‘Probe undervalued rice imports’
Credit to Author: Eireene Jairee Gomez| Date: Fri, 25 Oct 2019 19:40:46 +0000
THE Federation of Free Farmers (FFF) has reiterated its call on the government to investigate the alleged undervaluation of tariff collection from rice imports, which may have caused at least P1.6 billion in forgone revenue.
In a statement on Friday, the FFF said the tariff collections could have been higher by P1.6 billion from January to July this year if not because of what they claim “anomalous circumstances” namely, “the declaration of import values lower than the BoC’s (Bureau of Customs) reference values, the understatement of freight costs, and the erroneous application of tariff rates on rice imports.”
As of July 2019, Philippines’ rice imports have reached 2.36 million metric tons (MMT), while tariff collections from March to July amounted to P7.8 billion, based on the data from the BoC. But Agriculture Secretary William Dar had earlier announced that tariff collections have already breached the P10 billion needed for the annual Rice Competitive Enhancement Fund (RCEF) as mandated by the Rice Tariffication Law.
The liberalized rice industry allowed the private sector to import unlimited volumes of rice, provided the appropriate tariffs were paid.
FFF National Manager Raul Montemayor explained that tariffs on rice imports are based on the cost of imports from the point of origin, otherwise known as the “free on board” (FOB) price, plus the cost of freight and insurance, to come up with the “cost, insurance and freight” (CIF) price. The CIF price is then multiplied by the tariff rate to come up with the customs duties to be paid by the importer.
“Almost half of the volume of rice imports had declared FOB values which were lower than the BoC’s reference rates by more than 5 percent. By declaring a lower FOB value, importers will be able to reduce the tariffs they have to pay to the BoC. We estimate that tariff collections could have increased by P684 million had the BoC insisted on collecting tariffs based on their reference rates instead of FOB values declared by importers,” Montemayor said.
He also stressed that the freight costs declared by the importers is only P0.01 per kilo, despite having published shipping rates from Bangkok or Hanoi to Manila amounting to about $30 per metric ton, or P1.56 per kilo.
“Our computations show that an extra P756 million in tariffs could have been collected had the BoC applied the proper freight rates and not rely exclusively on the declarations of importers,” Montemayor pointed out.
Furthermore, he said a 35-percent tariff rate that should be charged only to imports from member-countries of the Association of Southeast Asian Nations (Asean) was also applied against imports from countries like India and Pakistan, translating to P140 million in revenue losses.
Under the Rice Tariffication Law, the country will apply a 35 percent tariff for rice shipments from Asean member-states, 40 percent for in-quota or within minimum access volume (MAV) from non-Asean countries, and 180 percent for out-quota and non-Asean or as calculated by the Tariff Commission.
Since no MAV quota has been issued so far for rice imports, all imports outside Asean should have been assessed a tariff of 180 percent, according to FFF.
“Rice imports will come out to be abnormally cheaper if importers are able to cheat on the tariffs they pay, and this could lead to a further depression in palay prices,” Montemayor said.
Earlier this week, the Department of Finance said tariff collections from rice imports have so far reached P15 billion. The law also stipulates that the excess of P10 billion a year, for six years from rice import tariffs, will be used to assist farmers and provide them support in diversifying into other crops.
“In effect, farmers lost P1.6 billion worth of projects because of the undervaluation of import and freight costs and the misapplication of tariffs. This money went to the importers instead,” said Montemayor.
The FFF said it has submitted copies of its study and recommendations last August 26 to Finance Secretary Carlos Dominguez 3rd and Agriculture Secretary William Dar, but has not received any definitive reply as of the moment.