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Home3PL/4PLDTI proposes new sea freight forwarding rules

DTI proposes new sea freight forwarding rules

  • The Department of Trade and Industry is proposing new rules on sea freight forwarding that will require applicants to apply for a Certificate of Recognition instead of accreditation
  • Seeking to amend rules issued more than 15 years ago, the proposed order aims to lay down minimum standards for recognizing freight forwarders
  • Proposal includes higher capitalization requirements for non-vessel operating common carriers as well as international and domestic freight forwarders and new paid-up requirement for cargo consolidators and breakbulk agents
  • Varying levels of training for key personnel eyed
  • Fewer documentary requirements also pushed

The Department of Trade and Industry (DTI) is eyeing new rules on sea freight forwarding that will, among others, require applicants to apply for a Certificate of Recognition (COR) instead of accreditation.

The proposal also calls for higher capitalization requirements for certain forwarder categories, entirely new paid-up requirements for other categories, varying levels of training for key personnel, and fewer documentation requirements.

The proposed department administrative order (DAO) aims to lay down minimum standards and requirements for recognizing freight forwarders, and to finally amend the defunct Philippine Shippers’ Bureau’s (PSB) Administrative Order (AO) No. 06-2005.

AO 06-2005, which prescribes extant rules on sea freight forwarding, was issued more than 15 years ago in 2005.

Sea freight forwarders, unlike other transport service providers regulated by agencies under the Department of Transportation, are accredited by DTI, previously through an attached agency the PSB. When PSB was dissolved in 2014 under DTI’s rationalization plan, it was replaced by a new office, Supply Chain and Logistics Management Division; PSB’s regulatory powers and functions were also transferred to the Fair Trade Enforcement Bureau.

The proposed DAO was discussed in a series of public hearings conducted by the DTI-Consumer Policy and Advocacy Bureau from June 29 to July 1. But much earlier, DTI in November 2019 had also conducted a public hearing on a then proposed DAO with similar provisions to the latest draft. Notably, the latest draft further trims the proposed documentary requirements in the 2019 draft.

It also proposes that instead of a Certificate of Accreditation (COA), a COR will be required for all entities transporting goods for a fee by sea and/or by land from point of receipt to point of destination prior to operation.

The COR will be valid for five years, longer than the current two-year validity of the COA.

Like the 2019 proposal, the latest draft will no longer require firms to apply for a separate registration—currently the case for the accreditation—for their branch offices so long as they declare the establishment of these offices prior to their operation.

The new draft categorizes sea freight forwarders into non-vessel operating common carrier (NVOCC), cargo consolidator (CC), international freight forwarder (IFF), domestic freight forwarder (DFF), and breakbulk agent (BBA).

Under the proposal, the required paid-up capital/partner’s contribution/proprietor’s equity should not be less than the following:

  • P5 million for NVOCC
  • P4 million for CC
  • P3 million for IFF
  • P2 million for BBA
  • P1 million for DFF

For companies applying for more than one category, the paid-up capital/equity requirement for the higher/highest category will be applied.

The same freight forwarding categories are in place under current rules, but the minimum paid-up capital is required only for corporations and partnerships, specifically P4 million if an NVOCC, P2 million if an IFF, and P250,000 if a DFF.

Entirely new provisions are the paid-up requirements proposed for CC and BBA.

The proposed minimum amount of insurance coverage remains the same with the current rules:

  • NVOCC – P1 million
  • CC – P800,000
  • IFF – P600,000
  • BBA – P400,000
  • DFF – P300,000

For companies applying for more than one category, the category with the higher/highest minimum amount of insurance coverage will be applied.

The 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.

Application requirements

The draft DAO requires at least two key operating officers, who may be the owner, president, chief operating officer, general manager, or operations manager, to have relevant trainings of at least 150 hours for IFFs and a minimum of 40 hours for DFF. For the five categories, at least one of the key operating officers must have at least three years’ experience in shipping, freight forwarding and/or related activities.

For those applying as CC and NVOCC, the three-year freight forwarding experience must include trainings on consolidation of export cargoes.

Filing and processing fees for application will be increased to P12,500 for NVOCC; P11,500 for CC; P10,000 for IFF; and P7,500 for DFF. Processing fee for CCs will be P11,500 and for BBAs, P8,500.

A recognized firm applying for additional category will be charged a filing and processing fee of P3,500 for every additional category applied for. The validity period of the additional category certificate will be coterminous with that of the first recognized category.

A documentary stamp tax of P30 will still be charged per application regardless of the mode of issuance of the certificate.

No fee will be collected from the applicant for the COR issued and generated via the online system, while P500 will be charged for a hard copy.

Applications for recognition should be processed by DTI within three working days from receipt of complete requirements and payment of the filing fee.

Renewal and expiration

The COR must be renewed within two months before it expires. An application for renewal of the COR filed after the expiry date will be subjected to a surcharge of 50% of filing and processing fee if filed within one month after expiration, and 100% of the fee if filed one month after expiration.

Under the proposed DAO, registered freight forwarders will be required to submit reportorial requirements for cargo statistics report every semester (July and January of next year); Annual Audited Financial Statements within 30 days from the deadline of filing of income tax return; and copy of cargo insurance policy within 30 days from renewal or coverage.

To ensure  the proposed DAO and other relevant issuances meet objectives, DTI will still exercise its visitorial power by entering, when necessary, any establishment, office, and premises of a firm reported to be engaging in transactions covered by the DAO.

The draft DAO lists unlawful acts and omissions, including engaging in the freight forwarding business without prior recognition; misrepresentation by a firm that it has a subsisting recognition; and using of a subsisting recognition by another entity.

Others include failure to deliver cargo as required in the transport document; failure to deliver cargo to its rightful owner; delay in the delivery of cargo, and pilferage, among other.

Complaints of violations on the proposed policy should be filed and processed under DTI’s existing uniform procedural rules and regulations on handling or processing of administrative complaints.

Stakeholders were given seven days after the public hearing to submit their position papers on the proposed order.

Meanwhile, a separate order may be issued to amend PSB Memorandum Circular No. 01-2005, which provides the standard freight forwarding services, rates and charges for containerized shipments. Sea freight forwarders have earlier noted that rates under the 2005-issued order no longer reflect the costs incurred and the rates imposed by sea freight forwarders.

The proposed DAO seeks to be consistent with Republic Act No. 11032, or the Ease of Doing Business and Efficient Delivery of Government Services Act of 2018, which mandates all government agencies and offices to streamline services and reduce bureaucratic red tape and processing time. – Roumina Pablo


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