LEGALIZE UKAY-UKAY:

A SECOND-HAND CHOICE

A Position Paper

Elrex T. Belino

Jefferson C. Bugante

Dan Paulo S. Morilla

Keith O. Rayos

Mark Anthony C. Rosales

Joe Sohrab A. Tolentino II

ACCOUNTANCY DEPARTMENT

Divine Word College of Calapan

October 2, 2010
INTRODUCTION

We have to admit that almost all of us are fond of hunting good items over

mountains of second-hand clothes, also known as ukay-ukay. The booming of this

business in the Philippines reveals the existence of a little-known law prohibiting it.

Republic Act 4653 is an act passed to safeguard the health of the people and maintain

the dignity of the nation. According to Section 1 of the said act, it shall be unlawful for

any person, association or corporation to introduce into any point in the Philippines these

textile articles. In spite of the fact that there is a law against the importation and sale of

these goods, many are still patronizing it because though it is branded, it is cheaper than

brand new. Many of our traders are also not aware of the penalty for those who are

caught or found guilty of the violation of the provision of R.A. 4653. Stated in Section 2,

the penalty of fine of not less two hundred pesos nor more than twenty thousand pesos

and imprisonment of not less than two years nor more than five years shall be imposed

upon persons found guilty. This law was in effect since June 17, 1966.

Despite the said facts, these illegal goods are evidently traded everywhere

around the country. Though illegal, these are widely accepted by the consumers and

majority of the Filipino Community.

Recently, ukay-ukay has been a very controversial issue since Bureau of

Customs Commissioner Angelito Alvarez proposed to legitimize the used clothing or

ukay-ukay trade and tax importers of these items. Alvarez said it is better to allow the

entry of used clothes and impose proper import duties and taxes, instead of merely

confiscating these items. He further said that he will ask the Congress to amend the law

to finally legalize the importation of used clothes.

 Now, the question is, is it right to legalize importation of used clothing and earn

revenues out of it?

OVERVIEW OF THE ISSUE

After officials have noticed the fast growth of this business and the need to

resolve this problem, they have discussed few matters regarding the issue. The

Department of Trade and Industry (DTI) announced that they would stop the popular

ukay-ukay because it is against the law. Trade Secretary Gregory L. Domingo claimed

that they have never given any licenses and permits to those illegal vendors and that the

permits were issued by the Local Government Units (LGUs). Domingo clarified that

because ukay-ukay sells primarily smuggled goods, the issue is more under the Bureau

of Customs (BOC). The BOC is held responsible for receiving these imported goods.

Customs Commissioner Angelito Alvarez said that these items that arrived every year

are not released, confiscated and stored in warehouses. Alvarez appealed to legislators

to repeal R.A. 4653 to give financially strapped people access to branded but second-

hand clothing. There had been arguments for using these used items from risk of

suffering health hazards, particularly skin diseases. So he added, we want the law

repealed wherein the importation of second-hand clothing would be allowed, there would

be just certain controls in the sanitary features.

In a separate statement, the Federation of Philippine Industries (FPI) chaired by

Jesus L. Arranza, said domestic manufacturers were alarmed by the pronouncement of

Alvarez that he is espousing the legalization of ukay-ukay so the government can

generate tax revenues from it. Arranza quoted that Alvarez statements will just

embolden the smugglers of ukay-ukay to continue bringing in used clothes for

commercial use despite the expressed prohibition in laws, and will also dissuade

investments in the textile and garments industry that is now in the verge of collapse.

Domestic manufacturers are strongly opposed to the plans of Customs Commissioner

Angelito Alvarez to legalize the importation of used clothes.

