Also on DA’s plate: stop palm oil smuggling

Image from the Department of Agriculture website

MANILA, Philippines — The Department of Agriculture (DA) is investigating allegations of illegal importation of palm oil into the country, including its officials and employees allegedly in cahoots with smugglers of agricultural products.

“Indeed, we have investigated the alleged smuggling of palm oil as animal feed, but which was already being processed into cooking oil for human consumption last year,” prosecutors said in a statement on Thursday, read by Agriculture Secretary Fermin Adriano.

This comes after Albay MP Joey Salceda raised the issue of palm oil smuggling during Tuesday’s House Ways and Means Committee hearing.

Salceda, chairman of the House panel, claimed the government lost about Pta 45 billion in revenue because palm oil was mislabeled as animal feed. He said a 15 percent tariff should be imposed on imported palm oil for human consumption.

Not subject to sales tax

In the Philippines, palm oil can be imported duty-free as animal feed and is not subject to 12 percent Value Added Tax (VAT).

However, prosecutors said they had no police powers to arrest and prosecute suspected smugglers under existing laws and regulations, although they had already sought the assistance of other government agencies to stop this illegal activity.

It recently asked the Anti-Red Tape Authority (Arta) to look into the issue, and Arta pointed out the “major discrepancy” in the import data from the Bureau of Customs (BOC) and the DA.

Data from the BOC showed that palm oil imports reached 55.49 million kilograms in 2020, up from 40.63 million kilograms recorded by the Bureau of Animal Industry (BAI) in the same year. The BAI is an agency affiliated with the DA that promotes livestock development.

In 2016, the BOC recorded that the country imported 1.18 million kg of palm oil, less than the BAI’s import volume of 2.42 million kg.

economic sabotage

The Arta also noted that the Food and Drug Administration issues a certificate that the imported palm oil is unfit for human consumption, one of the requirements for obtaining a sales tax exemption from the Bureau of Internal Revenue, but the tax agency has delegated that responsibility to the BAI Granting exceptions in September last year.

The bureaucracy then recommended that the prosecutor conduct an internal investigation into the difference between the VAT-exempt import dates and the BOC’s records of the actual arrival of imported palm oil.

Palm oil smuggling is tantamount to economic sabotage under Republic Act #10845 (An Act Declaring Large-scale Agricultural Smuggling as Economic Sabotage), which went into effect in 2016. The law applies to most shipments worth at least P1 million of agricultural produce, or at least P10 million for rice.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said that while the increase in smuggling activity could drive down food prices, it would result in lower revenue for the government, which in turn could be used to fund various projects or even its debt shorten

“Smuggling agricultural products would deprive the government of revenue, which is also needed to pay for the various COVID-19 programs over the past two years,” Ricafort said in a Viber message to the Inquirer.

He noted that importing smuggled agricultural goods also poses a serious risk to consumers’ health, especially if they do not go through controls or other safety procedures.

import ban

The country’s palm oil industry is relatively small, with about 100,000 hectares of agricultural land earmarked for growing palm oil, Adriano told the Inquirer in a Viber message.

Palm oil cultivation is mainly concentrated in Cotabato, Agusan, Sultan Kudarat and Maguindanao in Mindanao.

In 2019, as copra prices fell and hurt local coconut farmers, prosecutors called for a ban on imported palm oil from Malaysia and Indonesia to the country.

Imported palm oil competes directly with local coconut oil as both are used to make cooking oil.

According to then Agriculture Minister Emmanuel Piñol, the recommendation to ban palm oil imports came back in 2018 after reports that the European Union had imposed a ban on palm oil from Malaysia and Indonesia over “environmental concerns”.

In 2017, palm oil entering the Philippines from Malaysia and Indonesia reached 200 million kilos.

Import data collected by the agency showed that palm oil exports from Malaysia and Indonesia to the Philippines had increased by 100 percent in the three years leading up to 2019.

The governments of the Philippines, Malaysia and Indonesia also agreed in 2019 to set up a tripartite technical working group to address palm oil dumping in the Philippine market.

Some of the prosecutors’ recommendations included monitoring reports of smuggling of crude and refined palm oil to the Philippines by Malaysia and Indonesia, and opening markets for Philippine coconut products by the two countries “to correct trade imbalances.” ” —With a report by INQUIRER RESEARCH

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