Report on MAV and Tariffs on Agricultural Products

COCAFM EN BANC MEETING 19 March 2011

Content

 Agricultural Tariffs    Basis for Tariffication in Agriculture   WTO Agreement on Agriculture Agricultural Tariffication Act of 1996 (RA 8178) Tariffs on Agricultural Products (including MAV Tariffs) Implementation of MAVs   MAVs/Utilization MAV Mechanism

Basis for Tariffication in Agriculture

 WTO Agreement on Agriculture (AoA)   Established generally applicable rules with regard to trade related agricultural measures Rules relate to country-specific commitments to improve market access and reduce trade-distorting subsidies   On market access, the AoA prohibits the use of non-tariff measures; tariffs on virtually all agricultural products are bound in the WTO A tariffication package provided for the replacement of non tariff measures with tariffs

Basis for Tariffication in Agriculture

 Agreement on Agriculture (continuation)   Part of the tariffication package required WTO Members to maintain for those tariffied current import access opportunities at levels corresponding to 1986-88 base period Where current access is less than 5% of domestic consumption, an additional minimum access opportunity had to be opened, such that in 1995, current and minimum access opportunities combined represented at least 3% of base period consumption and expanded to reach 5% by 2000 (developed Members) or 2004 (developing Members)

Basis for Tariffication in Agriculture

 Agreement on Agriculture (continuation)     The current and minimum access opportunities are implemented in the form of tariff quotas, the applicable duty to be low or minimal The Philippines’ schedule of commitments in agricultural products is annexed in the agreement as Part 1of Schedule LXXV   Section 1-A: Tariff commitments Section 1-B: Tariff quota commitments A “special treatment” clause permitted the Philippines to maintain QR on rice Special safeguards may be invoked on tariffied products (not applicable to tariff quota or MAV imports)

(Page 1 of Section 1-A, Schedule LXXV)

Schedule LXXV - PHILIPPINES

PART I - MOST-FAVOURED-NATION TARIFF SECTION I - Agricultural Products SECTION I - A Tariffs The reduction in tariffs and any expansion of tariff quotas provided for in Section I of Part I of this Schedule shall be implemented in equal annual installments beginning on 1995 and ending on 2000 unless otherwise specified in Column 5 of Section1A of 1B of this Schedule.

The agricultural products in Section IA of Part I of this Schedule in respect of which the provisions of Article 5 of the Agreement on Agriculture may be invoked, if any, are those designated by the symbol SSG in Column 6 thereof.

Tariff item number 1 Description of products 2 0101.11.00 Pure-bred breeding horses 0101.19.00 Other live horses 0101.20.00 Asses, mules and hinnies 0102.10.00 Pure-bred breeding bovine animals 0102.90.10 Feeder cattle weighing not more than 300 kg 0102.90.90 Other live bovine animals 0103.10.00 Pure-bred breeding swine 0103.91.00 Live swine weighing less than 50 kg 0103.92.00 Live swine weighing 50 kg or more 0104.10.10 Pure-bred breeding sheep 0104.10.90 Other live sheep 0104.20.10 Pure-bred breeding goats 0104.20.90 Other live goats 0105.11.10 Chicks for breeding weighing not more than 185 kg 0105.11.90 Fowls of the species Gallus domesticus weighing not more than 185 g other than those of subheading No. 0105.11.10

0105.19.10 Ducks, geese and turkeys for breeding weighing not more than 185 g 0105.19.90 Other live poultry, weighing not more than 185 g 0105.91.10 Chicken, for breeding, weighing more than 185 g 0105.91.20 Game cock or any male chicken for cock fighting weighing more than 185 g 0105.91.90 Other fowls of the species Gallus domesticus weighing more than 185 g 0105.99.90 Other live poultry, weighing more than 185 g Base rate of duty Ad valorem (%) Other 3 20 60 60 10 20 40 10 60 40 10 40 10 60 10 80 80 80 80 80 80 80 U/B Bound rate of duty Ad valorem (%) Other 4 5 36 5 40 3 35 10 40 40 5 10 36 5 40 36 40 40 40 40 40 40 Implementation 5 Special period from/to safeguard 6 SSG SSG SSG SSG SSG SSG SSG SSG SSG SSG SSG SSG SSG SSG SSG SSG SSG Initial negotiating right 7 Other duties and charges 8

(Section 1-B, Schedule LXXV)

Schedule LXXV - PHILIPPINES

PART I - MOST-FAVOURED-NATION TARIFF SECTION I - Agricultural Products SECTION I - B Tariff Quotas The reduction in tariffs and any expansion of tariff quotas provided for in Section I of Part I of this Schedule shall be implemented in equal annual installments beginning on 1995 and ending on 2000 unless otherwise specified in Column 5 of Sections 1A or 1B of this Schedule.

