FPI asked BOC to prosecuteFPI asked BOC to prosecuteFPI asked BOC to prosecuteFPI asked BOC to prosecuteFPI asked BOC to prosecutesmugglers of steel productssmugglers of steel productssmugglers of steel productssmugglers of steel productssmugglers of steel products

under RA 1703under RA 1703under RA 1703under RA 1703under RA 1703

The Federation of Philippine Industries (FPI) has asked theBureau of Customs (BOC) to use RA 1703 in filing the appropriatecases against smugglers of steel bars. This is an offshoot of thejoint effort of the FPI, the Philippine Steel and Iron Institute (PISI)and the BOC, where they apprehended shipments of more than3,000 metric tons of steel bars consigned to Kingson InternationalTrading Corporation, which were not only misclassified but werealso grossly undervalued.

The shipments defrauded the government of almost PhP15 million,not to mention the fact that said steel bars maybe substandards.As of this writing, the result of the test by the DTI-Bureau of ProductStandards has yet to be received.

While there are violations under the Tariff and Customs Code ofthe Philippines, FPI has requested the BOC to file cases against the

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CCCCCUSTOMSUSTOMSUSTOMSUSTOMSUSTOMS TOTOTOTOTO TTTTTAKEAKEAKEAKEAKE OVEROVEROVEROVEROVER THETHETHETHETHE

OPERAOPERAOPERAOPERAOPERATIONTIONTIONTIONTION OFOFOFOFOF ENTRENTRENTRENTRENTRYYYYY

ENCODINGENCODINGENCODINGENCODINGENCODING CENTERSCENTERSCENTERSCENTERSCENTERS

aking its cue from the serious legal issues raised by theHonorable Senator Juan Ponce Enrile on the operations of theEntry Encoding Centers (EECs) during the Bureau of Customs’(BOC) Budget Hearing at the Senate, Customs CommissionerNapoleon L. Morales wrote a letter to the Philippine Chamberof Commerce and Industry (PCCI) informing the organizationthat the BOC will take over the operations of EECs.

Senator Enrile issued an opinion that the encoding of importentries is a government function and therefore it is illegal for aprivate organization like PCCI to operate it because of conflictof interest. He said that the contract between BOC and thePCCI is so grossly disadvantageous to the government.

It was learned that the contract expired on 2001 and yet theEEC is still being operated by PCCI up to now without biddings.

The Department of Trade and Industry (DTI) led by Division Chieffor Product Certification Bureau of Product Standards, Mr. FranciscoBarranta, Enforcement Division Chief, Mr. Samson Paden, PhilippineProduct Safety & Quality Foundation Inc. (PPSQF) ExecutiveDirectors Ms. Victoria Padilla, in cooperation with Flat Glass Allianceof the Philippines, Inc. (FGAPI) National President Mr. Renato R.Ermita spearheaded the destruction of 89 pieces of seizedsubstandard flat glass. The destruction activity for substandardand uncertified flat glass products was held recently at the DTIBuilding Parking Lot along Jupiter Street in Makati City.

DTI AND FGAPI DESTROYSUBSTANDARD GLASS PRODUCTS

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T

Customs Commissioner Napoleon L. Morales and FPI President Jess L.Arranza led the inspection of the deformed steel bars that were confiscatedfrom two warehouses located in Valenzuela City and Imus, Cavite and arenow in the safekeeping of the Bureau of Customs at its Harbor Center inTondo, Manila.

The Federation of Philippine Industries’(FPI) position paper on “the petition forP75 daily wage increase at the NationalCapital Region” of the Trade UnionCongress of the Philippines (TUCP) dated16 May 2006, was presented on 21 June2006 to the honorable NCR RegionalTripartite Wages and Productivity Board(NCR-RTWPB) for consideration

• The Federation of Philippine Industries(FPI), in behalf of its members,conveys its appreciation to the NCRRegional Tripartite Wages andProductivity Board (NCR-RTWPB) forextending the invitation to participatein the deliberation process on thepetition for wage increase in the NCRby the Trade Union Congress of thePhilippines (TUCP) dated 16 May 2006,and the passage on 2nd Reading ofHouse Bill No. 345 of the 13th Congresson 31 May 2006 mandating a P125wage increase across-the-board overa three-year period.

