Import rules in the Philippines, particularly on corn, do not support the participation of small shareholders that translate to poor cost savings for consumers, according to the United States Department of Agriculture (USDA).
In a report dated March 27, the USDA said the country still maintain a minimum access volume (MAV) for corn and following the extended tariff reduction until the end of the year, there is significant interest in accessing in-quota tariff which is “anti-competitive, outdated and potentially inconsistent with the Philippines’ commitments with trading partners.”
The MAV mechanism specifies an import threshold below which preferential tariff no longer apply.
Under MAV for corn, the Philippine commitment was 216,940 metric tons (MT) yearly with in-quota tariff of 35 percent and over-quota tariff of 50 percent. Starting in May 2022 and until the end of the year, however, the most-favored nation (MFN) in- and out-quota tariff rates on corn were lowered from 35 to 5 percent and 50 to 15 percent, respectively, which are now closer to the 5 percent tariff within the ASEAN.
The USDA said stakeholders are apprehensive over the likelihood of penalties being cancelled for underutilization and allow existing MAV license holders to keep their full allocation for next year without having to import.
The USDA said that under the ASEAN Trade in Goods Agreement, corn from ASEAN should not be subject to the MAV even as Philippine officials have not yet implemented the measure in full, effectively enabling importers to declare corn sourced from ASEAN as counting toward their MAV allocation.
“MAV license holders, including importers that do not buy local corn, are then able to keep their MAV allocations if they buy ASEAN corn, all of which should enter out-quota at 5 percent as opposed to in-quota at 5 percent,” the USDA said.
It also cited the Department of Agriculture’s Administrative Order 1 of 1998 which set the lot size for corn at 25 MT. According to the USDA, this is an outdated regulation that has allowed allocations to be made in quantities that are not commercially viable since the smallest commercial vessel for transporting corn is 30,000 MT.
“Until further reforms are made, the government’s policy objective to provide relief from elevated prices via the temporarily lowered tariffs are likely to remain muted,” the USDA said of the practical impact of the current corn import structure on Filipino consumers.
It explained that with corn supply deficit growing through the years, the Philippines has become increasingly reliant on imported corn and corn substitutes instead.
Until recently, corn was sourced almost exclusively from the ASEAN given the higher tariff rate that makes the MFN tariff-rate quota less attractive, the USDA said.
MFN corn tariff rates are also unattractive compared to imported corn substitutes like feed wheat and barley that enter duty-free from select trade partners like Australia.
The USDA said increasingly punitive price pressures last year compelled government to assist local feed manufacturers, livestock and poultry producers and consumers of locally produced meat and poultry. The Philippines produced 8.26 million MT of corn in 2022, down 0.5 percent from 8.3 million MT.