The agricultural products in Section IA of Part I of this Schedule in respect of which the provisions of Article 5 of the Agreement on Agriculture may be invoked, if any, are those designated by the symbol SSG in Column 6 thereof.

Description of products Horses Cattle Live swine Live goat Live poultry 1 Beef Pork Goat meat Poultry meat Potatoes Coffee Corn Rice ST- Annex 5 Rice ST- Annex 5 Sugar Tariff item number(s) 2 0101 0102 0103 0104 0105 0201 0203 0204 0207 0701 0901 1005 1006 1006 1701 quantity Initial quota tariff rate 3 quantity Final quota tariff rate 4 Implementation period from/to 5 Initial negotiating right 6 Other terms and conditions 7 57.00 12.20 2,570.00 49.37 5,708.12 4.00 32.52 0.67 14.09 930.00 5.90 130.16 59.73 119.46 38.43 hd '000 hd ' hd '000 hd '000 hd '000 MT '000 MT '000 MT '000 MT MT MT '000 MT '000 MT '000 MT '000 MT 30% 30% 30% 30% 40% 30% 30% 30% 50% 50% 50% 35% 50% 50% 50% 57.00 20.34 2,570.00 5.57 54.21 1.12 23.49 1,550.00 5.90 238.94

64.05 ' hd '000 hd ' hd 82.29 '000 hd 9,513.54 '000 hd '000 MT '000 MT '000 MT '000 MT MT MT 216.94 '000 MT 119.46 '000 MT '000 MT '000 MT 40% 40% 40% 40% 40% 30% 30% 40% 40% 40% 40% 35% 50% 50% 50% 1995-1999 2000-2004 1995-2004 NFA* NFA* * - National Food Authority (NFA) has the first right to import minimum access volumes in accordance with the food security policies of the Philippines.

Basis for Tariffication in Agriculture

 RA 8178 (Agricultural Tariffication Act of 1996)   Repealed laws or provisions of laws prescribing quantitative import restrictions or granting government agencies the power to impose such restrictions on agricultural products, except rice Replaced these quantitative restrictions with tariffs   Laid down the principles for the establishment of a mechanism to implement the agricultural MAVs Created the ACEF from the proceeds of the importation of the MAVs to be earmarked for competitiveness enhancement

Tariffs on Agricultural Products

 “Sensitive” Products (those included in EO 313, s.1996)     Locally-produced products (LP) and “sensitive” agricultural products (e.g. livestock and poultry products, some vegetables, coffee, corn, sugar) are generally provided with MAVs and are levied the bound rates (applied tariffs currently range from 35%-65%) Not-locally produced products (NLP) but are substitutes to sensitive products were levied high tariffs but were later levied tariffs lower than bound rates (e.g. feed wheat at 50% in 1996; now at 7%) Some products in EO 313 were later considered as non-sensitive (e.g. live cattle and beef in-quota and out-quota tariffs were unified at 20% and 10% in 1998 and 1999, lower than the in-quota rate of 30% ) Some products not included in EO 313 were later considered as sensitive (e.g. some Benguet vegetables had their tariff increased from 7% to 20% or 25% in 2003)

Tariffs on Agricultural Products

   Rice   Retains its QR through Annex 5 of the AoA (Special Treatment), initially until 2004 but extended until June 2012 The NFA is the sole authority allowed to import rice or allocate import quotas “Non-sensitive” products  Most agricultural products not included in EO 313 are levied low tariffs Agricultural and Fishery Inputs  Levied low tariffs and can be imported duty-free subject to certification requirements as provided by AFMA (implemented through EO 376, s. 2004)

Distribution of Agricultural Tariffs (2010)

