PHL to Establish Supply Chain Scrutiny to Dodge US Forced Labor Tariffs

The Philippine Chamber of Commerce and Industry (PCCI) is fast-tracking the establishment of a mechanism to ensure that manufacturing inputs used in its exports are not sourced from countries employing forced labor, in an effort to dodge the 12.5% tariff imposed by the United States. "We are working on that now. Hopefully, we can prove that the input materials are not coming from any countries with forced labor," PCCI President Ferdinand A. Ferrer told reporters on Monday. He added that they need to validate evidence over the next two to three weeks, not just validate with evidence but truly look at the pattern. Mr. Ferrer said businesses are hopeful that the 12.5% rate will be the highest tariff imposed by the US on the Philippines, as the country is not subject to other reviews, unlike some neighboring countries which might face higher rates due to other investigations. "But we do not want that type of advantage. We should compete on our strengths, our workmanship and our cost. We do not want that leverage, but it is here," he added, acknowledging the tariff's disadvantageous impact. While most of the country's major export products, particularly electronics and agricultural goods, are exempt from the levy, Mr. Ferrer pointed out that any tariffs are always a cause for concern, and a 12.5% tariff would put the affected industry, or the country as a whole, at a slight disadvantage. Diversifying where manufacturers source their materials is cited as one solution. "We are looking at alternative input materials... that is definitely not made with forced labor," he said. He also expressed optimism that the Joint Administrative Order (JAO) signed by the Departments of Trade and Industry, Labor and Employment, and Finance will help the country address the issue. The JAO has established rules for investigating and prohibiting the import of goods produced wholly or partly through forced labor. It has also created an inter-agency committee to receive, evaluate, and investigate complaints and information involving imported goods suspected of having been produced with forced labor, and to recommend appropriate actions. Last week, the US imposed a 12.5% levy on Philippine goods after an investigation by the Office of the US Trade Representative found that the country had failed to restrict imports of goods produced using forced labor. However, selected electronic products, automotive and aircraft parts, agricultural products, and minerals were exempted from the levy.