• Given the present economic situationat the macro level and theconsequential problems confronting itsmember-companies, the FPI conveysserious reservation as to the movesfor mandated wage increases,particularly on the grounds ofaffordability and potential impact tojob losses.

• On the other hand, the FPI is keenlyaware of commodity price movementsand their impacts on the well-beingof workers within and outside theambit of FPI membership.

• The FPI firmly believes that theRegional Wage Boards are theappropriate venues to determineminimum wage adjustments based onthe following points:

a. Employment is a derived demandbased on tradable and actuallytraded goods and services, withwage as the medium of exchange.

Under Article XIII, Section 3 of the1987 Constitution, the power ofthe State is limited to, “regulatethe relations between workers andemployers, recognizing the rightof labor to its just share in the

FPI positions on the wage increase proposalFPI positions on the wage increase proposalFPI positions on the wage increase proposalFPI positions on the wage increase proposalFPI positions on the wage increase proposalnegotiate for just wages and to obtaindecent living standards. Shifting tothe Legislative mode in pushing for HB-345 would only frustrate CBAnegotiation. It is also worth mentioningthat the across-the-board adjustmentstend to cause wage distortion amongpeers workers and employees withinand outside individual enterprises.

• Article 122 of Republic Act No. 6727specifically empowers the RegionalWage Boards to, “determine and fixminimum wage rates applicable intheir region, provinces or industriestherein and to issue the correspondingwage orders.” However, there are noprovisions in RA-6727 that would vestupon the Wage Boards any power togrant wage increases over and abovethe minimum rates. On this basis, theprovision of TUCP’s petition for across-the-board increase must be set asideand disregarded.

• On the petition of TUCP, the FPI submits the following observations:

fruits of production and the right ofenterprises to reasonable returns toinvestments, and to expansion andgrowth.” This provision prohibits Congressfrom prescribing new wage rates thatwould impair and cause enterprises tofinancial losses due to increasedexpenditures.

Therefore, it must be concluded that thepower of Congress to legislate new wagerates is not absolute, nor can it berendered unilaterally without proper andsufficient consultation and due process.Further, it would be noted that “regulatingrelations” does not connote the power toprescribe outright new labor standards,especially on remuneration.

b. The Regional Wage Boards are mandatedto undertake studies, researches andsurveys necessary for the attainment oftheir functions, objectives and programs.Due to their higher proximity to the partiesconcerned and immediate access toneeded data, the Boards can respond tosituational needs more sensitively andmore timely than other governmentagencies or instrumentalities.

c. FPI strongly believes RA 6727 (creatingthe Wage Boards) is the product ofcollective wisdom of multilateral partiesand concerns. Over the years, WageBoards have been proven competent byissuing wage orders responsive to theneeds of the two directly concernedparties. In fact, over the past years arelative industrial peaceful environmentwas attained and it is continuitinously beensustained.

d. Given the foregoing arguments, the FPI isexpressing its strong opposition tolegislated wage increase. Furthermore,the Federation hopes that through thevarious wage increase hearings anddeliberations, other groups would agreewith our viewpoint and to likewise extendthe sentiment to our Honourable Congress.

e. The petition utilizes 1991 as the baseyear to compute the erosion ofpurchasing power of wages, the timewhen the mandated wage increasewas the highest in both absolute termand percentage. However, it ignoredthe fact that within a few monthsthereafter, inflation rose from about15% to 20% and Real GDP droppedfrom about -1% to -2%. It would thusappear that the rise in wages wasquickly negated by price spirals.

f. It should be noted that year 1991 wasrelatively unstable, given the manymilitary adventurism and poweroutages. It was recovery after 1992,but it was nonetheless abbreviated bythe 1997 Asian financial crisis. Hence,statisticians would normally consider2000 as baseline year for thePhilippines.

g. It is strange TUCP would recommendP29 increase to account for the GRDPdifferential due to faster economicgrowth of NCR. It must be noted that

• Furthermore, House Bill 345, the grantingof across-the-board wage increaserepudiates the gains in wages of workersthrough collective bargaining agreements(CBAs). The CBA practice is a rightguaranteed by the State to labor underArticle XIII of the Philippine Constitution.CBAs are mechanisms for workers to continue on page 6...

