Stronger regulation needed

Filipino steelmakers want legislation prescribing stiffer penalties on manufacturers of substandard products and better enforcement of customs regulations to curtail rampant smuggling of inferior steel products principally from China.

The steelmakers, represented by the Philippine Iron and Steel Institute (PISI), presented a detailed package of legislative and administrative measures needed to protect Filipino consumers from substandard products before the Senate Committee on Trade, Commerce and Entrepreneurship. Sen. Bam Aquino chairs the committee.

Aquino earlier filed a resolution calling for a public inquiry on the proliferation of substandard steel products in the domestic market. The senator noted expert studies showing the effects of the earthquake that hit Bohol and Typhoon Yolanda that hit Leyte and Samar were aggravated by widespread use of substandard steel in the most severely damaged structures.

The resolution also noted several “test buys” of steel products conducted jointly by the DTI, the CIDG and technical experts from PISI on several hardware outlets some months ago. These resulted in the discovery of large quantities of substandard steel products. The confiscated products included both smuggled items without prescribed markings as well as inferior products bearing the markings of several unscrupulous local manufacturers.

The PISI has since called on the DTI to impose penalties on the local manufacturers, including revocation of their licenses. The group also called on the Bureau of Customs to impose new measures to check rampant smuggling of steel products.

PISI submitted to the Senate industry data that shows a large discrepancy in the figures China reports as having exported to the Philippines and BOC figures indicating the amount of steel products imported. The discrepancy amounts to nearly half a million metric tons of steel.

Specifically, the PISI asked Sen. Aquino to lead in the amendment of RA 7103 to add the selling of substandard products to be covered by the same penalties applied to those smuggling steel products. Manufacturers found violating standards laws ought to be prohibited from simply changing their business names to get around the penalties. As in the case of bus operators running decrepit buses in our streets, manufacturers often resort to changing business names to evade penalties.

The industry association also called for mandatory destruction of products found to be substandard. This is to prevent resale of the same to ensure consumer protection. Proliferation of substandard products poses severe dangers to our consumers.

Better regulation of local manufacturers and stronger measures against smuggling will help encourage investments in domestic steel production. At the moment, domestic demand for steel products far exceed our manufacturing capacity, leading to increased reliance on uncertified imports.

As the construction boom continues, there is a need to boost local production capacity. This will create tens of thousands of quality jobs for our workers and more reliable stocks of steel products. It will be difficult to attract investments in steel production if the regulatory environment remains weak and if smuggling continues unchecked.

Shortly after the Bohol quake, the PISI sent experts to examine the collapsed structures. They found many of the more severely damaged structures used inferior steel products. The same findings were established during an inspection of the Yolanda-hit areas. The Port of Cebu has long been notorious as entry point for smuggled inferior steel products, mainly from China.

Proliferation of inferior steel products is not limited to the Visayas, however. In his resolution calling for an inquiry into this proliferation, Aquino noted test buy operations conducted recently in Caloocan hardware stores, hundreds of inferior steel products were confiscated and will be destroyed by the DTI Consumer Protection Group. The test buy operations were conducted with the participation of experts from the PISI as well as the Steel Angles, Shapes & Sections Manufacturers Association of the Philippines (SASSMAPI).

Neither are inferior steel products due to smuggling alone. The inferior products seized in recent raids included certified but substandard as well as uncertified items. Uncertified items, without manufacturer markings, are almost certainly smuggled. The substandard items, carrying the markings of their manufacturers, suggest lax supervision of the steel plants by the DTI.

Ensuring local manufacturers adhere to industry standards is the job of the DTI Consumer Protection Group. Despite the seizures and the mounting evidence of locally manufactured but inferior products, the DTI will file cases against the erring manufacturers.

Among the items with manufacturer’s markings seized in the Caloocan raids were products from Cathay Pacific Steel Corp., Continental Steel Manufacturing Corp., Dragon Asia Metal Corp., Mackay Industrial Corp. and Somico Steel Mill Corp..

Part of the problem of proliferating substandard steel products is rampant smuggling. The Senate hearing could compel Customs officials to disclose their intelligence data on the major steel smuggling syndicates.

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