Gypsum board manufacturer seeks duty exemption on imported raw materials

May 08, 2023

German-owned Knauf, the lone gypsum board manufacturer in the country, is seeking exemption from the three percent tariff on the importation of its raw material -natural gypsum - to ensure quality at reasonable prices and sustainable operations amid bullish demand for this alternative housing plaster board.

At the public hearing Tuesday, Feb. 28 on most favored nation (MFN) tariff on natural gypsum and anhydrite conducted by the Tariff Commission, representatives from Knauf Gypsum Philippines presented justifications for their petition to exempt them from the three percent MFN tariff. Natural gypsum accounts for 90 percent in the production of gypsum boards, which is an alternative to the traditional plywood and hollow blocks.

According to Knauf, the company is now importing natural gypsum from Oman, which is imposed a three percent duty on their gypsum board exports to the Philippines as it is not part of any free trade agreement that the Philippines is a party to.

Based on the company's initial estimate, a duty exemption or zero duty on their imports from Oman would translate to P2 and P2.50 per sheet price reduction of Knauf plaster boards. Knauf also cited the need to provide the best quality at lower prices and higher productivity amid the current housing backlog in the country at 6 million units.

Gypsum board is also faster to install and easier to replace, thus helping improve the productivity of customers and developers.

Knauf is the lone manufacturer of gypsum boards in the country which competes against traditional plywood and hollow blocks. Its manufacturing plant in Calaca, Batangas has a production capacity of 80.6 million square meters of gypsum board.

It accounts for 65 percent of total gypsum boards supply in the country while the rest are being supplied by other countries such as Thailand, Indonesia and China. Imported gypsum from countries where the Philippines has existing free trade agreement like Thailand should entitle Knauf zero duty, but the company said they have shifted sourcing to Oman to meet their quality standards.

Imported gypsum boards are also being priced lower than the Knauf's. The zero duty would also make the company more competitive as it anticipates growing demand. Last year, Knauf boards grew 14 percent, outpacing the industry's 6.5 percent growth.

From the company's side, the exemption from the tariff would help the company achieve better margins and enable them to hire more workers for its Batangas plant.

The German-owned company said they have no plans to export yet their production of gypsum boards, but stressed that they may start in a year or two their second production line as they are almost reaching 80 percent of production capacity.

Even if they are registered with the Board of Investments being a pioneering and the loan gypsum board manufacturer in the country, company representatives that their exemption is just income tax holiday but they pay real property taxes in Calaca and VAT on sales. Last year, the company paid P287 million in taxes.