Bureau of Customs should have more teeth in curbing undervaluation in Philippines

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Lawmakers should consider giving more teeth to the Bureau of Customs (BOC) in deterring undervaluation of rice shipments in their proposed amendments to the Rice Tariffication Law (RTL). This is to curb state tariff collection losses, an industry group said.

The Federation of Free Farmers (FFF) said the Senate bill on the proposed RTL amendments must contain provisions that would minimize undervaluation of rice imports which is causing the government billions in tariff collection losses.

The group estimated that the state's foregone tariff revenues have reached at least P29 billion between 2019 and July this year, an amount it noted could have been used to support rice farmers in the country.

One of the proposed provisions of the group is the establishment of a threshold level of deviation of declared prices of imported rice from the BOC's reference price.

With such a mechanism in place, any rice shipments with a declared value lower than the threshold would be automatically flagged to customs personnel as potentially undervalued.

The law must also stipulate the requirement of posting bonds for importers whose shipments were flagged as potentially undervalued equivalent to the additional tariff that they would have been paid if the threshold had not been breached, according to the group.

If the importers are found to have indeed undervalued their shipments, the government must confiscate their bonds, blacklist them and subject them to legal penalties, the group added.

Under global trade rules, the BOC accepts the values declared by importers as long as they are supported with pertinent documents even if the amounts were significantly lower than the bureau's own reference prices.

The group proposed that all rice imports be within the minimum access volume (MAV) so that the government would have more hand in intervening in the country's importation if deemed necessary based on prevailing market situation.

The group explained that by using the MAV mechanism the government can increase or decrease the applied tariff rates at ease since it is a volume committed by the country to the World Trade Organization.

More so, the government can impose additional restrictions for imports under the MAV such as putting a deadline on import arrivals, type of rice to be imported, who can import and the countries where importers must source their shipments, the group claimed.

Adjusting the most favored nation (MFN) tariff rates to address supply shortages or price spikes could lead to over importation by traders which may result in a supply gut that could depress palay prices, according to the FFF.

'If necessary, we can increase the MAV to any volume and simultaneously lower the MAV tariff, as deemed necessary to address the shortage or price spike. Only imports falling under the MAV will be able to avail of the lower tariffs, thus deterring over importation,' the group said yesterday.

At present, imports within the MAV mechanism are slapped with a lower tariff rate than shipments that arrive outside it or considered as out-quota volume.

Under the law, imports within the MAV require additional requirements and processes such as the issuance of a MAV import clearance from the government compared to imports outside MAV.

MAV rules are governed by the MAV management committee chaired by the agriculture secretary.

'The increase in the MAV volume and/or reduction in MAV tariffs can be adjusted or withdrawn as the situation normalizes,' the FFF said.

The government also suggested that the government should use available trade remedies such as safeguard measures to curb imports instead of the President declaring an outright limitation on rice imports.

Under existing regulations, the state can impose safeguard duties on top of the applied tariffs on imports when the cumulative import volume surges to a point that it has been deemed detrimental to the domestic sector.

The group noted that there is no limit the amount of safeguard duties that the government can impose on imports, thus allowing it to set it at a very high level that would discourage all further imports, thus, acting like an import ban.

'Once the situation normalizes, the safeguard duty can be withdrawn. Compared to the other options, the imposition of general safeguard duties appears to be the most practical and effective way to address supply gluts that result in depressed palay prices,' the FFF said.