BUSINESS OPTIONby FPI Director George S. Chua

BUSINESS OPTION

What! Pass up on making a sale? Are you out of your mind! Well,sometimes you would really be out of your mind to make the sale.Of course, there would be obvious reasons why you would notwant to make a sale and there are less obvious ones. The mostcommon reason for not making a sale is when the customer asks forcredit terms and his payment ability is questionable. It does notmatter how big the sale is or how much the margin is, the bottomline is if you do not get paid you are definitely better off not makingthe sale.

Of course, there are a variety of ways to mitigate the credit risk tojustify making the sale. You could do your homework and do acredit investigation and evaluation of the client to see how muchand under what terms you could set a limit on your credit exposure.You could also ask for some kind of collateral which you can claim orcollect on in the event of a default on payment.

Another common reason for rejecting a sale is when the price is toolow or unacceptable to you. It may be in the company’s bestinterest not to make the sale when it would result in a loss or adeviation in certain pricing standards that would create an unstablemarket leading to general price erosion. However, there are anumber of reasons why you should turn down or limit a sale for thelong term benefit of the company.

This is the case when you become overly dependent on a few oreven one client, which is also true the other way around when youbecome too dependent on one supplier. At the start this mayprove to be efficient, profitable and convenient. However, it is onlya matter of time that your client will use it position of power on youto dictate pricing and terms. Maybe not to the point of putting youout of business but certainly enough to make you hurt.

Learn how to set a limit on what percentage of your sales shouldcome from one client. While there is no hard and fast rule on whatthis magic percentage is, I would start getting worried when morethan 10% of my total sales come from one customer and I wouldstart having sleepless nights when this figure reaches 20%. Similarlymake a cautious review of certain types of accounts that are given“preferential” status due to historical and personal relationships,perceived “must have” accounts, and dominant clients for yourproducts.

In keeping these “preferential” accounts, you could be limiting theprofit and growth potential of your company. Why? All companieshave limited resources and production capacities and when these“preferential” clients take up more than what they return to thecompany, perhaps it is time to turn them down. Difficult as it maybe, you have to break a bad habit to ensure your long term survival.

There are also sales that you should pass up on if it will undermineyour own business. Examples of this would be when you make asale to your customer’s competitors to the detriment of your regularcustomers. Another example is when a sale is made to unauthorized

customers or for the unauthorized application or use of your products,that will eventually tarnish your image, reputation and brand name.

Situations also arise when on a matter of principle you do not wishto make a sale to an account. This could be because the accounthad previously gone bad and had not yet settled their previousobligations. However, certain arrangements are possible that wouldenable the account to update their past obligations if you continueto deal with them. Such as dealing with them on a cash basis andtacking on a certain percentage to settle previous arrears. Anotherreason is that the potential client could have a notorious reputationthat would put your company in a bad light by mere association.

Give up a sale? Yes! For the right reasons you should not be afraidto turn down the business. You may earn a peso from the sale butend up losing more. Remember, don’t be foolish and don’t be greedy.(Comments may be sent to georgechuaph@yahoo.com)

Give up a Sale?Give up a Sale?Give up a Sale?Give up a Sale?Give up a Sale?

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FPI asked BOC to prosecute smugglers..

The joint effort of the BOC and the FPI led to the confiscation ofthis big haul of deformed steel bars, in favor of the government.

FPI President Jesus L. Arranza is seen in this file photo addressinga crowd of media people along with Customs officials headed byCommissioner Morales, FPI’s EVP Edison Co Seteng, Atty. RufinoM. Margate, Jr., FPI Secretary General and Atty. Danton Lucenarioof the PSRMA, who were seated in the background.

consignee, broker and all buyers and sellers of the said steel Bars under Republic Act (RA) 1703, which carries heavier penalties.

