LKI 26th Press Statement-Final Position Paper on Cement Safeguard Duty

2019-06-03 00:32:33


Republic of the Philippines 

TARIFF COMMISSION 

QUEZON CITY 


IN THE MATTER OF THE FORMAL 

INVESTIGATION ON THE IMPOSITION 

OF SAFEGUARD MEASURE AGAINST 

IMPORTATIONS OF CEMENT FROM 

VARIOUS COUNTRIES 

AHTN 2017 Subheading Nos. 2523.29.90 

and 2523.90.00 


FOR SAFEGUARD MEASURE 

Republic Act No. 8800 

Investigation No. SG-2019-OC- Cement 


LABAN KONSYUMER INC. 

Oppositor 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 


FINAL POSITION PAPER 


    The Oppositor Laban Konsyumer Inc. thru its President and undersigned counsel, respectfully submits its Final Position Paper, as follows: 


    “Figure 2, Tariff Commission Staff Report, May 2019, Cement Supply, 93% Domestic Production and 7% Imports”, Exh “A”. 


    “Figure 10, Tariff Commission Staff Report, May 2019, Imports of Cement by Importing Sector, 31%, Domestic Manufacturers, 69%, Importers, Exh “B”. 


    “PDI, May 27, 2019, No import tax, no expansion, Cement firms press imposition of safeguard duty, by Roy Stephen C. Canivel, B1 to B2-2 – Exh “C” 


INTRODUCTION 


Figures 2 and 10 of the Tariff Commission Staff Report, Exh “A” and “B” are self-explanatory . There is absolutely no cause of action of “ threatened or serious injury from imports “ under the Safeguard Measures Act or Republic Act 8800. As the Oppositor repeatedly claimed, the amount of Php 8.40 per bag of cement was a government imposed price increase but cloaked as a safeguard duty, and aggravated by the failure of the local cement industry and the Department of Trade and Industry (DTI) to comply with the directive in the DTI Report to set Suggested Retail Price ( SRP ) for cement. Sadly , the consumers took the hit badly.

 

In the Laban Konsyumer Inc. Initial Memorandum/Position paper dated February 11, 2019 and filed on the same date , 8 pages , Exh “C ”, the retail prices of cement had increased over the past three (3) months by as much of Php 15.00 per bag , based on data culled from the Department of Trade and Industry (DTI) E Presyo ( electronic price data base ). The collection of the safeguard duty of Php 8.40 per bag had pushed higher the retail price of cement by the amount of the safeguard duty to the prejudice of the consumers. 


Meantime, the DTI had not required the local cement manufacturers to maintain suggested retail prices ( SRP ) while the hearing of the Tariff Commisssion is ongoing , LKI Manifestation dated May 6, 2019, Exh “ D “ citing page 44 of the DTI Report . 


This was confirmed in the hearing of May 21, 2019 by the DTI representative, Director Luis Catibayan. On the other hand, Mr. Cirilo Pestano , the Executive Director of the Cement Manufacturers Association of the Philippines or Cemap answered that the retail price of cement is “stable “ and quoted no figures , on the clarificatory question of the undersigned as to the prices of cement . 


Your Honors, the current investigation is the latest in the string of protectionist measures, which are listed below, that the local cement wish to perpetuate to curtail or deny the consumers the opportunity to seek alternative choices of cement at lower prices and better quality .“ Sadly, the DTI had been a cooperative regulator, to the prejudice of the consumers”.


1. In the first half of 2016 and earlier, Cemap claimed that imported cement are substandard and blamed DTI for the proliferation of substandard cement. Thereupon, a complaint was filed against CEMAP members for anti-competitive practices and abuse of dominant position with the Philippine Competition Commission. The case is pending full administrative investigation in the PCC. 


2. When Ramon M. Lopez took over as DTI Secretary, the DTI Secretary issued an Administrative Order in early 2017 that allowed “green lane importation “from the local cement industry. The importers group protested, sued DTI in the regular court and by intense lobby, the DTI Secretary repealed his own order. 


