more Daewoo cars

Government has allowed the Cebu-based Transfarm & Co. Inc (TFI) to import more Daewoo car models to cover the unutilized balance of its previous import authority for completely knocked-down (CKD) units.

Following the failure of its planned joint venture with the beleaguered Daewoo Motor Corp, TFI had deferred the start of its CKD assembly operation until the case has been resolved in various courts.

However, documents from the Board of Investments (BOI) reveal that TFI had been allowed to continue importing CKD units of the Daewoo Tico/Matiz model provided it pays the difference between the taxes and duties of the CKD and completely built-up (CBU) units on all importations.

TFI was also required to meet the net foreign exchange earnings (NFEE) requirements under the Motor Vehicle Development Program. The company has a $28.261-million NFEE deficit incurred from the previous importation of other Daewoo models.

So far, the BOI said TFI has imported a total of 54 units of Daewoo Tico/Matiz and it was given an extended authority to import the unutilized portion of its previous authority to import a total of 122 units of soft-CKD units. Unlike CKD units, soft-CKDs do not have tires and batteries and their hoods and doors are not attached.

The BOI’S engineering industries department said TFI has thus far committed to pay some P14.5 million to cover the tax and duty different between CKD and CBU units as well as to meet the $37.8-million NFEE requirement (computed at P40:$1).

The tax differential, the BOI said, should be paid as soon as the Securities and Exchange Commission (SEC) decides on the TFI-Daewoo case and orders the dissolution of the ill-fated joint venture between the two companies.

FTI, however, would be making a risky gamble because non-compliance would be ground for the cancellation of TFI’s registration of the Daewoo models under the MVDP.

TFI, was under contract to assemble Daewoo cars at its Mandaue assembly plant and distribute the vehicles to the local market until the Korean car manufacturer decided to rescind the agreement for still undisclosed reasons.

Several lawsuits and appeals later, the two parties are still in a deadlock over how to resolve the issue. Daewoo had since filed with the BOI a separate application registration for the same car model being assembled by TFI, arguing that it had the option to do so since the joint-venture agreement had already been resolved.

TFI had asked Daewoo to buy it out the joint venture if the Korean company wished to dissolve the venture and register on its own and the company had earlier pegged its asking price at $20 million.

Daewoo and Transfarm’s differences started when Daewoo invoked the dissolution clause of their joint venture agreement and decided to register with the BOI on its own.

However, since Transfarm had already registered with BOI, the board could not act on the application filed by Daewoo until the ensuing legal tussle is resolved.