RA 1703 also known as the Iron and Steel Industry Act, provides under Section 10, Penalties for Smuggling, “Upon the operation of thesmelting plants, the following penalties shall be imposed upon any person who shall smuggle, fraudulently import or bring goods intothe Philippines that constitute the intermediate or final product of the manufacturing activity described in Section 5 (b) of this Act, suchas pig iron and steel, whether in the form of ingots, slabs, blooms, billets, bars, rods, wires, coils, strips, plates, sheets or otherwise,and whether in raw form or galvanized, painted, treated, recast, rolled, finished or processed by any other means, or who shall receive,conceal, buy or in a manner facilitate the transportation, concealment, or sale after importation of such products”;

The penalty in Section 10, paragraph (c), provides as follows: “a fine of not less than three hundred thousand pesos (PhP300,000) andimprisonment of not less than twelve (12) years and one (1) day or more than twenty-four (24) years, if the appraised landed value,determined as aforesaid, including duties and taxes, of the article unlawfully imported exceeds One hundred and fifty thousand pesos(PhP150,000)”.

FPI is warning all persons who will smuggle, fraudulently import, transport, conceal, sell or buy, that they will be fined not less thanthree hundred thousand pesos and an imprisonment of not less than twelve years and one day or more than 24 years.

Commissioner Morales gave his appreciation to the FPI headedby its President, Jesus L. Arranza for continuously assisting theBureau of Customs in its quest to stop smuggling. The joint teamof BOC and the FPI has been proven to be effective so far, as in thecase of the recent apprehensions of deformed steel bars from thewarehouses of the consignee’s buyers.

Commissioner Morales is seen addressing the media and gavestern warning to would-be smugglers of steel bars.

DTI warns public on using substandard nailsThe Department of Trade and Industry’s Bureau of Product Standards (DTI-BPS) and the Philippine Nail ManufacturersAssociation (PNMA) alert all manufacturers, importers, distributors, dealers, wholesalers of steel wire nails to strictlyadhere to the provisions, guidelines, terms and conditions of Republic Act (RA) 7394 (Consumer Act of the Philippines),RA 4109 (Standardization Law), Executive Order (EO) No. 913, Department Administrative Order (DAO) No. 01:1997,DAO 05:2001 and DAO 02:2002, and to consistently comply with the requirements of Philippine National Standard(PNS: 136:2000).

The DTI-BPS, under its Product Certification Scheme, only allows steel wire Nails that have passed the tests andinspections based on the PNS, to be sold in the market. The steel wire nails that have passed the requirements of thePNS bear the Philippine Standard (PS) and the Import Commodity Clearance (ICC) marks, for locally-manufactured andimported products, respectively, to ensure product reliability and safety.

Manufacturers, importers, distributors, dealers, wholesalers and retailers found to be in possession and selling substandardsteel wire nails are liable under EO 913 and RA 7394 with a maximum fine of P300,000 per violation, without prejudiceto the filing of criminal or civil actions against violators.

For clarifications, call BPS at 751-3130.

Metro Manila is at present heavilycongested as it is. To give premiumfor being employed would inspire amass influx of new migrants into theover-stressed infrastructure systemsof the megapolis.

h. There are whimpers that given themassive unemployment andunderemployment, the notion ofanother wage increase may sendundue signals to investors of theirrationality of wage setting in thePhilippines with corresponding effects.

i. One may observe the series of wageincrease since 1986 and the fact thatthe Philippine wage rates are amongthe highest in Asean. To date, thecreeping process of wage hikes overthe years may be likened to a frogbeing very slowly boiled in a pan todeath. Without realizing, it suddenlybecame apparent that the Philippineeconomy is out of the game in termsof competitiveness. The wageincreases between 1986 and 1992brought sharp price spirals, whilethose in recent years may becontributory to the massivedisplacement. What is worrisome iswhere the tipping point is, andwhether another sharp wage hike isreversible, i.e. can the economicsystems readjust itself to the newrealities. Can the two above-citedstructural weakening sustain anotherbattering?

Indeed, the points discussed wouldrequire serious simulation andsensitivity analyses even before beingproffered by the proponent.

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FPI position on the wage...wage extenders, e.g., exemption frompersonal income tax for minimumwage earners and expansion ofbeneficiary coverage – in order tomeaningfully help the labor sectorcope with any rising cost of living.

o. To simplify and facilitate the accessof exemptions to wage hikes, thefollowing are proposed:

1) Companies must not be compelledto divulge critical trade secrets

2) The procedures should besimplified, and should not becostly or time consuming

3) Accept the endorsements ofindustry federations and businesschambers, whenever applicable

4) Non-decision on the part of theWage Board after the lapse ofthirty (30) calendar days wouldmean automatic approval of theexemption application, to beimplemented immediately

• Given the above-cited and perceivedinfirmities, the FPI proposes that thepetition of TUCP be set aside for futurereference. In place, the June 21meeting may be commuted into aplenary discussion on the need forwage rationalization.

