DTI ORDER: BOON TO SMUGGLERS; BANE TO LOCAL INDUSTRY & CONSUMERS
by Chito Junia
While barely able to cope with the impact of government’s failure to curb smuggling, the proliferation of under-priced, sub-standard products and the continued collection of port congestion related fees by international shipping lines, the local manufacturing industry could face even more trying times with Department of Trade and Industry Administrative Order (DAO) No. 15-01 dispensing with the Import Commodity Clearance (ICC) for some products.
Consumers and end-users, on the other hand, will be swamped with items of dubious quality that could be harmful or hazardous, with no recourse against the foreign manufacturer.
The ICC certifies that imported products considered life threatening have undergone mandatory testing for compliance with products standards and cleared for release to both the wholesale and retail markets.
According to DTI undersecretary for consumer protection Victorio M.A. Dimagiba and director Ann Claire C. Cabochan of the Bureau of Product Standards (BPS), “there is need to retain only the products that are life threatening in the BPS List of Products Under Mandatory Certfification to facilitate the issuance of the ICC.” The order targets the 3-day processing and release of the ICC to cope with “the significant increase in the number of ICC applications received as well as the number of test reports evaluated,” they said.
The DAO, which was issued in July this year, orders the lifting of plywood, flat glass and ceramic tiles, among other products, from the list of imported goods required to undergo mandatory testing, raising fears that the department order will not only cause a surge of sub-standard plywood, flat glass and ceramic tiles in the local market, but it would also increase the risk of unsuspecting consumers being exposed to the dangers of using sub-standard plywood, flat glass and ceramic tiles.
Prior to the issuance of DAO 15-01, the country’s importations of plywood, ceramic tiles and flat glass, after payment of duties and taxes at the Bureau of Customs (BOC), were conditionally released by BOC to the importers’ warehouse. Thereafter, the DTI would send independent technical appraisers to verify its compliance to mandatory standards set by BPS, after which the ICC would be issued to facilitate the release of the products to the local market.
Under the new DTI order, however, the mandatory testing of plywood, flat glass and ceramic tiles has been amended to mandatory labelling where an ICC is no longer required for release, but only product labels indicating the brand name, product manufacturer, origin and the Product Standard (PS) mark, among other required information. This means that imported plywood, ceramic tiles and flat glass can already be released to the local market upon arrival and payment of duties and taxes, if there are any, even without its having tested for compliance to product standards, so long as it is labelled in accordance with the mandatory labelling regulation. Actual testing of products will only be done when the products are already in the market and a complaint is filed against a particular product and/or business establishment, or whenever the BPS finds it necessary.
The self-declared information to be indicated on product labels by manufacturers or importers under mandatory labelling are: the trade name, trademark, model or type, name and address of importer or manufacturer and country of manufacture, together with other information such as, direction for use like where applicable, type of wood, class, thickness, moisture content, glue bond strength and formaldehyde emission for plywood products.
Non-Life Threatening Products
According to the DTI Order, the rationale behind the delisting of plywood, ceramic tiles and flat glass from mandatory testing and subjecting them instead to mandatory labelling was to facilitate trade by doing away with the ICC requirement for the release of non-life threatening imported products.
Among the causes of delay in the release of products requiring mandatory testing is the issuance of ICCs. Sometimes taking from four (4) to six (6) months, such delay results in additional costs due to longer warehousing, raising the cost of importation. These costs are eventually passed-on to consumers.
Industry stakeholders, however, believe that the delay in the issuance of ICCs can be addressed by hiring more independent appraisers to help get the job done within a reasonable period of time, without sacrificing the local industry and protection of consumers.
Local industry stakeholders fear that, the DTI order to allow the entry of imported plywood, flat glass and ceramic tiles without the mandatory testing and the ICC could do more harm than good, as it virtually opens the country’s doors to sub-standard products, especially with the government’s limited resources to monitor the market. Under the DAO, DTI would be responsible for monitoring the market for sub-standard and non-complying products, act on complaints and file cases against erring traders and businessmen.
The Plywood Industry
“Even with the mandatory testing and certification of plywood, sub-standard imported plywood products were already found in the local market. Removing, therefore, the mandatory testing and certification of plywood products and subjecting them only to mandatory labelling could result in an influx of more sub-standard plywood products in the country.” Philippine Wood Producers Association, Inc. Chairman Ramon Uy said.
According to Uy, the safety nets considered by the DTI to protect consumers and the local industry from imported sub-standard products like monitoring the market for non-complying products are not enough.