Furthermore, key officials of the Department of Health have assured lawmakers

that they will not stand in the way of a bill that would lift the ban on imported second

hand clothes despite hygiene concerns aired against such merchandise. Appearing in a

budget hearing at the House of Representatives, Health Secretary Enrique Ona said that

the repeal of the law prohibiting the entry of ukay-ukay products may be allowed so long

as safeguards will be provided to protect public health. Ona assured lawmakers that

there are number of safety measures that may be included in the repealing law to

guarantee that imported second-hand clothes and clothing materials that will be sold to

the public are safe.

As of now, this issue has not been settled due to the different positions of

different authorities responsible in this particular matter. The Bureau of Customs already

formed a research unit to look into repercussions of legalizing ukay-ukay including its

impact on the garments industry. Customs Commissioner Angelito A. Alvarez said the

research board is composed of Customs representatives and persons designated by

congressmen who will sponsor a bill to amend Republic Act 4653, which prohibits the

importation of used clothes and other textile products. Mr. Alvarez said there is nothing

final and that the bureau has decided to first study the feasibility of the plan. He also

quoted that they are hoping to get 700 million in revenues from 1,000 containers of

second-hand clothes in a year once ukay-ukay is legalized.

ARGUMENTS

1. Legalize and tax the trade and importation of used clothing or ukay-ukay.

The legalization of the importation of second-hand clothing and rags would

probably result in tax based on its earnings. This would have a positive impact on

different sectors depending in their concern in the issue.

As argued by the Bureau of Customs, the legalization of these goods will

certainly increase the revenue of the government through tax that will be imposed on its

trade and importation. This legalization of ukay-ukay was also supported by the

Department of Health provided that certain safeguards will be followed to protect the

public health.

Aside from the favorable impact of its legalization to the government through

taxes, it also has an implied impact on the other sectors. One of its possible positive

impacts on the businesses engaged in this illegal activity is the decrease in number of

competitors because of the difficulty in compliance with some regulatory requirements.

Some may not be able to meet those requirements and will tend to move into different

industry. This would also enhance their reputation and morale since they will be

legitimized. They could operate legally and could easily get connected in some

government agencies for some assistance. They could also expand the market of their

products and they could easily advertise it because these goods will now be accepted by

more consumers.

Furthermore, legalization of ukay-ukay would make their businesses stable and

they can apparently continue their operations without being enforced by certain

authorities. A business operating legally could help them to be socially responsible and
improve their business ethics because of the proper monitoring of the government and

the regulatory standards that they must follow.

Moreover, legalizing ukay-ukay has also a favorable impact in the Philippine

Economy. It would open several investment opportunities which may improve the

countrys economy. Local and foreign investors would be attracted to put their

investments in the importation and trading of ukay-ukay once it was legalized. This may

also open job opportunities depending on the type of their business investments.

2. Stop the trade and importation of used clothing or ukay-ukay and enforce

Republic Act 4653.

On the other side of the issue, here arise the negative impacts of repealing R.A.

4653. The textile and garments industry in the Philippines is currently in its critical phase

based on the statement of the FPI Chairman Jesus L. Arranza. The trend in this industry

may lead to a total collapse if ukay-ukay was legalized.

For traders and importers, imposing tax on ukay-ukay would increase the cost of

their inventory that directly affects their selling price. The increase in the selling price

would probably decrease the sale of these goods. More consumers would decline from

buying second-hand clothing than brand new with almost the same price. This was

opposed to the quotation of Alvarez about the taxes that can be generated with this

activity. Lesser traders and importers would result to lower tax revenues.

As stated above, more documents will be required for the compliance in the

registration and operation of the businesses engaged in this activity which mean higher

legal expenses on their part. The goods will all be subject to the value-added tax and

customs duties imposed by the Bureau of Internal Revenue and the Bureau of Customs
respectively. The burden of these taxes would affect not only the importers and traders

but also the consumers. This type of taxes known as indirect taxes is transferred to the

final consumers of the goods.

In addition, the health of the consumers of these goods is also a serious concern.

