The massive shift to a more open rice market did not happen overnight. It took more than two decades for the government to finally scrap the caps on imports and remove the power of state-run National Food Authority (NFA) to regulate the entry of imported rice. That’s because rice is the Philippines’s most important commodity, which is why it is the preferred crop for millions of local planters.
More than 2 million farmers plant rice and millions more—such as millers and farmworkers—depend on the sector for their livelihood. This is the primary reason behind the government’s previous efforts to have the World Trade Organization extend the waiver for the special treatment for rice. The rationale is to prepare the sector, particularly the farmers, for the eventual shift to a more open rice market.
Two decades later, the sector continues to struggle to produce all the rice requirements of the country. Bad policies, coupled with the ill effects of climate change, made it more difficult for planters to keep up with the increasing demand for the staple. NFA’s regulation of the domestic market and the fact that all Filipinos eat rice made the commodity the single biggest factor behind the acceleration of inflation last year.
The jump in inflation in 2018 prompted the President to call for the immediate passage of a measure that sought to repeal Republic Act 8178 or the Agricultural Tariffication Act of 1996. One of the provisions of the proposed bill is the setting up of a fund, dubbed Rice Competitiveness Enhancement Fund. The national government agreed to front-load P10 billion for the RCEF in the first year of the new law’s implementation. RA 11203 also provided that P10 billion should be allocated for the RCEF every year.
Under the law, the money must come from tariffs slapped on rice imports. Crucial to ensuring that there’s enough funds for the RCEF is the Bureau of Customs (BOC), an agency attached to the Department of Finance (DOF) that is tasked to collect the tariffs on imported rice (See, “Rice tariffs collection at P5.9 billion,” in the BusinessMirror, July 5, 2019). The bulk of collection came from the Subic Bay port, which accounted for more than a fifth of the total amount recorded in January to June.
A farmers’ group, however, contested the amount collected by the BOC and raised the possibility that traders and importers undervalued their shipments (See, “Undervalued rice imports may have caused P5-billion gap in tariff collection,” in the BusinessMirror, July 9, 2019). The group said tariffs collected from the shipments during the period do not jive with world market prices of rice. This prompted the bureau to launch an investigation to see whether traders resorted to what is known as technical smuggling—the act of importing goods through fraudulent, falsified or erroneous declarations to evade payment of correct duties and taxes (See, “BOC to probe January-June rice imports,” in the Business-Mirror, July 12, 2019).
We urge the BOC to spare no trader or importer in its probe and to punish those guilty of misdeclaration of shipments. Failure to penalize traders engaged in technical smuggling will only embolden other traders, which will deprive farmers of funds meant to help them survive the deluge of cheap rice imports. The government must also plug loopholes in policies that make it easier for traders to get away with undervaluation, specifically the rules on dutiable value.