Tariff Rate (%) 0 1 3 5 7 10 15 20 25 30 35 40 45 50 65 Frequency 1 116 339 80 238 184 197 31 4 22 23 125 5 18 4 % 0.1 8.4 24.4 5.8 17.2 13.3 14.2 2.2 0.3 1.6 1.7 9.0 0.4 1.3 0.3

Total Tariff Lines: 1,387

Distribution of Agricultural Tariffs, 2010 (%)

30 10 5 25 20 15 0 0 1 3 5 7 10 15 20 25 Tariff Rate (%) 30 35 40 45 50 65

MAV Tariffs, 1996-Present

Live horses Live cattle Live swine Live goat Live poultry Beef, fresh/chilled Beef, frozen Pork Meat of goat Meat of poultry Potatoes Coffee Corn Sugar Extracts of coffee In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota In-Quota Out-Quota 1996 3 30 40 30 60/40 30 60 40 80 30 60 30 60 30 100 30 60 50 100 50 100 50 100 35 100 50 70/100 30 100 1997 3 30 40 30 50/40 30 50 40 65 30 50 30 50 30 80 30 50 45 80 45 80 45 80 35 80 50 60/80 30 80 1998 3 3 30 50/40 30 50 40 65 30 30 30 80 30 50 45 80 45 80 45 80 35 80 50 60/80 30 80 30 60 30 40 45 80 45 60 45 60 35 65 50 55/65 30 65 1999 3 3 30 45/35 30 45 40 50 20 20 2000 3 3 30 45/35 30 45 40 50 10 10 30 60 30 40 45 60 45 60 45 60 35 65 50 55/65 30 65 10 30 60 30 40 45 50/60 45 60 30/45 60 35 65 50 55/65 30 65 2001 3 3 30 45/35 30 45 40 50 10 10 30 60 30 40 40 50/60 40 50 30/40 50 35 65 50 55/65 30 55 2002 3 3 30 40 30 40 35 45 10 10 30 40 30 35 40 40 40 40 30/40 40 35 50 50 50/65 30 45 2004 Present 3 3 30 35 30 40 35 35/40 10 10 30 40 30 35 40 40/50 35 40 30/35 40 35 50 50 55/65 30 45 2003 3 3 30 35 30 40 30 40 10

Implementation of the MAVs

  Products included in MAV commitments (Section 1-B)  Live horses, cattle, swine, goat, poultry          Beef (fresh/chilled) Pork Goat meat Poultry meat Potatoes Coffee Corn Rice Sugar Unilateral MAVs  Beef (frozen)  Coffee extracts

HS Heading Description Unit 1995

MAVs, 1996-Present

1996 0101 0102 0103 0104 0105 0201 0202 0203 0204 0207 0701 Live horses Live cattle Live swine Live goat Live poultry Beef, fresh/chilled Beef, frozen * Pork Meat of goat Meat of poultry Potatoes Head Head Head Head 000 Head MT MT MT MT MT MT 29 6,100 1,285 24,685 2,569 2,000 16,260 335 7,345 465 57 12,652 2,570 51,234 5,634 4,087 2,131 33,725 695 15,180 965 0901 1005 1006 1701 Coffee Corn Rice ** Sugar MT MT MT MT 5 65,080 29,865 19,215 927 134,981 61,513 39,854 2101 Extracts of coffee * MT 20 * Not included in Philippines' WTO Tariff Quota commitments ** NFA has the first right to import the MAV 1997 57 13,556 2,570 54,892 6,342 4,261 57,054 36,135 745 16,160 1,035 993 144,623 65,079 42,701 21 1998 57 14,461 2,570 58,514 6,765 4,436 71,317 38,545 795 16,701 1,102 1,060 154,266 97,061 45,547 23 1999 57 15,366 2,570 62,172 7,188 4,611 85,581 40,955 845 17,746 1,171 1,126 163,908 111,994 48,393 25 2000 57 16,270 2,570 65,830 7,611 4,785 98,418 43,365 895 18,790 1,240 1,192 173,550 119,460 51,240 28 2001 57 17,174 2,570 69,488 8,034 4,959 108,259 45,775 945 19,834 1,309 1,258 183,192 134,395 54,087 28 2002 57 18,079 2,570 73,146 8,456 5,134 119,085 48,185 995 20,879 1,378 1,324 192,834 164,265 56,933 30 2003 57 18,983 2,570 76,803 8,879 5,308 130,994 50,595 1,045 21,923 1,447 1,391 202,477 194,135 59,780 35 2004 57 19,888 2,570 80,461 2005 Present 57 20,340 2,570 82,290 9,302 5,483 114,093 53,005 1,095 22,968 1,516 1,457 212,119 224,005 62,627 35 9,513 5,570 54,210 1,120 23,490 1,550 1,475 216,940 238,940 64,050 37

