The Board of Investments mulls the deferment on the compliance of requirements and conditions imposed to participants of the Motor Vehicle Development Program (MVDP) and the Automotive Export Program (AEP) to provide relief to the domestic industry and encourage possible new investments in light of the global financial crisis.

Under the proposed policy measures, registered participants in the MVDP are allowed to defer their investment commitment for assembly and parts manufacturing parts, production and sales schedule, base equity of at least 25 percent, and parts localization program.

Under the MVDP rules, each new participant over a period of one year shall invest and/or bring in investments in the manufacture of motor vehicle parts and components for both export and domestic markets, equivalent to $ 10 million for passenger car assembler, or $8 million for commercial vehicle assembler or $ 2 million for motorcycle assembler.

On the automotive parts localization program, the government has also issued Executive Order 262 in December 2003 to restructure the most favored nation (MFN) tariff rates for motor vehicles and their raw materials, parts and components at such rates that will encourage the development of the local motor vehicle industry.

Under the order, MFN rates or duty on motor vehicle parts and components imported outside of ASEAN have scheduled tariff rates for implementation.
The tariff lines cover Chapters 40.90 to 94.01 involving motor vehicle parts and components of the Tariff and Customs Code of the Philippines.

Given the difficulties of the industry, the restructured tariff rates may also be suspended to ease the requirements of the motor vehicle assemblers.

To assist AEP participants, the BOI has also moved to defer the period of compliance of the minimum export requirements. It also move that the export compliance under the program may be extended up to the end of the period of the utilization of the net foreign exchange earnings (NFEE) (year 6 and 7) provided that no NFEEs shall be credited to the participant during such period.
 
The AEP grants preferential tariff rates to participants in their importation of completely built-up units (CBUs) on the basis of equivalent foreign exchange earnings (NFEEs) from their exports of locally assembled CBU packs. 
    
This means that the availment of preferential tariff rates is contingent upon export performance of a participant on a yearly basis.  The NFEE shall only be used against the import duties of the participant.

Unutilized NFEE may be carried forward until the end of the five-year program. At the end of the program (end of year 5), participants shall be given two (2) years to use the unutilized NFEE, after which the NFEE would be invalidated (no monetary value).  No unutilized NFEE can be converted to cash or to be used for other payments to government.

Under the AEP, participants may be classified under four categories (regular, developmental, niche, and high value-low value) under which they are required to export a certain volume of CBU packs.

Failure to meet the required minimum yearly export volumes and value per CBU unit required in the category on any given year shall subject the participant to the payment of normal MFN and/or CEPT tariff rates including adjustments in VAT plus penalties under existing Customs and Revenue rules and regulations from the time of entry into Customs territories for that particular year.

But given the difficulties of the local industry, the BOI is planning to defer compliance of the minimum export requirements to assist AEP participants and to enable them to continue exporting.
 
Under the regular category, a participant is required to directly CBU exports of high volume vehicles at a minimum total yearly volume of 10,000 units at minimum FOB value of US$ 5,000 per unit.
The developmental CBU exports category requires the participant to directly vehicles that are completely new basic models designed to be produced in the Philippines primarily for exclusive export at least to ASEAN at a minimum total yearly volume of 5,000 units at minimum FOB value of US$ 5,000 per unit.
 
The niche category means the export of export of low volume niche CBUcvehicles, which vehicles are existing basic and/or variant models currently not assembled in the country, the existing facilities of which are to be relocated for exclusive assembly in the country at a minimum total yearly volume of 2,500 units at minimum FOB value of US$.10,000 per unit.
  Niche CBU exports will only be granted incentives from the time that the models or variant becomes exclusively assembled in the Philippines.

On the other hand, the high-value, low volume category CBU export of high-end motor vehicles at a minimum volume of 2,500 units at a minimum FOB value of US$20,000 per unit.(BCM)