3. The DTI Secretary issued a new importation rules in November 2017 that “level the playing field “. 


4. In late 2018, the DTI Secretary, on his own initiative, or moto proprio, levied a safeguard duty of Php 8.40 per bag of imported cement to remedy what the DTI Secretary claimed as serious injury to the local industry profitability arising from imports. 


5. Emboldened , the local cement industry wanted more, a higher import tax , make the duty permanent and claims no import tax , no expansion , Exh “ E “ The testimonies and Affidavits of Cirilo Pestano, Reiner Dizon, Jose Mauro G. Valdes , Zoe Sibala, Jesusa Rojas, Emylita B. Ortega , all Cemap witnesses were submitted to support the latest plea of the local cement industry.


Your Honors, the Tariff Commission is the agency which determines if the imposition of the tariff in the form of a safeguard duty is in accordance with the Safeguards Duty Act. 


Historically, a tariff or safeguard duty is imposed when the national interest requires protection of worthwhile sectors which are still young and need nurturing. The ideal and logical development is that over time, that sector will mature and flourish and the protection of the state can be dispensed with or reduced and market forces and competition can take over. The cement industry is decades years old and has been the beneficiary of various incentives and support from the government, all intended to aid its development. 


In my 11 years and 6 months of public service in the Department of Trade and Industry or DTI as a regulator, I have been given the opportunity to study this industry and to interact with it. I have concluded that the industry players appear to be perpetually dependent on government incentives and assistance to prop up their operations and have failed to demonstrate their capability to grow into maturity and competitiveness. The conclusion that comes to mind then is that imposing and installing a permanent protection system such as the tariff will only maintain the industry in its dependent stage.


The Commission will note that the common argument/ reason put forth by the industry is a veiled threat that it is not willing to explore ways and means towards making its operations more competitive if its profits are in danger of being diminished. Ergo, government must coddle the industry and make sure it is always comfortable. Stated in blunter form, if similar industries in other jurisdictions can produce a product, sell it at better prices, and still make profits, what is stopping the domestic producers from achieving the same? Is increased protection from the state the only solution?


This case is the opportunity for the Tariff Commission to correct the mindset of the industry and keep them on their toes. The Commission will note that there is actually no argument presented by the industry other than "threat to profits". Instead of presenting other reasons (for increased and permanent tariff) what is evident is that the industry has even already coopted the very regulatory agency, the DTI, into doing the unheard-of act of unilaterally imposing the safeguard duty. 


The Tariff Commission should deny the imposition of the safeguard duty. Both the importers, the manufacturers and the DTI representative who attended the hearing held on May 21, 2019 admitted that an additional duty of Php 8.40 per bag have been passed on to the consumers and integrated into the retail prices of a bag of cement. The Value Added Tax of 12% shall be added when the safeguard duty becomes permanent thus further increasing the bag of cement to Php 9.40 per bag. 


ARGUMENTS 


A. THERE ARE NO THREATS TO, OR SERIOUS INJURY TO THE LOCAL CEMENT INDUSTRY THAT SUPPLIES 93% OF THE DOMESTIC MARKET ARISING FROM IMPORTS WHICH SUPPLIES ONLY 7% OF THE DOMESTIC MARKET. ACTIONS FROM THE INDUSTRY AND DTI FOR THE PAST THREE (3) YEARS UNDER THE DUTERTE ADMINISTRATION SHOW A PATTERN OF PROTECTIONIST PRACTICES BY THE LOCAL CEMENT INDUSTRY AGAINST IMPORTS, TO THE PREJUDICE OF THE CONSUMERS. 


