By Rea Cu & Jasper Emmanuel Y. Arcalas
IMPORTERS of mechanically deboned meat (MDM) of chicken whose shipments were assessed a lower tariff of 5 percent even after the effectivity of the rice trade liberalization law in March will have to pay the government more.
Chicken MDM is a key component for processed meat products, such as hot dogs and canned luncheon meat.
The Bureau of Customs (BOC) said it will still collect retroactively an additional 35-percent tariff from importers of chicken MDM who paid a lower tariff of 5 percent for shipments that entered the country after Republic Act (RA) 11203 took effect.
The BOC said the retroactive collection of the 35-percent tariff difference is in accordance with the law. The agency cited in particular Executive Order (EO) 23 issued by the President in 2017, which stipulated that concessionary rates on certain agricultural products should go back to the 2012 levels once the quantitative restriction (QR) on rice is removed.
The QR on rice was removed and converted into ordinary customs duties once RA 11203 took effect on March 5. The Department of Agriculture (DA) had argued that the reversion of MDM tariff to 40 percent is automatic by virtue of EO 23, but meat processors, led by the Philippine Association of Meat Processors Inc. (Pampi), disagreed with this.
“The 40 percent rate applied. Of course, we will [collect the 35-percent tariff difference] because the rate is 40 percent. So if [an importer] paid a lower rate, then the difference will be collected,” BOC Spokesman Erastus Sandino B. Austria told the BusinessMirror via SMS.
‘New EO means P4.5-billion loss’
The BOC policy to keep imposing the 40-percent rate could be negated, however, if Malacañang pushes through with an executive order reverting the rates to 5 percent, as earlier reported by the BusinessMirror.
That projected EO, however, could cost the government P4.5 billion annually in forgone revenue, said the United Broiler Raisers Association (Ubra). This could be used to improve the livelihood of small farmers, it added.
Ubra issued the warning after the BusinessMirror reported that an executive order reducing the tariff on chicken MDM to 5 percent is just awaiting President Duterte’s signature.
The BOC, meanwhile, made the statement justifying its orders to impose the 40-percent rate after Pampi questioned the legal authority of the agency attached to the Department of Finance (DOF) to issue Customs Memorandum Circular (CMC) 131-2019 dated May 23, which announced the reversion of the tariff rate to 40 percent.
Pampi President Felix O. Tiukinhoy Jr. had also complained that even before CMC 131-2019 was issued, collectors had already imposed a 40-percent tariff on imported chicken MDM. BOC Public Information and Assistance Division (PIAD) Chief Administrative Officer Elenita Abaño told the BusinessMirror in a phone interview that the reversion of the chicken MDM tariff to 40 percent was already in effect since April.
Tariff body meeting
Abaño said the adjustment of the rate was in accordance with what was discussed during a meeting involving the BOC, Tariff Commission (TC), DOF and the National Economic and Development Authority (Neda) on April 12.
The TC called the meeting after Pampi requested the BOC to reinstate the 5-percent tariff on imported chicken MDM. The BOC sent the letter of Pampi to the commission on April 3.
Abaño said the decision to implement the 40-percent tariff rate was included in the reply of the commission to the BOC sent on April 16.
She also said that during the April 12 meeting, government agencies had agreed that the difference in duties can still be collected by the BOC.
“They also had a point during the meeting that it was agreed upon, and it’s in the web site of the Tariff Commission, with regards to duties already collected. For example, if the tariff collected was only 5 percent, the BOC is entitled to collect the difference,” Abaño said.
“It’s in the final highlights of the meeting, the applicable tariff equivalent and other matters in the implementation of RA 11203,” she added.
Forgone revenue
The Ubra, meanwhile, worries over the impending issuance of a new EO reverting the tariff rate to 5 percent.
“That is unfortunate because the government will continue to forgo additional revenues of P4.5 billion to P5 billion,” Ubra President Elias Jose Inciong told the BusinessMirror on Wednesday.
Inciong said the P4 billion to P5 billion could be used by the DA to aid small farmers, as collections will form part of the Agricultural Competitiveness Enhancement Fund (Acef).
He also said that since the QR on rice has been removed, MDM should again be included in the minimum access volume (MAV) for chicken imports.
The inclusion of chicken MDM imports in the MAV would allow the government to slap special safeguard duties (SSG) on shipments exceeding the 23,500 metric tons.
This, Inciong noted, was part and parcel of the concession in reducing the tariff on MDM from 40 percent to 5 percent in 2007.
“The importers could easily regain that P4 billion to P5 billion by increasing their prices a little. The problem is that they want to continue enjoying a trade privilege granted in consideration for the rice industry,” he said.
Tariff collections from imported agricultural products should go to Acef, a fund pool which should be used to improve Philippine farm sector, as mandated by RA 8178.
‘Acceptable compromise’
Agriculture Secretary Emmanuel F. Piñol told the BusinessMirror that he agreed with his fellow Cabinet officials to maintain the 5-percent tariff on imported chicken MDM since it is not produced locally.
“This was the consensus but this will apply only for chicken [MDM]. We agreed to lower tariff on chicken MDM because we don’t produce it anyway,” Piñol said via SMS. “It’s just MDM. That’s an acceptable compromise for us.”
Inciong said it was “unfortunate” that even Piñol agreed to the reduction of tariffs despite the uncertainties surrounding the local meat processing industry.
He noted that unscrupulous importers and traders avoid paying the correct tariff on chicken leg quarters by misdeclaring this as chicken MDM.
In January, the Cabinet-level Committee on Tariff and Related Matters decided to retain the 5-percent tariff on MDM of chicken despite the opposition of local poultry growers.
