Consumers to bear brunt of higher cement prices

Consumers will bear the brunt of higher cement prices, which will likely be the result of the Department of Trade and Industry’s (DTI)’s controversial administrative order that effectively tightens rules on cement importers.

In an interview with The STAR on Friday, a cement importer, who has been in the business for many years now said consumers would be put at a disadvantage if prices of cement go up.

The Duterte administration’s ambitious Build Build Build infrastructure program would also be put at risk as it would jack up the cost of infrastructure projects, he said.

The importer, who declined to be named, said DTI’s department administrative order (DAO) 17-02/05, issued in February, would essentially cripple if not totally eradicate pure importers from the market.

If this happens, he said, the local manufacturers – which also import from other countries – would be able to control the prices of cement in the market.

Defending the controversial order, Trade and Industry Secretary Ramon Lopez said the administrative order was merely meant to ensure the safety of cement in the local market.

“The only reason post import standard is being done is only to ensure consumer protection. This is being done in other countries. We need to protect consumers from possible substandard imported cement. Lives can be endangered if substandard cement gets into the market,” Lopez said.

But on this point, the importer said, “these local manufacturers import from the same sources,” referring to the source in Vietnam.

Lopez also said the order had been subject to consultations and merely added a product testing process, similar to the steel industry.

The cement industry is composed of different types of players – the cement manufacturers, which also import; pure manufacturers, which do not import and those that are pure importers or the traders. The manufacturer-importers and the pure importers are both authorized by the DTI and the Bureau of Customs to import cement from abroad.

The importer said the present demand in the Philippines is about 70 million bags a month. The local manufacturers can supply 50 million bags while the pure importers account for 12 million bags.

There are about 20 traders who do pure importing but the number has been reduced to less than 10 since the DTI issued its administrative order. The smaller ones import 100,000 bags a month while the bigger players import one million to two million bags a month.

The whole fuss stems from the requirement of DAO 17-02/05 which is for pure importers to secure an additional import commodity clearance (ICC) while exempting manufacturerimporters from this requirement.

Pure importers said this would cripple their business because cement only has a maximum shelf life of 10 months and with the tedious procedure in securing an ICC, the imports would already near expiration if not totally expire.

“The testing to get an ICC will take one month. That delays the traders. These manufacturer-importers, however, are not required to have that ICC,” the importer said.

As a result, he said, the tighter requirements such as the ICC would drive pure importers out of the market.

In turn, the manufacturer-importers would now be able to dictate their prices, the source said.

The importers also believe the administrative order is not justified because the imported cement all carry the Product Safety (PS) Mark backed by the reputation of international testing bodies.

At present, the price of cement is

P220 to P235 per bag from a high of P300 per bag in 2015.

This is because importers were able to bring in adequate supply of the commodity, resulting in lower prices.

However, the importer said the current low price of cement in the market could soon change because of the administrative order.

The Duterte administration’s Build Build Build infrastructure project program may also be affected as the limited supply of cement in the domestic market could result in delays in project implementation and the projects could cost more as cement prices are likely to go up.

To remedy the issue, a few importers of cement have filed separate cases before the Makati Regional Trial Court questioning the legality of administrative order. The cases are still pending in court. In their petitions, the importers claim the administrative order violates due process and equal protection clauses of the 1987 Constitution; that it encourages unfair trade practices and unfair competition; and violates international law.

As an alternative, pure importers are asking the same treatment for manufacturers-importers. This means they should be required to comply with the ICC requirement as well.

In compliance with the ICC requirement, both should be allowed pre-shipment sampling and testing, which may be conducted by certified accrediting bodies.

The importer said this would hasten the process of getting the ICCs.

The bottom line is, he said, is that the government should observe equal protection.

Otherwise, it may only lead to monopoly in the industry and the cement cartel could cause prices to go up.