B. THE SAFEGUARD DUTY IMPOSED BY DTI IS PRIMARILY AND PRINCIPALLY A GOVERNMENT IMPOSED PRICE INCREASE AND IN AID OF NEW AND EXPANSION CAPITAL PROJECTS OF THE LOCAL CEMENT INDUSTRY TO INCREASE PROFITABILITY , RATHER THAN A REMEDY TO THREATEN OR SERIOUS INJURY ARISING FROM IMPORTS, IN VIOLATION OF THE PROVISIONS OF THE SAFEGUARD DUTY LAW AND TO THE PREJUDICE OF THE CONSUMERS. 


C. THE LOCAL CEMENT PLANTS AND THE DTI HAD NOT SET THE SUGGESTED RETAIL PRICES (SRP) OF CEMENT WHILE THE INVESTIGATION IS ONGOING AS MANDATED IN THE DTI REPORT, A VIOLATION OF THE DTI REPORT AND TO THE PREJUDICE OF THE CONSUMERS. ADDITIONALLY, THE PRODUCT QUALITY OF IMPORTED CEMENT ARE HIGHER AND BETTER THAN LOCAL CEMENT. 


DISCUSSION – 


A- THERE ARE NO THREATS TO, OR SERIOUS INJURY TO THE LOCAL CEMENT INDUSTRY THAT SUPPLIES 93% OF THE DOMMESTIC MARKET, ARISING FROM IMPORTS WHICH SUPPLIES 7% ONLY OF THE DOMESTIC MARKET. ACTIONS FROM THE DTI AND THE INDUSTRY FOR THE PAST THREE (3) YEARS UNDER THE DUTERTE ADMINISTRATION SHOW A PATTERN OF PROTECTIONIST PRACTICES BY THE LOCAL CEMENT INDUSTRY AGAINST IMPORTS, TO THE PREJUDICE OF THE CONSUMERS. 


Your Honors, consider the following in support of the 1st Argument. 


1. The Cement Manufacturers of the Philippines ( Cemap ) , Lafarge Holcim Philippines Inc., Republic Cement and Building Materials , Inc. and Ernesto M. Ordonez , in his capacity as President of Cemap , are all respondents in the complaint –affidavit filed before the Philippine Competition Commission ( PCC ) , Exh “ F”. The PCC found reasonable grounds to proceed to full administrative investigation for possible violations of Sections 14 on Anti-Competitive Agreements and 15 on Abuse of Dominant Position of the Philippine Competition Act. Republic Act 10667 Exh “G ” , Letter of Orlando P. Polinar, Director IV, Competition Enforcement Office, PCC and Exh “ H “ Letter dated May 8, 2018 from the same office . The complaint affidavit was executed by the undersigned and filed on August 22, 2016. 


Briefly, the complaint seeks to ensure fair competition amongst manufacturers and importers and to ensure the growth of competition that offers choices to the consumers at reasonable prices. The case remains pending full administrative investigation in the PCC. 7 


2. On November 6, 2018, a group of importers sought the PCC intervention in the safeguard duty investigation Exh “I “. The importers group requested the PCC to step in and participate in the DTI investigation to ensure a level playing field for small businesses and strengthen competition in the cement industry. The letter was received by the PCC on November 20, 2018 and advised that the letter shall be endorsed to the proper PCC office for action, Exh “J“. 


3. On March 17, 2017, the DTI issued Department Administrative Order 17-02 (DAO), and amended by DAO 17-05, both signed by the DTI Secretary Ramon M. Lopez. It exempted the cement importation of local cement companies from securing an Import Commodity Clearance Certificate or ICC, and what the industry called as “green lane importation”. On the other hand, importers need to secure ICC , pay bond and conduct testing of cement , Exh “ K “ and “ L” . The DTI DAO on “green lane importation “by the local cement industry had been repealed due the incessant and intense protest from the importers group. 


