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The Customs Office (BOC) will begin levying a 40 percent duty on all imports of mechanically deboned meat (MDM) from chicken and turkey, including those in transit, unless President Duterte issues a new Executive Order. keep the tariff at 5 percent.
Assistant Customs Commissioner and Spokesperson Vincent Philip Maronilla told BusinessMirror that the rollback to a 40 percent tariff on chicken and turkey MDM began on January 1 after Duterte’s EO 82 expired.
Maronilla explained that the higher tariff will apply even to shipments that are already at sea or en route to the country.
Under EO 82, the 5 percent tariff withholding on chicken and turkey MDM is only in effect until December 31, 2020, unless Duterte issues an EO that extends it.
“Unless we receive a new EO, then by law we are mandated to implement a 40 percent duty rate on MDM imports as of yesterday. [January 1]Maronilla said in a message.
When asked if the BOC will issue a circular memorandum formalizing the effectiveness of charging a 40 percent fee on MDM, Maronilla said: “We will discuss this during the execom (executive committee) [meeting] tomorrow (Monday) yes [there’s still a need] to issue a note. “
Undecided CTRM
The Committee on Tariffs and Related Matters (CTRM) has yet to decide on the tariff rate that will be imposed on mechanically deboned meat (MDM) imported into the country, according to sources.
The sources told BusinessMirror that the CTRM will decide on the matter through a referendum. The documents have been submitted for approval at the end of the year.
Meanwhile, the sources said, given the expiration of the 5 percent fee on MDM on December 31, 2020, the existing Executive Order establishing that the fee will be reverted to 40 percent would be implemented.
“IS HE [Executive Order] will be drafted as soon as there is a CTRM decision, “said a source, adding in part in Filipino,” According to [the] Current EO, there should be an automatic 40 percent rollback. “
Sources in the meat processing industry told BusinessMirror that they expect Duterte to issue an EO on the chicken and turkey MDM fee soon and that the new order will include a retroactive provision.
A well-informed source explained that a provision on the retroactivity of tariffs applied to imports of MDM would prevent a 2019 incident, where the meat processing industry and Customs had a dispute over the collection of the tariff differential on imports of MDM. (Related story: https: //businessmirror.com.ph/2019/06/04/pampi-in-a-bind-as-boc-reverts-tariff-of-imported-mdm-of-chicken-to-40/ and https://businessmirror.com.ph/2019/07/30/pampi-files-case-against-boc-over-retroactive-collection-of-tariffs/)
Another source quoted senior officials as telling them that economic managers are interested in withholding the 5 percent tariff on the chicken and turkey MDM.
A rollback to a 40 percent tariff means a higher cost for processors, which in turn could lead to higher retail prices for products where MDM is a key component, such as hot dogs and meat. canned for lunch.
Last year, San Miguel Food and Beverage Inc. (SMFBI) Senior Vice President of Corporate Affairs and Strategic Planning Group, Rita Imelda Wordyab, projected that retail prices for hot dogs would increase by about P20 per kilogram if the tariff rate applied to chicken MDM reverts to 40 percent.
“We know from experience that even a P2 increase in the price of hot dogs already affects the volume that can be sold. Adding P20 will surely put the product out of the reach of regular consumers, ”he said.
An industry source tracking developments on MDM fees said that meat processors could be in a difficult position to seek an increase in the suggested retail price (SRP) of their products due to the declaration of the state of calamity until on September 12 of this year.
Coverage purchases
A report from the Global Agricultural Information Network (Profit) indicated that meat processors have already purchased most of the MDM last year, as they “hedge” against the “increasingly likely scenario” of tariff reversal on MDM.
A source confirmed that some meat processors have imported a lot of MDM and brought it in in November and December. The source said that some players have MDM shares until mid-February.
The retail price of chicken MDM has increased to P85 per kilogram from the usual P65 per kilogram as a result of the tariff reversal.
Neda’s position
In 2019, Neda said that the retention of a 5 percent tariff rate for MDM is a victory for consumers across the country.
Neda’s Undersecretary for Planning and Policy, Rosemarie G. Edillon, previously told BusinessMirror that the decision to keep rates at 5 percent was to reduce inflationary pressures.
Edillon said MDMs account for an average of 22.5% to 27.4% and 26.3% to 35.3% of the cost of producing hot dogs and meatloaf, respectively.
Based on Executive Order 82, “this Order will take effect immediately after its publication in the Official Gazette or in a newspaper of general circulation, and will be applicable until December 31, 2020.”
While the “expiration date” on the EO is quite common according to the then Neda Under Secretary for Regional Development, Mercedita A. Sombilla, Edillon said the decision to put a date also took into account rice prices.
The government passed a law last year that establishes a tariff rate of 40 percent within the quota and 50 percent outside the quota. The Philippines also has a 35 percent tariff rate for the product within the Asean.
Edillon said the government hopes that with the new rice tariff law in place, prices of the country’s staple foods will stabilize.
The president can increase, reduce or eliminate existing import duty rates on Neda’s recommendation if Congress is not in session.
According to EO 23 issued by President Duterte in 2017, concessional rates on certain agricultural products should return to 2012 levels once the quantitative restriction (QR) on rice is removed and converted to ordinary customs duties.
The rice trade liberalization law, which eliminated the QR on rice, came into force on March 5, 2019.