• On the same breathe, FPI presentsthe following issues and concerns fordeliberation:

government bodies (Wage Boards andCongress) grant wage increases at thesame time. Unless the Wage Boards areproven to be negligent or incompetent, themandate on wage increases shouldremain exclusively under the purview ofthe Regional Wage Boards, as supervisedby the DOLE-NWPC;

k. Mandated wage increases should becontextualized to the prevailing totalmacro-economic system. Wage settingmust not be taken in isolation, given itsinterrelation with all the other componentsof the economy. It is tragic when wagehike is forced upon, to cause the loss ofthe job per se. In addition, the increaseshould take into account the need to:

1) institute collateral anti-inflationarymeasures, to ensure that the increasewould not be cancelled-out by pricespirals,

2) consider the percentage employmentopportunities that may be lost and thecapacity of the economic system toequilibrate and recover,

3) review the level of competitiveness ofemployment generators in light ofglobalization and chronicinfrastructural flaws. The precedingis the case as the Philippine industrialcompetitiveness has been severelycompromised by uncontrollablefactors like high energy cost, highrates of interest, new taxes, unabatedand widespread unfair trade practicessuch as smuggling, customs dutiesundervaluation and the like.

4) consider productivity-based measuresaugmentative to the basic pay, or theenhancing of workers’ take home payshould be promoted, nurtured andsustained among enterprises and ifapplicable, replicated acrosscompanies and industries.

l. If and when legislated wage increaseswould be imposed, the coverage shouldexclude unionized establishments withCBAs that provide salaries and benefitshigher than the envisioned new minimums.

m. In instances that the purchasing power ofwage earners had eroded significantly, theFPI may not oppose to the proposal forincreases provided that it is a reasonableadjustment to the minimum, and notacross-the-board. In addition, theexemption mechanism should be effectiveand useful.

n. The government should consider, instituteand promote complementary modes of

• The wage boards should explore thepossibility of industry-based wagesetting indexed on an industry’s percapital income, i.e. in order for thebusiness to survive and be globallycompetitive. This may be achievedby invoking Article 122, Section (b) ofRA-6727 granting to the wage boardsthe powers and functions to:“determine and fix minimum wagerates applicable in the region,provinces or industries therein …” Itis clear that within the region, thereis no need for enabling legislation forindustry-based wage setting. And ifgiven the opportunity, the FPI willendorse an appropriate industry forpilot testing.

• Under Article II, Section 18 of the 1987Constitution, “The State affirms laboras a primary social economic force.It shall protect the rights of workersand promote their welfare.” Thispolicy should be underpinned by globaleconomic realities. Employment is aderivative of the marketplace. Hence,before wages or rates may beconsidered, the availabil ity ofemployment opportunities takesprecedence. This is a truth thatcannot be subverted by edicts nor byintimidation. This means that in orderto “protect the rights of workers andpromote their welfare”, it is anabsolute necessity for the State to firstensure the availabil ity of workscompensable by wages. Otherwise,the State itself would have to be theemployer.

j. It is confusing for stakeholders withinthe social contract when two

The Industry Commodity Experts or ICEs representing various industries made another breakthroughs on their monitoring/inspection activitiesin major ports of the Bureau of Customs, for the year 2005 (Table I) and from January to May 2006 (Table II).

Pursuant to Customs Memorandum Order (CMO) 9-99 entitled “Guidelines to strengthen the Alert System” issued on 22 April 1999, theIndustry Commodity Experts (ICEs) are mandated to assist Customs in terms of technical know-how or their expertise in the industry theyrepresent. The ICEs are agents deputized to represent their respective industry to assist the BOC by way of monitoring/inspecting/scrutinizing import documents of products subject for monitoring and physical examinations. In case of discovered irregularities or deficiencies,part of the responsibilities of the ICEs is to recommend the appropriate action to be taken by Customs, such as the collection of additionalduties and taxes, safeguard and dumping duties whenever applicable and necessary.

