DA blanket ban on co-op rice importers risks challenge

THE Department of Agriculture (DA) could be leaving itself open to legal challenges with its ban on farmer-cooperatives and irrigators’ associations from importing rice as such may violate existing laws, the Federation of Free Farmers (FFF) said Thursday.

Nonetheless, Monetary Board Member V. Bruce J. Tolentino said the suspension would not have a “significant” impact on the country’s rice supply as local production just finished its peak harvest while legitimate importers are eligible to import the staple.

In a statement on Thursday, FFF said the blanket ban on farmers’ cooperatives and associations (FCAs) is discriminatory since not all cooperative-importers have fallen dummies to unscrupulous traders.

“While we discourage farmer-cooperatives from importing, we also respect the right of legitimate groups to import for their own business and other needs.  Neither is it fair to penalize all FCAs for the mistakes of just a few groups,” the FFF said.

“Otherwise, to be consistent, the DA must also ban all imports by private companies in the event it is proven that some private entities were also used as dummies or found violating import rules,” it added.

The group pointed out that the blanket ban may be in violation of certain provisions of the Rice Trade Liberalization (RTL) law, as it has allowed virtually anybody to import rice following the removal of import licensing requirements.

“The suspension of import privileges of FCAs is subject to legal challenge by coops and farmer groups.  A case can be filed against Secretary Dar in the Ombudsman for not following the law and unfairly infringing on the rights of certain groups,” FFF said.

FFF National Manager Raul Q. Montemayor said it is possible that the suspension of the co-op importers would result in temporary decline of rice imports as unscrupulous traders seek measures to circumvent the laws anew.

“I don’t expect there to be a significant impact since the peak of the harvest has just been brought in. Also, duly registered enterprises continue to be eligible to apply for SPSIC [sanitary and phytosanitary import clearance] and import,” Tolentino told the BusinessMirror.

Tolentino said the temporary suspension would provide the government the opportunity to clean up the cooperatives sector “of such undeserving entities, especially with the work of the” Cooperative Development Authority (CDA).

“It’s true, as you already found, that there are many co-ops formed expressly to take advantage of the tax privileges of co-ops while importing rice. Thus, such entities may not be ‘true co-ops’ as meant by the tax privilege,” he said.

Economist Pablito M. Villegas told the BusinessMirror that he also frowns on a blanket ban on cooperatives importing rice as it “discriminates” against legitimate farmers groups.

However, he pointed out that it was right for the DA to ban the cooperatives being used as dummies by unscrupulous traders. Still, he cautioned that it doesn’t solve the root of the problem.

Instead, the government should run after the backers and financiers of these cooperatives as they serve as the masterminds of the coop-for-traders dummy scheme, Villanueva said.

Furthermore, the dummy scheme issue also highlights the government’s lack of “accurate, reliable, and timely” data that would have aided policy-makers to avert these unjust business practices, Villegas said.

“There should be a distinction between the legitimate cooperatives and the cooperatives that are just being used. The ban alienates legitimate cooperatives and second it does not solve the real problem,” he said via phone call.

The CDA earlier expressed opposition to the blanket ban as it is discriminatory against medium and large cooperatives that have sufficient capitalization to venture into rice business and importation. (Related story: https://businessmirror.com.ph/2020/10/23/consensus-reached-on-rice-imports-reforms/)

On October 30, Dar issued Administrative Order 34, S. 2020 ordering the suspension of SPS-IC to cooperatives and associations, including irrigators’ associations for commercial purposes until further notice.

“It has been noted that contrary to the purpose of farmers’ cooperatives and associations and irrigators’ associations, many FCAs and IAs have been engaged in importing rice instead of procuring local rice from local farmers. FCAs and IAs imported almost half of the volume imported rice in 2019,” Dar said in the order.

“Adding insult to injury, there have been numerous reports that the SPSICs issued for importing rice have been misused or abused by unscrupulous traders and businesses using farmers’ cooperatives and irrigators associations as fronts. Taking advantage of the privileges provided by the law to the cooperatives to avoid their legal responsibilities and evade taxes,” he added.

Dar also ordered the Bureau of Plant Industry (BPI) to investigate the situation and consult with affected stakeholders to come up with new policies and rules “to avoid circumvention of the laws” that would protect both farmers and their cooperatives from exploitation and abuse.

The BusinessMirror broke the story last year that unscrupulous traders continue to use farmers cooperatives’ and associations as their fronts and dummies even after the rice industry was liberalized. (Read the award-winning story here: https://businessmirror.com.ph/2019/10/31/pre-and-post-rice-trade-liberalization-law-big-traders-gaming-farmergroups/).

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