The Federation of Free Farmers (FFF) has criticized the Bureau of Customs (BOC) for its alleged failure to check the gross undervaluation of rice imports which has resulted in huge shortfalls in tariff collections.
The group claims that the BOC could have collected P890 million more in tariffs had it made the proper assessment of rice import values from its recorded P4.8 billion in tariffs from 766,000 metric tons (MT) of rice imports from January to April 2020.
Notably, FFF had previously flagged similar anomalies in 2019 which resulted in an estimated tariff shortfall of P1.9 billion.
“We reported these findings to DA (Department of Agriculture) Secretary William Dar and DOF (Department of Finance) Secretary Carlos Dominguez in August 2019 but we did not receive any feedback on what corrective actions were taken. It appears that all the importers who undervalued their shipments were allowed to go scot free and now it seems that they are continuing to ignore these leakages even as they encourage private traders to import more rice,” Raul Montemayor, the group’s national manager, said in a statement.
He noted that tariffs are based on the cost, insurance and freight (CIF) price of imports which is then multiplied by the tariff rate to arrive at the customs duties that the importer has to pay for a particular shipment which is at 35 percent for imports originating from ASEAN countries such as Vietnam and Thailand.
FFF claims that the BOC failed to collect an additional P471million in tariffs during the first four months of 2020 due to the undervaluation of free-on-board (FOB)prices of imports which were lower than the Customs’ own reference prices that are based on internationally published rates.
“About one-third of the volume imported was undervalued by at least 10 percent and accounted for 84 percent of the tariff shortfall. In one instance, a shipment of 6,014 MTof rice with 5 percentbrokens arrived from Vietnam in April 2020 with a declared FOB value of $319.63 per MT,” Montemayor further stated.
He cited that BOC accepted such rates even if it was almost 30 percent lower than its $447 reference price citing that the government should respect the declared FOB values of importers for as long as documentary proof is submitted.
“If this is the practice, what then is the purpose of the reference rates? What will now stop an importer from conniving with the exporter to issue undervalued invoices or issue two separate invoices to split the total cost of the imports?” the FFF leader stated.
Apart from undervalued FOB prices, the group said that freight and insurance costs are also beingmisdeclared.
Montemayor expressed that an analysis of the BOC data reveals that importers spent less than two centavos per kilo or about $0.30 per MT to insure and ship rice from countries like Thailand and Vietnam when internationally published rates per regular freight and insurance are at a minimum of $33 per MT, 110 times bigger thanthe value declared by importers which caused an estimated lost of P416 million in tariff collections.
“Importers may claim that their declared FOB values already include insurance and freight.
If so, the BOC must also adjust its reference prices to include internationally recognized insurance and freight rates so that it can properly detect undervalued imports,” he explained.
The FFF said concluded that such malpractice should be given attention especially that fund for theRice Competitiveness Enhancement Fund to support farmers may end up zero or very small as a result ofshortfalls resulting from undervaluation and other anomalies.