THE lower tariff collection from rice imports—which, in turn, may have caused the government billions in forgone revenue—may have been caused by the undervaluing of such by importers and traders, according to the Federation of Free Farmers Inc. (FFF).
Given the prevailing global prices of the staple, FFF National Manager Raul Q. Montemayor described as quite small the P5.1-billion tariff collections from 1.43 million metric tons (MMT) of rice imports by the Bureau of Customs (BOC).
According to FFF’s computation, the landed cost of the rice imports per metric ton would only be about $227 if one were to base this on the import and tariff collection figures released by the BOC, Montemayor said.
This, he pointed out, indicates an undervaluation of shipments by importers, which they could deliberately do in connivance with their suppliers abroad to avoid paying higher duties.
“Data from international monitoring groups, such as the Food and Agriculture Organization [FAO] indicate that the real landed cost of these imports should have been around $391 per ton if these were 25-percent broken rice,” he said in a statement on Monday.
“In effect, importers appear to have undervalued their shipments by 42 percent and paid P4.24 billion less than what was due from them,” he added.
Montemayor said the discrepancy in tariff collection could rise to as much as P5.1 billion, as a majority of imported rice constitutes 5 percent of the “brokens” variety, which is estimated to have a higher landed cost of $422 per MT.
“In fact, reports indicate that most of the private-sector imports were for 5-percent broken rice, which commands a higher price in the market and gives a better profit margin for traders. This type of rice should have landed at $422 per ton at the lowest, instead of just $227,” he said.
“In this scenario, the tariff discrepancy would amount to around P5.1 billion,” he added.
Sought for comment, the BOC had not responded as of press time.
Both government, farmers lose
If the undervaluation is true, it would not only mean revenue losses for the government but also lower funding for rice farmers, as rice tariffs are now earmarked for the improvement of the industry, Montemayor said.
Under the rice trade liberalization law, which took effect on March 5, the government shall allocate P10 billion annually to the rice sector, which is known as the Rice Competitiveness Enhancement Fund (RCEF).
The RCEF shall be primarily comprised of the rice tariffs collected by the government and any excess of the P10 billion would still be appropriated for other programs targeted for rice farmers.
“Because of undervaluation of imports, tariff collections may not breach the P10-billion threshold, or the excess may be too small to provide any meaningful assistance to affected farmers,” Montemayor said.
If the undervaluation of rice imports is true, then it could further depress farm-gate prices of palay as the landed cost of imported rice translates to only about P17.30 per kilogram, Montemayor explained.
“The $227 per metric ton landed cost of imported rice translates to around P17.30 per kilo wholesale in our domestic market. Traders will be forced to buy palay from farmers at less than P10 per kilo in order to compete with this price,” he added.
BOC data showed that it has already collected P5.072 billion tariffs from over 815,173.960 MT worth P14.459 billion in the March-to-May period alone, the period effectively covered by the rice trade liberalization law.
Based on BusinessMirror’s computation, this shows that the average unit cost of rice imports is about $339.57 per MT.
At this average unit cost, the BOC should have already collected P8.837 billion if 1.43 MMT of rice entered the country from the March to June period, BusinessMirror’s analysis showed.
Montemayor concurred with BusinessMirror’s analysis and noted that it is possible that the BOC’s figures, either the import volume or tariff collection, are incorrect. It is also possible that both figures are incorrect or it is really a case of undervaluation, Montemayor added.
Image credits: Nonie Reyes