Group sounds off on smuggling of low-grade cement

A consumer watchdog has raised the alarm over an alleged smuggling of some 50,000 metric tons (MT) of imported cement, warning this would not only result in revenue losses for the government but could also pave the way for the proliferation of substandard products in the market.

Rodolfo Javellana Jr., president of United Filipino Consumers and Commuters (UFCC), alleged in a statement the group had evidence that about 30 cement traders have illegally brought in over 50,000 MT of cement into the country, of which 90 percent reportedly came from Vietnam. He said the evidence would be submitted to the Bureau of Customs.

Javellana alleged the traders purchased the cement at an average freight rate of only $6.38 per MT, which was roughly $17 lower than the standard freight rate of  $23 per MT.

“Looking at an audit of 78,000 MT of imported cement and current cement importation trends, we are looking at an under declaration of just over P200 million from January to April of this year alone,” Javellana claimed.

The P200 million came in the form of undervalued freight rates and not the value of the goods themselves, he said. This, he added, was how “many unscrupulous traders engage in technical smuggling as freight rates are part of the basis for the computation of import taxes.”

“Tariff for cement imports is 3 percent for countries with most favored nation (MFN) status. It’s difficult to calculate the exact tax revenue lost because this also includes value of the goods and insurance, apart from freight rates. But considering how grossly undervalued the freight rates were, it’s readily apparent that the government is losing a lot in tax revenues because of technical smuggling of cement,” he stressed.

Javellana said the issue was also alarming given the exponential growth of cement imports. The country has been addressing its infrastructure backlog in the past few months.

The amount of imported cement shipped to the Philippines grew almost 79-fold between 2014 and 2015 to 314,000 MT. In the first quarter this year, cement imports were estimated to have already reached more than 390,000 MT.

Javellana believed some of the products brought in were substandard, even transported sloppily.

“Smuggling makes it easier for substandard products to enter the country. This is dangerous when it comes to construction materials such as cement, since they can cause road or building failure,” he said.

Last July, representatives of the National Consumer Affairs Council (NCAC) complained about 150,000 bags of cement contaminated by seawater have been sold in local markets. These bags were part of a 25,000 MT shipment that came in contact with a leak while being transported, thus contaminating 6,000 MT. This shipment under the Halong cement brand from Vietnam was unloaded in La Union in March 2016.

“More stringent measures by Customs can prevent poor quality products from entering the market. We urge Commissioner Faeldon to investigate the contents of our list not only to go after lost revenues but also to protect public safety,” Javellana said.