Following reports of farmer cooperatives and associations (FCAs) being used as fronts by unscrupulous traders to import rice to enjoy tax exemptions, the Department of Agriculture (DA) has temporarily banned such groups from engaging in the trading of rice.
Agriculture Secretary William Dar last week issued the memorandum order, which effectively suspends the issuance of import certificates to cooperatives by the Bureau of Plant Industry (BPI).
According to the agriculture chief, there were “hundreds” of these associations that willingly gave their permits for the use of traders.
Dar added that upon investigation, many of these farmer groups did not have the financial capacity to import the volume they had indicated in their documents.
In fact, data lifted by the Federation of Free Farmers (FFF) from BPI showed that two small cooperatives from Pampanga and Tarlac were allowed to import 50,000 metric tons of rice worth P1 billion each. Another set of nine cooperatives, also from Tarlac, was able to import P3.1 billion worth of rice between January and August this year.
There were also 13 FCAs from Pampanga that were able to bring in rice shipments worth P2.3 billion while 15 Bulacan-based FCAs also accounted for P1.5 billion of rice imports.
The scheme robbed the government of taxes, as these traders did not only avail themselves of tax perks exclusively given to FCAs but also undervalued their imports to escape paying the right amount of tariffs.
The Bureau of Customs is currently investigating these cases. More than 40 importers have already been charged and were ordered to pay a combined P1.4 billion in penalties, but FFF said it could be more.
Farmers groups
While the industry group discourages FCAs from importing the staple, it said the route that the DA had taken was “ineffective and discriminatory,” arguing that importers could easily use other entities like non-FCAs and small-time traders as alternative dummies to shield themselves from liabilities once their shipments are flagged.
“Banning certain groups from importing is not the solution to the problem,” FFF chair Raul Montemayor said. “DA should instead tighten the accreditation of importers to ensure they are legitimate businesses that have the logistics and finances for the volumes they are applying for.”
Montemayor added that it is not fair “to penalize all FCAs for the mistakes of just a few groups.”
Dar said the agency had already strengthened its guidelines. Any entity, before getting an import permit, must be financially stable for the past three years and must also have warehouse capacity.
The Philippines has had increased rice imports since the rice tariffication law was enacted in 2019 and many FCAs have been importing rice instead of helping domestic farmers.
“Farmer cooperatives … and irrigators’ associations imported almost half of the volume of imported rice in 2019,” Dar said.