Overkill

This is a classic case of government intervention gone wrong, if not an abuse of governmental powers.

Last March 28, Trade Secretary Ramon Lopez signed DAO 19-05 prescribing technical regulations concerning the mandatory product certification of flat glass, tempered glass, laminated glass and heat-strengthened glass.

The order requires all manufacturers of glass, both local or foreign, to secure a Philippine Standard (PS) License as condition for the distribution, sale or use of these products in the Philippines for safety, traceability and accountability purposes. All importers have to source their glass products only from a PS license holder in addition to securing the statement of confirmation as condition for the distribution, retail and use of the imported glass products here.

DAO 19-05 likewise imposes a mandatory minimum capitalization of P20 million for all importers and the disclosure of all their local clients as conditions for their importation of glass. 

The measure is too much considering that just two years ago, the definitive anti-dumping duties were imposed on importation of clear float glass and bronze float glass from China for a period of five years.

DAO 19-05 also came as a shock since in 2015, DTI already removed flat glass from the list of products under mandatory certification on the ground that it is not life-threatening, unlike steel and cement which are basic construction materials. The updated list by the DTI in 2018 also did not include flat glass.

With the implementation of DAO 19-05 beginning last April 22, two groups of glass fabricators and importers, including the Philippine Chamber of Glass and Aluminum Industries, last May filed their respective petitions for injunction and declaratory relief to declare the order unconstitutional.

They claimed among others that the DTI has no authority to subject foreign manufacturers to mandatory PS license especially on those not doing business in the Philippines, to impose the P20 million minimum capitalization requirement, and to subject flat glass to mandatory product certification under the Consumer Act as it is a raw material.

The petitioners also maintain that the order is unconstitutional for having been adopted by the DTI without due process and in violation of the equal protection clause, and for being illegal for having violated other laws such as the Consumer Act, the Administrative Code, the Ease of Doing Business Act, the Philippine Competition Act, and international agreements like the WTO Technical Barriers to Trade Agreement (TBTA) and ASEAN Trade in Goods Agreement (ATIGA).

According to the complainants, they can can no longer import glass from foreign manufacturers who have no PS License and opt not to secure this because of its burdensome requirements which include audit inspection of their factory by DTI personnel at the expense of the manufacturers and thereafter, annual audit inspection of the same plant. This requirement will be repeated as many times as there are importers of the same foreign manufacturer because the PS License is on a per importer basis.

Under previous DTI regulations, only Philippine manufacturers are required to secure PS License for consumer products sold locally.

They also stressed that under the new regulation, glass importers can no longer source their glass requirements from traders or brokers who consider the manufacturers’ identities as part of their confidential business information. Glass importers who have been in business for decades, but whose capitalization is below P20 million, will no longer be allowed to import, something that will result in the closure of small and medium businesses in the glass processing, fabrication, and installation and other industries and the unemployment of many.

In addition, DTI is now requiring glass importers to disclose all their customers and their corresponding addresses which are confidential business information protected by law.

And probably the most important, they pointed out, is that the regulation violates the Philippine Competition Act as glass importers are being forced to buy from the sole local manufacturer Pioneer Float Glass Manufacturing, Inc. which was recently bought by Total Quality Manufacturing Products Philippines Corporation (TQMP). 

This local manufacturer, it was learned, only produces clear and bronze flat glass. It will be recalled that it was Pioneer’s predecessor Asahi Glass which petitioned for the imposition of anti-dumping duties and it was also Pioneer who asked for the enactment of DAO 19-05. And to think that the anti-dumping duties and DAO 19-05 covered certain glass products which weren’t even being produced locally.

As if the anti-dumping duties and the increased import regulations were not enough, last Feb. 19, the DTI said it found prima facie evidence to initiate preliminary investigation on Pioneer’s application for the imposition of safeguard measures (DAO 19-12) for the importation of clear and tinted flat glass and reflective glass. 

Glass importers said that although Pioneer’s initial application was only limited to clear and bronze flat glass that it produces, the DTI included all tinted glass such as (blue, green, euro gray, dark grey) and reflective glass.

While the DTI temporarily deferred implementation of DAO 19-05 until last Aug. 9 and the Pasay Regional Trial Court and Makati RTC  granted the petition for the preliminary injunction filed by some glass importers and fabricators (the main petition is still being heard), the imposition of the order still remains as a sword of Damocles hanging above the heads of glass importers and allied businesses.

The DTI is obviously not protecting the consumer here because the glass being imported is not a consumer product, but rather a raw material. What public welfare therefore is being promoted here to justify the exercise of police power? After all, suppliers and clients of these importers are already adopting their own quality and safety standards in order to shield them from liabilities and legal suits in case of defects and cancellations, in addition to existing local regulations. The sole local glass manufacturer, Pioneer can’t even meet local demand. It doesn’t even produce some of the products being overregulated.

Just last July 22, the DTI dealt the importers another blow when it imposed provisional safeguard measures amounting to P2,552 per metric ton for clear float glass and P2,835  per ton for tinted float glass, including reflective glass imported from various countries for a period of 200 days based on a petition by Pioneer.

Meanwhile, the stakeholders emphasized that the DTI should also address the current tariff distortion, wherein imported processed glass is levied a zero duty, while glass that is used as a raw material is imposed a 10 percent duty, on top of anti-dumping and safeguard duties.

So whose interest is the DTI really trying to protect? Definitely not the end-users who have to suffer from very high prices.

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