“With its limited resources, It would be very difficult for DTI to monitor the whole country for sub-standard and non-complying products,”Uy said, adding that “the mandatory testing was the best protection consumers and the local industry could get from the proliferation of sub-standard plywood, and yet this was taken away by DAO 15-01.”
In a position paper submitted by local plywood manufacturers, the group said that contrary to DTI’s claim that plywood is not a life-threatening product, use of sub-standard plywood could be life threatening, depending on where it is used and its level of formaldehyde emission.
According to Uy, formaldehyde is a carcinogenic substance present in plywood products. However, at a certain emission level, formaldehyde in plywood would not be a health risk to people. But beyond the tolerable limit, it could already pose a risk. “This is precisely the reason why formaldehyde emission is required to be in the mandatory labelling of plywood products.”Uy said.
“Plywood could also be a life threatening product if used in the boat building industry. Just imagine if sub-standard marine plywood products are used for a boat’s hull, would this not pose a big risk to fisherfolks. This could cause the boat to sink” he added.
Plywood products are also used for form works in construction projects. Thus, it is supposed to withstand the pressure of concrete being poured into foundations and girders. “Using sub-standard plywood in the construction industry may also have an impact on the integrity of structures,”Uy warned.
In that regard, the local plywood manufacturers urged DTI to develop a more stringent verification procedure for the country’s plywood importations to be sure that declarations indicated on product labels are real and they meet the mandated standards.
To help facilitate trade, local plywood manufacturers suggested mandatory testing at the point of origin, a sentiment shared by other manufacturers affected by the order.
According to Uy, because of the high cost of power in the country, local plywood manufacturers are having a hard time competing with the cheaper imported plywood from China. “Removing the ICC requirement on plywood importations would then worsen the already precarious situation of local plywood manufacturers,” Uy said.
A production cut down in the local plywood industry could result in thousands of jobs lost. “Already, for every 40-footer container van of imported plywood that is brought into the country, 16 jobs are lost in the local plywood industry. Thus, if we import 1,000 container vans of plywood each month, 16,000 jobs are lost each month, as well.” Yu said.
The Flat Glass Industry
For his part, AGC Flat Glass, Inc. Vice Chairman Emmanuel Y. Go said, the DTI order would have tremendous impact, not only on the country’s glass industry but on consumers as well. He lamented DTI’s possible abuse of its authority in issuing the DAO without proper consultations with industry stakeholders and consumers.
AGC Flat Glass, which is the country’s only flat glass manufacturing company, supplies 60% of the local market’s flat glass requirement each year. Go fears that the DAO would eventually affect their current market share as illegal trade of flat glass would now be easier without the ICC requirement.
According to Go, DTI’s issuance of the DAO practically opened the floodgates for imported sub-standard flat glass in the country. “Even with the mandatory testing of flat glass there were already lots of imported sub-standard flat glass in the market.” Go said, adding that, “the DAO has made it even easier for importers of flat glass, whether legal or illegal, to bring in sub-standard flat glass because of the removal of the ICC as a requirement for release.”
The AGC Flat Glass top executive could only feel deep disappointment over DTI’s disregard for the studies and research of the Technical Committee which undertook to determine the life-threatening risks in flat glass products.
“Without due consultations and presenting to us a new study that would refute the Technical Committee studies and research that flat glass has its risks, flat glass was lifted from the list of products required to undergo mandatory testing,” Go complained.
According to Go, while local flat glass manufacturer has to undergo stringent accreditation and certification procedures by the government before it can declare PNS compliance, foreign manufacturers/suppliers of flat glass are only required to self-declare the standard of their products to export to the Philippines.
“How will Filipino consumers run after foreign manufacturers in case an imported flat glass fails despite its PS mark on the label? In the case of local glass manufacturers, our operations could be stopped, should there be severe accidents involving the failure of our product, “ Go asked.
In the ASEAN community, most, if not all of its 10 member nations require all flat glass importations to undergo mandatory testing, a major step towards harmonized standards under a common and integrated regional market. The Philippines will be out-of-step with the rest of the region under this order which falls short of consumer protection and lays local industry bare to unfair competition, Go warned.
According to Go, the DTI could have considered their suggestion to adopt the pre-accreditation scheme by other Asean Countries, like the Indonesian model of facilitating trade without sacrificing quality and safety standard, by sending a technical team to the factories of foreign flat glass manufacturers to evaluate their production procedures for compliance to their own country’s product standards. The Philippines can adopt the same pre-certification of would be exporters to the country.
