The Federation of Free Farmers (FFF) urged the government to impose anti-dumping duties and penalties in order to curb the apparent undervaluation of rice imports following the passage of the Rice Tariffication Law (Republic Act 11203). Figures released by the Bureau of Customs (BoC) indicate that the average landed cost of rice imports, inclusive of insurance and freight, was only $227 per metric ton compared to between $391 to $422 if based on internationally published prices. The low valuation of rice imports could have resulted in a tariff revenue loss of Php 5 billion and may also have contributed to the drastic decline in domestic palay prices.
Raul Montemayor, FFF National Manager, explained that an anti-dumping duty can be imposed if the imported commodity is sold at a price lower than its normal value in the exporting country. Additionally, it must be shown that the entry of the dumped product has caused or is threatening to cause injury to a domestic sector. The anti-dumping duty is equivalent to the difference between the export price and the normal value in the exporting country and is applied on top of the regular tariff.
“In June 2019 for example, the monitored export price for rice with 5% brokens from Vietnam was $359 per metric ton. If a shipment arrives in the Philippines with a landed cost of $227 per metric ton, it is equivalent to an ex-Vietnam export price of only $159 per metric ton after removing costs for freight and insurance. This is $200 cheaper than the monitored export price, and this difference can be the basis of the anti-dumping duty that will be charged against the importer in addition to regular tariffs.”, explained Montemayor.
Anti-dumping measures are governed by Republic Act 8752 or the Anti-Dumping Act of 1999. The law was patterned to a large extent after pertinent rules on anti-dumping in the World Trade Organization (WTO), wherein the Philippines is a founding member. Under RA 8752, the Secretary of Agriculture can initiate an anti-dumping investigation and the BOC may provisionally require importers to post a cash bond equivalent to the estimated dumping margin while a thorough evaluation of the anti-dumping complaint is undertaken by the Tariff Commission. Anti-dumping measures on imports of a particular commodity can be applied for as long as five (5) years from the date of initial imposition.
“The BOC has argued that they cannot question the declared value of imported rice if valid documents are submitted by the importer, even if there appears to be a clear case of undervaluation. With anti-dumping, an importer will be subject to higher anti-dumping duties the larger the undervaluation, no matter what documents are submitted. RA 8752 also provides that the license of an importer who is caught dumping can be cancelled, and its officers can be barred from holding positions in any business enterprise in the country.”, said Montemayor.
Montemayor added that anti-dumping measures may be a more effective deterrent to undervaluation and imports surges than so-called safeguard measures that are being proposed by other groups. He explained that special safeguard duties can be applied only when cumulative imports exceed a trigger volume and can be imposed only up to the end of the calendar year. The additional safeguard duties cannot exceed one-third of the regular tariffs, or only about 12% in the case of rice imports from ASEAN countries where the tariff is pegged at 35%. Montemayor also clarified that while the Rice Tariffication Law allows tariffs to be raised up to 180%, the maximum allowable tariff for ASEAN imports is only 35%.
Montemayor also explained that the recent instruction of the president to ban rice imports during harvest time may run into conflict with the provisions of the RA 11203 which categorically repealed all laws allowing government officials to reimpose quantitative restrictions on imports, even if temporarily. He added that the law also limits the National Food Authority (NFA) to buffer stocking, in contrast to his instruction to buy as much palay from farmers as necessary.
“It is possible that his [President Duterte’s] economic and legal advisers deliberately withheld important information from him when they asked him to sign RA 11203 into law. Otherwise, why would he refer to his proposed ban on imports at harvest time as a ‘happy compromise’? And why would he say that it is ‘common sense’ to buy as much farmers’ produce as possible even at a loss? If he knew that RA 11203 would prevent him from doing these things, would he have signed it into law?”, asked Montemayor.
Montemayor also chided some economic and policy advisers for their apparent apathy and inaction in the light of the drastic decline in palay prices for farmers. “Why do they have to wait for a year before revisiting the Rice Tariffication Law? Millions of farmers are already suffering. Many groups had warned about the drop in palay prices in the event of tariffication, but no effective measures were put in place in the law to address this. How can they now ask farmers to sacrifice a little bit more before they start doing something. It is like telling earthquake victims to wait for relief goods because they are still waiting for the tsunami to come”, said Montemayor.