Despite the safety measures mentioned by the Department of Health, we cannot set

aside everyones health especially if were talking about a basic necessity which is

clothing. Consumers would be exposed to different contagious skin diseases brought by

these goods.

Furthermore, letting ukay-ukay business activities would somehow degrade the

Filipino pride and dignity. Using second-hand clothes from other countries may imply

that we cant afford to buy original clothes, besides; it is against the Filipino nationalism

to patronize those imported products. Ang hindi magmahal sa kanyang wika, mahigit sa

hayop at malansang isda, as quoted by our National Hero, Dr. Jose P. Rizal, in his

famous poem may also be true in patronizing imported goods than our very own native

products.

Additionally, imposing tax on ukay-ukay businesses will be a basis for the

legalization of other illegal operation on selling like goods or services all over the

country. Other illegal sellers will insist pursuing and legalizing their activities even these

are evidently illegal.

CONCLUSION

After weighing the possible impacts of legalizing ukay-ukay, we have decided to

go against it. We will support the second argument which is to stop the trade and

importation of used clothing or ukay-ukay and enforce R.A. 4653.

Legalization of and imposing tax on ukay-ukay has heavier negative impacts to

its consumers and the industry. Only the government will be benefited on its legalization

because of the 700M estimated tax revenue which can be generated from it. We have

no reasonable assurance that these tax revenues will benefit every individual in this

country.

On the other hand, consumers will be at risk of having skin diseases that cant be

assured to be prevented despite the safety measures planned by the Department of

Health. The dignity and morale of the Philippine Nation will also be degraded for using

only second-hand clothing. Also, though these are not brand-new goods, its price will

surely increase because of the additional costs which will be borne by the sellers and

also by the buyers.

Moreover, ukay-ukays worst effect will be on its industry. The garments and

textile industry will probably decline because these goods will certainly get some of its

share in the market. More investors will choose to invest in ukay-ukay than with the local

garment industry.

To conclude, we, a group of Accountancy Students from Divine Word College of

Calapan, are intensely supporting the strict implementation of R.A. 4653. It would be

better if all of these smuggled goods will just be confiscated and enforce the law against

those who violate it.

 An illegal will always be illegal. An illegal activity will always be an illegal activity

in some features even if it is legalized. To repeal the law and make another law will not

solve the problem. It has nothing to do with the existing law; the problem exists in the

implementation and enforcement of this law. Those who broke the rules are trash, an

excerpt from a quotation of a character in the famous anim Naruto Shippuuden, entails

that we must follow the rules and obey the laws which are all created to protect our

nation and our community.

We must help protect our country, our dignity and our own native products. We

must patronize and be proud of the Filipino products. We must oppose the proposal to

repeal the R.A. 4653 and the legalization of smuggled goods or ukay-ukay in our

country.
 BIBLIOGRAPHY

An Act to Safeguard the Health of the People and Maintain the Dignity of the Nation by

Declaring it a National Policy to Prohibit the Commercial Importation of Textile

Articles Commonly Known as Used Clothing and Rags.Republic Act No. 4653.

17 June 1966.

Legalize "Ukay-Ukay" and Collect Taxes - Customs chief. abs-cbnnews.com. ABS-CBN

Corporation. 17 September 2010 <http://www.abs-

cbnnews.com/business/09/16/10/legalize-ukay-ukay-and-collect-taxes-customs-

chief>

Macairan, Evelyn. Repeal of Law Prohibiting Importation of Ukay-Ukay Sought. The

Philippine Star. 10 September 2010.

Magkilat, Bernie. FPI Opposes Customs Move to Legalize Ukay-Ukay Trade. Manila

Bulletin. 20 September 2010.

Osorio, Ma. Elisa. DTI to Stop Sale of Ukay-Ukay.The Philippine Star. 21 September

2010.

Support for Ukay Gaining Ground.mb.com. Manila Bulletin. 14 September 2010

<http://www.mb.com.ph/articles/277104/support-ukay-gaining-ground>