ARE you ready to pay more for your french fries?
Costlier fries, if industry sources are to be believed, may stare Filipino fast-food eaters in the face next year if the government does not cut tariff on imported fries to zero. The importers’ cost will be passed on to the public.
The Tariff Commission (TC) has launched an investigation on the petition filed by a firm to reduce the tariff on imported frozen potato fries from 10 percent to zero percent. Industry sources claimed the tariff cut is needed to reduce the cost and avert price increases of the food item.
In a notice issued on October 24, the TC said it is conducting the investigation on the petition filed by Prime Pacific Foods Corp. (PPFC) on the reduction of the most favored nation (MFN) rate of duty on frozen potato fries from 10 percent to zero percent.
The investigation, the TC explained, is pursuant to the pertinent provisions of Section 1608 of Republic Act 10863, or the Customs Modernization and Tariff Act (CMTA).
In its notice, the TC said interested parties may submit their comments, inputs and position papers to the body on or before November 11.
The TC added that it would announce the schedule of public hearing at a later date. The tariff slapped on frozen fries reverted to 10 percent after Republic Act 11203, or the rice trade liberalization law took effect on March 5.
In 2015, such tariff on frozen fries had been reduced to zero as a concession by the Philippines in its bid to secure the nod of the World Trade Organization (WTO) member-states for it to extend its right to impose quantitative restrictions (QR) on rice by two more years.
Avert price increase
Industry sources privy to the matter told the BusinessMirror that the petition aims to avert price increases of french fries sold locally, both in the supermarkets and by fast-food chains.
One of the sources said majority of the country’s frozen fries supplies come from countries that do not enjoy lower tariffs due to free-trade agreements (FTA), such as the United States and European countries.
Countries like New Zealand, which has an existing FTA with Asean, exports frozen fries to the Philippines at zero tariff. Another industry source said that the increase of 10-percent tariff on imported fries would just be passed on to consumers eventually.
Another source privy to the development said the petition is being backed by the local fast-food chain industry, including big firms like Jollibee and McDonalds.
In fact, the source said fast-food chains and importers also filed petitions for the tariff reduction. Until press time, BusinessMirror could not validate this information, yet.
Likewise, the proposal is expected to gain support from foreign suppliers as it would allow exports of frozen potato fries to the Philippines to grow faster, a source said.
The source said price increases could be seen next year if the tariff is not reduced to zero, as end-users start to use frozen fries levied with 10-percent tariff.
‘Hurt sales’
In a report released last year, the National Potato Council (NPC) said the US exports of frozen fries to the Philippines would expand by as much as $5 million to $10 million if the latter would maintain a zero-percent tariff.
The NPC said the Philippines is the fifth- largest market for US fries with an approximate 58,000 MT volume exported in 2017-2018 valued at $62.8 million.
The NPC pointed out that the reversion of the 10-percent tariff on frozen fries would “hurt” US “sales and undermine the continued growth of exports” in the Philippine market.
“The National Potato Council respectively requests that USTR [US Trade Representative], USDA [US Department of Agriculture] and the US Embassy in Manila continue to work with the government of the Philippines to ensure frozen fries can continue to be exported to the market with zero tariffs,” said its report published in October 2018, five months before the tariff on frozen fries reverted to 10 percent.
The country’s frozen fries imports from January to August expanded by 13.23 percent to 109,261.461 metric tons from 96,490.491 MT in the same period of last year, Philippine Statistics Authority (PSA) data showed.
Likewise, value of total imports rose by 16.85 percent to $97.978 million, from $83.846 million last year, PSA data showed.
The United States is the country’s top supplier of frozen fries as it accounts for almost 45 percent of total purchases during the reference period. During the eight-month period, the Philippines purchased about 49,000 MT frozen fries from the US, which was worth $46.878 million. The Netherlands is the second-largest exporter of frozen fries to the Philippines at 22,573.916 MT followed by Belgium at 21,350.561 MT, PSA data showed.
The country’s imports of frozen fries last year reached record-high volume of 147,107.997 MT valued at $129.025 million, historical PSA data showed. Historical PSA data also showed that the country’s frozen fries imports have expanded by over 70 percent in the past three years after it reduced the tariff on the commodity to zero in 2015.
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