4. Thereupon, DTI issued another DAO and signed by the DTI Secretary Ramon M. Lopez, numbered 2017-06-, Exh “M”. All cement importation, whether from a local cement company, or from the pure traders, have to comply with uniform and identical rules and procedures. \


B. THE SAFEGUARD DUTY IS PRIMARILY AND PRINCIPALLY A GOVERNMENT IMPOSED PRICE INCREASE AND IN AID OF NEW AND EXPANSION CAPITAL PROJECTS OF THE LOCAL CEMENT INDUSTRY TO INCREASE PROFITABILITY , RATHER THAN A REMEDY TO THREATEN OR SERIOUS INJURY ARISING FROM IMPORTS, IN VIOLATION OF THE PROVISIONS OF THE SAFEGUARD DUTY LAW , AND TO THE PREJUDICE OF THE CONSUMERS 


In support of the 2nd Argument, hereunder are the pertinent portions of the sworn statements of the Cemap witnesses: 


1. John Reiner H. Dizon, Strategy and Business Development of Republic Cement & Building Materials, paragraph 13 and “The Company is considering investing in the following projects to increase capacity, efficiency and productivity to be able to be more efficient and meet expected increase in demand. The same projects are in danger of being cancelled, scaled down and /or postponed because of the impact of lower prices resulting in reduction of profitability and return on investment, and difficulty in raising capital”. And to be read in relation to a portion of paragraph 9, and “the company has been unable to increase its prices because of the competitive price of imported cement”, Exh “N” ” and “O”. 


2. Cirilo M. Pestano II, Executive Director of the Cement Manufacturers Association of the Philippines. Paragraph 10, “The Philippines is at an inflection point. Listed cement companies reports show actual lower profitability. This development will be a factor in determining whether or not to invest in new capacity “, Exh “P”. 


3. Zoe V. Sibala, Vice President of Strategy, Holcim Philippines, Inc. in paragraph 11 , “ the Company plans to invest in the following projects to increase capacity, efficiency and productivity to be able to be more cost effective and at the same time meet expected increase in demand “, Exh “Q” , and in paragraph 12 , “ among these projects are in danger of being cancelled, scaled down and/or postponed because of the impact of imports resulting in the reduction of profitability and difficulty in raising capital , Exh “R”. 


4. Jesusa N. Roxas, Chief Financial Officer of the same company , paragraph 5 “ the main reason in the decline of the company’s profitability is the low selling price of imported cement “, Exh “ S”. 


5. Jose Mauro G. Valdes, Enterprise Risk Management Director of CEMEX Holdings Philippines , paragraph 4 , “ CEMEX have to cancel or scale down some of these projects if the financial situation of CEMEX continues to decline , and in 4.1, “ CEMEX will have difficulty in raising capital to fund these projects because of decreasing profitability cause by the surge of cheap imports of imported cement “, Exhs “ T “ , “ U “and “V “. 


6. Emylita B. Ortega, Chief Specialist, Taiheyo Cement Philippines, Inc. , paragraph 5, “ the decline in profitability is due to low selling price of imported cement “, Exhs “W “ and “ X ”. 9 


Your Honors, these sworn statements of the Cemap officials are glaringly anti –consumers and a deprivation of the right of the consumers to seek alternative choices of lower prices of cement. Right at the start of the investigation , the Oppositor has stated in its Initial Memorandum , Exh C , that “ this will eliminate perceptions that retail prices have gone up in anticipation of the safeguard duty now subject of the investigation” when the Oppositor pushes for a Suggested Retail Price for cement. 


We wish to reiterate our manifestation in the hearing of May 21, 2019 that the safeguard duty had been and will be ‘a strategy to increase prices of cement, to the prejudice of the consumers. Other arguments of decline in profitability, threatened or serious injury and product standards are all secondary. The bottom line is the increase in the prices of cement. 