Table I - ICE Summary Report/Accomplishments at the Bureau of Customs, All Ports, 2005

Table I shows that the government was able to collect a total of PhP545,833,670.51, which resulted from the recommendations made bythe ICEs upon determination of discrepancies in the importers’ declarations made in their import documents, broken down as follows:PhP122,180,934.31 (22.38%) additional duties and taxes; PhP341,349,229.24 (62.54%) safeguard duties; PhP82,303,506.96 (15.08%)dumping duties; all with the efforts/assistance of the respective industry ICEs, from January through December of 2005.

Table II - ICE Summary Report/Accomplishments at the Bureau of Customs, All Ports, January-May 2006

From January to May 2006, the government was able to collect a total of PhP251,013,476.08, which resulted from the recommendationsof the ICEs for Customs to adjust the amount to be collected from importers found to have discrepancies in their declarations, broken downas follows: PhP75,460,073.72 (30.06%) additional duties and taxes; PhP157,297,281.51 (62.67%) safeguard duties; PhP7,889,093.34(3.14% ) dumping duties; PhP10,367,027.57 (4.13%) for warehousing entries with bonds. These accomplishments were realized throughthe efforts and assistance of the respective industry ICEs, from January through May 2006.

To date, there are at least fifty ICEs in the Bureau of Customs, where the majority of them are from FPI members and distributed in all majorports, nationwide, and are representing the following industries: Asia Cotton Manufacturing (1); Ceramic Tile Manufacturers Association (3);CHEMPHIL Group of Companies (2); Association of Petrochemical Manufacturers of the Philippines (2); Cement Manufacturers Association ofthe Philippines (2); Philippine Wood Producers Association (1); Asahi Glass Philippines (9); Tire Manufacturers Association. of the Philippines(1); Philippine Welding Products Manufacturers Association.(1); Northern Foods Corporation (1); Philippine Association of Battery Manufacturers(1); GI Wire Manufacturers Association (1); Pulp and Paper Manufacturers Association (1); Cassava Planters and Millers Association (2);Philippine Association of Flour Millers (6); Puyat Steel-GI Sheets (1); Puyat Vinyl Products (2); Samahan ng Magsasapatos sa Pilipinas (3);Association of Sanitary Ware Manufacturers (1); Chamber of Automotive Manufacturers of the Philippines (1); Philippine Steel Rolling MillsAssociation (2); Philippine Sugar Millers Association (5); and Tin Can Manufacturers Association of the Philippines (1).

Another breakthroughs for the ICEs

Subject of the destruction activity were flat glass itemsconfiscated from a glass store in Tondo, Manila in anenforcement operation conducted by the DTI’s SpecialMonitoring Assistance to the Regional Operations GroupTeam (SMART). Subject glasses originated from Chinaand were found being sold to the consuming public withoutthe required Import Commodity Clearance (ICC) mark.At the same time, the glass lot was found to be non-compliant of the requirements of Philippine NationalStandard for Flat Glass or PNS 193:2005.

The mandatory standard for Flat Glass was establishedlast june 23, 2005 to curb proliferation of sub-standardproducts in the local market. The government throughDTI aims to protect the consuming public by ensuringthat only safe and quality products are available for theirpurchase.

The glass store caught with the substandard glass itemsis now facing administrative charges for violations ofRepublic Act 4109 or the Standardization Law, and Sec.6 of Department Administrative Order 2 series of 2002,for the illegal distribution and selling of the said products.

Substandard products are checked, destroyed or re-exported to the country of origin by the DTI-BPS becausethey can be unsafe for use of the consuming public. Toavoid such risk, manufacturers and importers are requiredto secure PS license and Import Commodity Clearance(ICC) before selling, comply with the applicable mandatoryproduct certification and have PS mark clear and legibleon their product packaging in case the items they areselling are manufactured.

The DTI continously monitor and inspect flat glass in themarket for conformance to PNS 193:2005. The DTI teamshall employ random sampling for independent testingand sample shall be sealed and forwrded to BPS testinglaboratory or accredited testing laboratory for testing.Any sample which will fail with the requirements of PNS193:2005 will be dealt with appropriate legal actions, inaccordance with the relevant laws, rules andregulations.

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DTI and FGAPI...