Importation of SKD car units no longer allowed, says BOI

Importation of semi-knocked down units (SKDs) will no longer be allowed.

The Board of Investments (BOI) has finally put its foot down on attempts to get around the restriction on the importation of SKD units which was mandated in Memorandum Order 473 issued on April 8, 1998.

The new SKD policy would affect pending requests from Ford Motor Co. and the Columbian Group, as well as the approved SKD requests of Norkis Automotive Resources Corp. (NARC), Proton Pilipinas Corp. (PPC), and Columbian Motors Corp. (CMC).

In its board meeting last May 10, the BOI decided that it will no longer accept applications for the privilege of SKD Importation at preferential completely knocked down (CKD) tariff rates.

SKD imports are subject to a seven percent tariff rate, while CKDs carry a three percent rate.

Likewise, the BOI also recommended to the Office of the President that it should not entertain such applications.

According to Trade and Industry Secretary Manuel Roxas II, who is also the concurrent BOI Board chairman, the Office of the President has adopted the recommendation.

With the new SKD policy, the government intends to strengthen the Motor Vehicle Development Program (MVDP).

It would also create a level playing field in the automotive industry, enhance revenue collections, reduce the cost of doing business and support the small and medium enterprises (SMEs) of the parts manufacturing industry.

Roxas said that the new SKD would effectively close the door on the pending requests of Ford and CMC.

Ford had planned to Import SKD units of its sports utility vehicle, the Ford Escape.

CMC had requested authority to bring in SKDs of Kia vehicles.

However, on the earlier approved SKD request of NARC, PPC and CMC, they would be allowed to go ahead with their SKD importation, but only within the validity period of their Certificate of Authority (CA).

The BOI Board has also firmly ruled that there will be no extension of the validity of the CA. Likewise, the BOI would also not allow the extension of the deadline to go into full CKD operations.

A condition to the grant of the SKD Importation was for the automotive manufacturers to eventually go into full CKD operations.

The request for SKD imports was supposedly to test the market and determine which model would eventually be assembled locally.

Roxas warned that firms that fail to comply with all the conditions of the SKD authority would face the cancellation of their SKD authority and enforce payment of difference of the taxes and duties between the completely built-up (CBU) units and CKD as covered by the corporate/personal guarantee.