FedEx License To Fly Within the Philippines Imperiled

AIN Air Transport Perspective » August 19, 2013
FedEx MD-11
FedEx flies international freight with an MD-11 into and out of Manila, where the Philippines’ highest court weighs arguments in a case that could determine how the company provides domestic service within the country. (Photo: FedEx)
August 19, 2013, 12:50 PM

FedEx Express awaits the result of Supreme Court proceedings in the Philippines that could determine its ability to fly freight within the archipelago.

The case centers on the question of the validity of FedEx’s International Airfreight Forwarder License, issued by the Philippines’ Civil Aeronautics Board (CAB) in May 2011. Philippine law requires 60-percent domestic ownership of “public utilities”–including businesses that offer to the public services such as air-freight forwarding. Nevertheless, since 1946 the CAB and the Philippine Department of Justice have issued multiple opinions exempting purely international transportation and communication services. This past January, however, the country’s Court of Appeals disagreed, ruling in favor of two Filipino freight-forwarding companies that argued that the CAB should revoke FedEx’s license due to its status as a 100-percent foreign-owned and -based corporation.

The Court of Appeals denied FedEx’s first appeal on June 6, but didn’t publicize its decision until the third week of July.

Should the Supreme Court concur with the Court of Appeals, the decision could carry implications for more than 30 foreign-owned freight companies that hold International Airfreight Forwarder licenses issued by the CAB, according to FedEx.

The decision, however, would not affect its license to transport goods into and out of the Philippines. “Further transport of goods from Philippine airports to consignees or vice versa can be undertaken by subcontractors, as FedEx has done for many years in the past, or by a company established with 60-percent Filipino ownership,” said FedEx in a statement sent to AIN last week.

FedEx investment in the Philippines includes an allocation of more than 500 million Philippine pesos ($11.5 million) in the past year to the construction of the new facilities at the Manila and Cebu international airports, Clark customer service offices and Manila district headquarters, according to the company.

“We have created 315 new jobs in FedEx Philippines,” said FedEx. “We have also contracted with Filipino companies who have added 350 new jobs to support our brokerage, pickup and delivery services.”

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Luis Mansanadez
on September 7, 2013 - 7:02am

The Philippine Court of Appeals is correct. FedEx does not deserve the license it got since it is has a bunch of incompetent staff manning their branch in the Philippines. FedEx has so many delayed deliveries due to incompetence. Shameless FedEx personnel in the Philippines would just keep you guessing when the delivery is done and a month as already passed. For all shippers in the Philippines, you better send your cargoes through DHL which delivers in a flash.

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FedExised
on April 22, 2014 - 5:28am

It is unfortunate that the 60% Filipino/ 40% Foreign company ownership rule (established by the 1987 amendments to the Philippine Constitution) is still on the books.  It is a stumbling block to the dismal Philippine economy and unemployment rate and it is used by local companies as a shield to protect their existence from more efficient foreign companies.  Be that as it may, foreign companies (like FedEx, DHL, UPS, etc.) that wish to set up business operations in the Philippines should make sure to get competent corporate governance advice on how to properly structure and register their businesses in the Philippines.   I think that trying to classify FedEx as a "public utility" is bit of a stretch, but nonetheless, the exposing tactic used by local freight forwarding companies got everyone's attention.   Now FedEx using a third party subcontractor (locally owned) to run the show for them in the Philippines.  The name of the company is Airlift Asian International (AAI).  AAI provides brokers to deal with the Philippine Bureau of Customs at the international airports in the  Philippines, as well as provide ground transport to actually deliver FedEx packages received from other countries.  However, all this additional corporate overhead has put FedEx in a pickle, as now they have to try to charge additional fees like "storage fee" and "other administratvie fees".  This raises a serious legal issue, especially when someone pays a supplier outside the Philippines for goods and also for door-to-door delivery by FedEx.  For example, if I order some toy parts from a supplier in China, and I pay the supplier say US$50 for door-to-door FedEx delivery, then I should not have to pay any additional "administrative fees" to FedEx in the Philippines just so they will deliver my package to me.  Another serious legal issue is the fact that Airlift Asia International's brokers do not know how to use the Tariff Finder website set up by the Philippine Tariff Commission ( http://finder.tariffcommission.gov.ph/ ) to verify if goods received are subject to customs duties or not.  The AAI brokers simply allow the crafty Customs Agents to arbitrarily decided how much duties and taxes to impose, even if the goods received are not subject to customs duties.  For example, on 26 March 2014 some remote control toy parts I order from China were delivered to my home by FedEx's subcontractor.  When the subcontractor arrived, he presented me a FedEx invoice for over P2,000 (approximately P1,000 for FedEx local administrative fees, and P1,000 for various customs duties.  Interestingly, the tariff code heading reference number used by the Customs Agent was a goods classification for 'bingo/casino equipment".  After 2 hours of angry phone conversation with FedEx management, they agreed that Philippine Customs made a mistake and gave me my package with no additional cost imposed.  You can check out the story at jebstewart.wordpress.com.  And yesterday (21 April 2014) the exact same thing happened.  I had ordered some small pieces of clear acrylic tubing for my daughter's classroom projects.  According to the ASEAN China Free Trade Agreement (ACFTA) Tariff Schedule, such plastic pipe is subject to ZERO customs duties.  However, FedEx subcontractor sent me an SMS message yesterday informing me that they had a FedEx invoice for P2,380 for "FedEx administrative fees and customs duties".  Enough is enough!!!  I have contacted the Enforcement Division of the Philippine Bureau of Customs, the Chinese Embassy in Manila, the National Bureau of Investigation and several Philippine newspapers.  If FedEx wants to open Pandora's Box, then let the games begin!!!

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