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Freight forwarder

Covered under the draft Department of Trade and Industry order are all entities engaged in transporting goods for a fee by sea or by land from point of receipt to point of destination. Image courtesy of khunaspix at FreeDigitalPhotos.net

The Department of Trade and Industry (DTI) is looking at revising rules on sea freight forwarding, including imposing higher paid-up capital requirement for some freight forwarding categories.

The draft department administrative order (DAO) also intends to make processing of accreditation application faster (from 21 days to three days), and validity of certificate of accreditation longer (from two years to three).

The grant of rebates is also cited as an unlawful act under the proposed rules.

A public consultation has been set on November 26 at the AVR Penthouse, Board of Investment, from 8 am to 12pm.

Covered under the draft DAO are all entities engaged in transporting goods for a fee by sea or by land from point of receipt to point of destination.

Under the proposal, the required paid-up capital/partner’s contribution/equity to appear in the articles of incorporation/partnership is as follows:

  • P5 million for non-vessel operating common carriers (NVOCC)
  • P4 million for cargo consolidators (CC)
  • P3 million for international freight forwarders (IFF)
  • P2 million for breakbulk agents (BBA)
  • and P1 million for domestic freight forwarders (DFF)

It must be noted that the current rules classify freight forwarders using the same categories (NVOCC, IFF, CC, BBA, and DFF).

Presently though, the minimum paid-up capital is only required for corporations, partnerships and sole proprietorships, specifically P4 million (if an NVOCC), P2 million (IFF) and P250, 000 (DFF).

The paid-up requirement proposal for CCs and BBAs is entirely new.

For companies applying under more than one forwarding category, the paid-up capital requirement for the highest category will apply under the proposed rules.

Firms no longer need to apply for a separate accreditation—which is currently the case—for their branch offices so long as they declare the establishment of these offices prior to their operation.

The insurance requirements also face adjustment. The proposed minimum amount of insurance coverage is as follows:

  • NVOCC, P1 million
  • CC, P800,000.00
  • IFF, P600,000.00
  • BBA, P400,000.00
  • DFF, P300,000.00

Under current rules, insurance was only required for corporations and partnerships, with minimum requirement of P1 million for NVOCC, P500,000 for IFF, and P250,000 for DFF.

Proof of cargo insurance coverage must come in the form of insurance policy and official receipt showing payment of premium referring to either the Merchandise in Transit (Floater) Insurance or any standard global comprehensive cargo liability insurance for freight forwarders and transport operators covering destinations between the Philippines and the outside world.

The current rules regulating seafreight forwarders are contained in Philippine Shippers’ Bureau’s (PSB) Administrative Order (AO) No. 06, Series of 2005. PSB is, however, now defunct, dissolved in 2014 under DTI’s rationalization plan, and replaced by a new office, the Supply Chain and Logistics Management Division. PSB’s regulatory powers and functions were transferred to the Fair Trade Enforcement Bureau, another DTI unit.

Seafreight forwarders are the only cargo transport service providers accredited by DTI, previously through PSB. Others, including airfreight forwarders, are regulated by the Department of Transportation.

The draft DAO noted the need to revise current rules as they still are governed by PSB AO No 6, and to realign provisions with the “present organizational makeup of DTI.”

Unlawful acts

The draft DAO lists unlawful acts and omissions, including engaging in or transacting business without prior accreditation; misrepresentation by a firm that it has a subsisting accreditation; using accreditation of another with or without authority from an accredited firm; non-compliance with orders/administrative issuances and/or circulars of DTI; violation of the Code of Conduct and Ethical Standards for Freight Forwarders; collecting and charging fees not prescribed by DTI; failure to deliver cargo as required in the transport document; failure to deliver cargo to its rightful owner; failure to comply with its contractual obligation to the shipper; and grant of rebates.

The proposal requires a copy of the export freight tariff rates and local charges for NVOCCs and domestic rates for DFFs.

In addition, accredited firms must submit reportorial requirements for cargo statistics every semester (July and January of next year) and audited annual financial statements not later than May 15 of the year. Non-compliance will cause payment of applicable fees ranging from P1,000 to P12,000 depending on the period of delay.

The fee for the certificate of accreditation will still be P200, but with a documentary stamp tax of P30.

Filing and processing fees will be doubled to P10,000 for NVOCC; P8,000 for IFF; and P6,000 for DFF. Processing fee for CCs will be P9,000, and for BBAs, P7,000.

The DTI will continue to exercise its visitorial power by entering any premises of a firm reported to be engaging in transactions covered by the DAO.

Complaints of violations of the proposed policy will be filed and processed in accordance with DTI’s existing uniform procedural rules on handling or processing of administrative complaints.

In case of breach of duties and responsibilities and the firm cannot justify its actions, sanctions include suspension, recall, cancellation or revocation of Certificate of Accreditation, or denial of application for renewal.

The existing schedule of fines for violation of any Trade and Industry Law under Executive Order No. 913 and its implementing rules and regulations will be imposed on the various offenses under the draft DAO.

The proposed policy seeks to be consistent with Republic Act No. 11032 (Ease of Doing Business and Efficient Delivery of Government Services Act of 2018), which mandates all government agencies to re-engineer their systems and procedures to streamline services and reduce bureaucratic red tape and processing time.- Roumina Pablo

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