C. THE LOCAL CEMENT PLANTS AND THE DTI HAD NOT SET THE SUGGESTED RETAIL PRICES (SRP) OF CEMENT WHILE THE INVESTIGATION IS ONGOING AS MANDATED IN THE DTI REPORT, A VIOLATION OF THE DTI REPORT AND TO THE PREJUDICE OF THE CONSUMERS. FURTHER, THE PRODUCT QUALITY OF IMPORTED CEMENT ARE HIGHER AND BETTER THAN LOCAL CEMENT. 


Your Honors, both the DTI and the Cemap representatives have no answer why there has been no SRP for cement. The DTI representatives pointed to another agency in DTI as responsible in setting SRP which he did not identify, while the Cemap representative pointed to DTI. The continuing failure to set SRP is a material defect of the entire investigation. 


Based on the DTI E Presyo, as of May 28, 2019, in the National Capital Region, Quezon City, Republic Cement prevailing price is Php 260.00 per bag, since a month ago, Rizal Cement prevailing price is Php 230.00 per bag since 3 months ago, and Advance Eagle prevailing price is Php 230.00 per bag since 3 months ago. 

In our Initial Memorandum//Position Paper , Exh “C ”, submitted on February 11, 2019, the prevailing prices of the sample cement brands ranges from Php 215.00 to Php 220.00. 


Noticeably, retail prices had increased from Php 15.00 to Php 40.00 a bag. The increases are more than the safeguard duty passed on to the consumers of Php 8.40 a bag. Yet DTI and the Cemap members continue to violate the obligation required in the same DTI report. The consumers continue to bear the brunt of the safeguard duty, the additional increases in the retail price of cement and suffers from the inaction of the local cement industry and the DTI.  


Your Honors, the Tariff Commission should exercise its quasi-judicial powers and impose the sanctions against the DTI and the local cement companies they deserve for the continuing violation of a specific directive of the DTI own Report. 


Lastly, Your Honors, in Section 6.8.3 of your Staff Report, imported type cement show higher compressive strength results than their local counterparts. 


PRAYERS 


Your Honors, we respectfully PRAY that the following REMEDIES AND ORDERS be issued immediately , namely: 


1. That the investigation under Section 6 of Republic Act No. 8800 or the Safeguard Measures Act should be dismissed immediately for lack of cause of action. 


2. That the Honorable Commission issues a permanent Order to stop immediately the collection of the safeguard duty of Php 8.40 per bag of cement. 


3. Order a refund of the safeguard duty collected from all consumers. 


4. Order the DTI and the local cement industry to set Suggested Reasonable Retail Price of cement under such terms and conditions prescribed by the Price Act , as amended or Republic Act No. 7581 as amended by Republic Act No. 10623. 


5. Endorse to other agencies on the administrative, civil and criminal accountability of the concerned DTI Officials as well as the Cemap officials. 


6. Such other reliefs and remedies for the benefit of the consumers. 

Respectfully submitted. Quezon City, May 28, 2019. 11 


ATTY. VICTORIO MARIO A. DIMAGIBA, AB, LLB, LLM 

OPPOSITOR/COUNSEL 

No. 5 Elgin Street, Brgy. Fairview, Quezon City 1118 

Roll of Atty. No. 24285 

PTR No. 7446842, Jan. 11, 2019 

IBP No. AR 4719174, Jan 11, 2019 

MCLE 5 000692, April 19, 2019 

MCLE 6 compliance certificate under process 

Email: labankonsyumer@gmail.com ;dmagiba@pldtdsl.net 

cc: Atty. Salvador M. Rivera, Jr., w/ attachments c/o courier 

Counsel of Cemap, Cemex, Republic, Holcim, Taiheiyo 

Macropharma Building , No. 1 Julia Vargas Avenue 

CW Home Depot, Brgy.Ugong 

Pasig City 

Importers Group – c/o Mr. Napoleon Co and Mr. Sahagun ,by email and w/o attachments 

DTI representative c/o Director Luis Catibayan , by email and w/o attachments 
Vietnam Economic Counsellor, c/o Ms. Vu Viet Nga , by email and w/o attachments 

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