“That way, the issuance of ICC would no longer be necessary as foreign manufacturers of flat glass would be pre-certified. This would eliminate the lag in the release of importations caused by the delay in the issuance of ICCs,” Go said. He said he was disappointed over DTI’s cold reception to their suggestion.
“We have a price driven market. Consumers will always go for cheaper products, especially if they are not aware or cannot understand the information indicated on product labels. This is also the reason why we want the product labels to be traceable and for its manufacturers or importers to be accountable, as well.” Go said.
Go cited a particular incident where a glass panel fell from the atrium roof of a mall. Fortunately, no one was hurt. According to Go, as the only flat glass manufacturer in the country, they were first being blamed as the supplier of the glass. But after a thorough investigation of the glass source, it was found to be imported.
According to Go, the flat glass industry employs thousands of workers. And should the industry start to feel the inconvenience and impact of the DAO, reducing its current production level could be a possibility. This would result in more job loss, he warned. Already, AGC Flat Glass is not able to maximize its production capacity because of stiff competition from cheaper and illegally traded flat glass. “We feel that DAO 15-01 could worsen the situation,” Go said.
The Ceramic Tiles Industry
For Ceramic Tile Manufacturers Association President Emilie B. Maramag, the responsibility to facilitate timely issuance of ICCs to enhance trade facilitation lies with DTI.
According to Maramag, there are many ways the DTI can facilitate trade without sacrificing quality standards, and one of them is doing the testing at point of origin. “This will definitely help expedite the release of ceramic tile shipment to the Philippines without sacrificing quality standards,” Maramag said.
She feels that the DTI’s claim that mandatory testing is not actually lifted under the DAO as they will still do random testing at the market won’t do the job of protecting the local ceramic tiles industry and consumers. “How can they monitor the entire market with their limited resources. Moreover, allowing the release of imported ceramic tiles to the market even without the ICC would hurt the local ceramic tile industry even more.” Maramag said, adding that “our industry is already suffering from the influx of smuggled ceramic tiles in the country, and removing the ICC requirement on imported tiles could worsen the situation.”
According to Maramag, as proof of the real threat posed by the DAO, even legitimate importers of ceramic tiles have joined them in their calls to retain the mandatory testing and ICC requirement for all tile importations, if only to protect the market from the influx of smuggled ceramic tiles.
“If one of the reasons why DTI issued DAO 15-01 was to facilitate trade by eliminating the delay caused by its lack of personnel to undertake the mandatory testing and issuance of ICCs, then all the more reason that they will be having a hard time monitoring the entire market with their limited resources.”Maramag said, as she bewailed DTI’s apparent abandonment of its responsibility to protect the local industry and consumers.
“Issuing the DAO to eliminate the delay in the issuance of ICCs to help facilitate trade was a quick fix for DTI. This is, however, damaging to the local industry and consumers.” Maramag said.
Maramag also questioned DTI’s lifting of ceramic tile products from the mandatory testing list for allegedly not being a life threatening product. “How could the DTI totally disregard the research on the risks in ceramic tiles that was patterned after the European model. Moreover, the DTI did not present a study or research that would show that ceramic tiles are non-life threatening products.” Maramag pointed out.
According to Maramag, ceramic tiles are life threatening depending on where it is used and how it is used. So declaring ceramic tiles as non-life threatening without regard for said factors is totally unfair.
Just like the plywood and flat glass industries, Maramag said that the impact of the DAO on their market could be very damaging, and this could eventually result in a production slow down, should the entry of smuggled tiles worsen because of the removal of the mandatory testing and ICC requirements. “This could eventually result in a cut down of workers in the ceramic tiles industry,” Maramag said.
Product Standard Verification Left to Consumers
Consumers under the mandatory labelling regulation are supposed to look for the PS mark and other required information on product labels. However, they can only take the self- declaration of manufacturers at face value since most consumers are not technically trained to evaluate such information.And with a price driven market, removing the mandatory testing and ICC as requirements for the release of imported products like plywood, flat glass and ceramic tiles could be damaging to consumers and the local industry as well.
Incidentally, there are unconfirmed reports that several thousand container vans of plywood and ceramic tiles are now allegedly lying in various Bureau of Customs ports and cannot be released because of ICC problems, raising the question: “Will these container vans of plywood and ceramic tiles be allowed automatic release with the DAO? Is the DAO, in fact, an omnibus ICC to cover these stalled imports?”
If it is perhaps any indication, DAO 15-01 also withdraws all the show cause orders on the delisted products, a facilitatory clause that could open the floodgates.