RP to file trade protest vs Thailand

The government is ready to lodge a protest against Thailand over its recent decision to impose an excise tax on imported off-road purpose vehicles (OPVs).

Trade and Industry Secretary Cesar V. Purisima, however, said that Ford Philippines has asked that it be allowed to handle the situation first before the government officially intervenes in the tax matter.

The proposed Thai excise tax would be imposed three months earlier on imported OPVs before being implemented next year on locally assembled Thai OPVs.

Specifically affected by the new Thai excise tax are Ford Philippines-exported sports utility vehicles.

Recently, Thailand decided to increase its excise tax on OPVs from 29 percent up to 50 percent by September, while putting off until

January 2005 a similar increase on locally produced SUVs.

The new tax is being seen as a move by Thailand to woo Ford to transfer production of its SUV models from the Philippines to Thailand.

As such, if Ford decides to assemble the Escape SUV in Thailand, it would not be subject to the increased excise tax of 35 percent for its 2.3 Litre version and 40 percent for the 3.0 L version until next year.

Specifically affected would be Ford Philippines-assembled Escape SUVs and most likely the Mazda Tribute SUVs which Ford Philippines has started assembling and will export to Thailand, Indonesia and Malaysia.

Mazda is a subsidiary of Ford Motors Co.

Ford has reportedly already filed a protest with the Thai Government and is expected to elevate the matter up to the US Trade Representative (USTR) so that the matter can be resolved as a bilateral trade issue.

Ford Motors Company Philippines, Inc. has exported some 21,000 completely built-up (CBU) units of the Lynx and Escape models to Thailand, Indonesia and Malaysia since May 2002 to the present.

Ford has also started production of the Protege and Mazda Tribute models for both local and export sales.

Ford Motors Company, as part of its Asian regional plan, had designated the Philippines as the main export production hub for its Lynx, Protege, Escape and Mazda Tribute models.

Ford Thailand, on the other hand, produces the popular Ford Ranger pick-up which is imported by the Philippines.

While the Escape is a bestseller in Thailand, the Ford Ranger is a better bestseller in the Philippines than the Escape.

Based on Thai newspaper reports, the purported reason for the increase in the excise tax on SUVs is to simplify their automotive tax structure and to encourage energy savings.

Thus, excise taxes on passenger cars and vehicles using alternative fuel would be lowered, while taxes on off-road vehicles would be raised.

However, Thai industry sources had assured that in the case of Ford Escape, the increased excise tax would not hurt as much since it is already subject to a low custom duty under the ASEAN Free Trade Agreement.