A Fresh Look at Logistics Costs: DTI's Pledge in Eradicating 'Passing Through Fees'

As the calendar turned to late July 2023, a fresh wave of change is sweeping across the Philippines' logistics and supply chain industry. Right on the heels of President Ferdinand Marcos Jr.'s State of the Nation Address (SONA), the Department of Trade and Industry (DTI), has pledged to take the bull by the horns in tackling the complex issues of high logistics costs that have been burdening logistics firms, forwarding companies, and import customs brokers alike. High on its agenda is the controversial 'passing through fees' - a practice that numerous Local Government Units (LGUs) endorse, causing a ripple effect of inflated costs and disrupting smooth business operations.

DTI's bold pronouncement has ignited a sense of optimism among diverse stakeholders, ranging from logistics companies, and international freight firms to global freight services. Prior to this, DTI had floated the idea of a moratorium to curb the relentless increases in port charges, a strategy applauded as a crucial first step towards creating a fair playing field for businesses. Today, the spotlight is on 'passing through fees,' another stumbling block in the journey towards a more business-friendly environment.

The Need for Strategy and Machinery

However, good intentions alone won't suffice. Realizing the goals necessitates a robust strategy and efficient machinery, taking into account the entire spectrum of stakeholders, which includes everyone from business entities, and government agencies, to all LGUs. The latter, in particular, need to be handled with care given they are shielded by laws like the Local Government Code of the Philippines.

A Persistent Issue

It's worth noting that the 'passing through fees' issue is not a recent problem. There have been attempts to reign in this practice, like the Department of Interior and Local Government Memorandum Circular 2018-133, and the more recent Joint Memorandum Circular (JMC) No. 2021-01 in April 2021. Despite these efforts, and even numerous public reminders from the former Secretary of DILG during the Duterte administration, the unauthorized fees remain an issue, underlining the resilience of ingrained interests.

Even concerted efforts by top-tier government officials and logistics stakeholders haven't fully eradicated these fees. The issue's persistence suggests a deep-rooted systemic problem, one requiring a comprehensive, root-cause approach.

Looking Beyond the Surface

This predicament calls for an intricate dissection of the problem at hand. An understanding beyond the surface-level narrative that's focused on illegal taxation on goods, but not the trucks that carry them. There's a need for an in-depth exploration of the issue, involving the revision of the narrative structure of pronouncements and joint memorandums.

So, what needs to be done to decisively address this issue? Firstly, we must reexamine the narrative underpinning these pronouncements and joint memorandums. Most public statements and sources focus on illegal taxation or 'passing through fees' on goods, not the vehicles that carry them. This calls for a more precise and inclusive understanding of the problem.

As the saying goes, there are '10,000 ways to skin a cat'. Costs can arise from taxes on goods and the trucks transporting them. While taxation on goods is often cited as prohibited, annual taxation on trucks is not as stated in the Local Government Code of the Philippines, particularly section 141. This loophole legally achieves the same result—revenue for the LGU leading to a rise in logistics costs

The Power of Law

Additionally, the law that shapes these practices must not be underestimated. The Local Government Code of the Philippines, R.A. 7160, is significant. It's a Law, and just like any other Law, can only be altered or stopped by court orders, repealed Laws, or similar actions. This Law can clash with statements and circulars of lesser legal weight. To effectively handle 'passing through fees', we need to go beyond merely issuing joint memorandums and statements. We must consider a review or modernization of the Local Government Code of the Philippines, evaluate the legal strengths of LGUs, and explore other relevant solutions. It's this multi-faceted approach that could potentially lead to effective action against the 'passing through fees' issue.

Conclusion

In conclusion, addressing 'passing through fees' and high logistics costs necessitates a holistic and multi-faceted approach. This should involve issuing more than just memorandum circulars or public announcements, and delving into re-assessing the legal prerogatives of LGUs, partnering with Congress for a potential update of the Local Government Code, and exploring additional pertinent actions. With President Ferdinand Marcos Jr.'s backing, we are fully supportive of and eagerly anticipate the positive changes this approach can bring about. Indeed, with concerted efforts across diverse levels of governance and legislation, we are optimistic that managing logistics and supply chain will become easier in the Philippines.

About the Author:

The author is a seasoned professional in the logistics and transportation industry, with over a decade of experience working in the Philippines. As part of a comprehensive logistics service provider,?Ernest Logistics Corporation, ?the author has expertise in trucking, domestic and international freight forwarding, and customs brokerage. Having witnessed the challenges and opportunities firsthand, the author possesses deep insights into the sector's inner workings and potential for growth. Through their extensive knowledge and passion for creating a more efficient and sustainable transportation system, the author aims to contribute to the ongoing conversation on policy reforms and best practices in the industry.