MAV Utilization Rate, 1995/96 - 2010

MAVs Committed in WTO, Livestock and Poultry Products

100 90 80 70 60 50 40 30 20 10 0 1995/96 1997 1998 1999 2000 2001 2002 Beef, fresh/chilled 2003 Pork 2004 2005 Meat of poultry 2006 2007 2008 2009 2010

MAV Utilization Rate, 1995/96 - 2010

MAVs Committed in WTO, Other Products

100 90 80 70 60 50 40 30 20 10 0 1995/96 1997 1998 1999 2000 2001 2002 Potatoes 2003 Coffee 2004 Corn Sugar 2005 2006 2007 2008 2009 2010

MAV Utilization Rate, 1995/96 - 2010

Unilateral MAVs

100 90 80 70 60 50 40 30 20 10 0 1995/96 1997 1998 1999 2000 2001 2002 Beef, frozen 2003 2004 Extracts of coffee 2005 2006 2007 2008 2009 2010

Pork

Status of 2011 MAVs

No. Of Licensees Unit 104 MT Meat of poultry 123 MT Coffee Corn Sugar Extracts of coffee As of 28 February 2011 2 38 2 MT MT MT MT MAV 54,210 23,490 1,475 216,940 64,050 37 Volume Imported Utilization (%) 4,147 2,764 15 7.65 11.76 1.02 9 23.26

MAV Mechanism

  Per RA 8178, a mechanism for implementing the MAVs shall be developed and established:  Equitable and transparent    Having the least government intervention Addressing the requirements of each geographical area Without entailing any cost to importers/users of the products to the detriment of local consumers and other end-users The Cabinet Committee created through MO 245, s.1994 (plus NEDA) was tasked to establish the appropriate mechanism for the implementation of the MAVs

MAV Mechanism

 Administrative Orders (AO) issued to implement the MAVs     AO No. 9, s.1996

 Initial quotas allocated based on local market shares AO No. 8, s. 1997  Subsequent allocations (at beginning and middle of the year) through a systematic procedure; penalty provisions for underutilization AO No. 1, s. 1998  Refinements in allocation procedures/application requirements AO No. 52, s. 2000  Changed composition of MAC; removed penalties for underutilization due to causes beyond control and use of local supply

MAV Mechanism: Eligibility for Allocation

  Initial Year of Implementation (1996)   Importer of a regularly imported MAV product (beef, corn, sugar) or User/seller of a scarcely-imported MAV product (other MAVs) Subsequent Year of Implementation   For fully subscribed MAVs: legal entities that have operated a business involving the product concerned at the start of the prior MAV year and have imported the minimum volume required For undersubscribed MAVs: legal entities that have not been in business involving the product concerned and have not imported the minimum volume required

MAV Mechanism: Allocation Procedure

  Initial Year of Implementation (1996)   Regularly imported MAVs: allocation is based on import share Scarcely imported MAVs: based on local output share Subsequent Year    Regular licensees retain their allocations except those from the Mid-Year Pool (MYP) and those cancelled or recalled The Beginning Year Pool (BYP) is allocated to regular licensees and new entrants based on a Systematic Distribution Procedure (SDP: drawing of lots to determine who gets the available allocations) The BYP is the sum of incremental MAV, recalled/cancelled allocations and unavailed MAVs in the prior MAV year

MAV Mechanism: Allocation Procedure

 Subsequent Year (continuation)   The MYP (volumes voluntarily surrendered by licensees by end May) is allocated to all interested licensees through SDP Regular licenses covering regular allocations and allocations from the SDP of the BYP are issued in February while Special licenses from the SDP of the MYP are issued in July  Any balance in the BYP and MYP after the SDP is available to any interested applicant on a first-come-first-served basis

MAV Mechanism: Organizational Structure

   MAV Management Committee (MMC)   Secretaries of DA (Chair), DOST, DAR, DOF, DTI, NEDA Ensure that MAV mechanism is administered in a manner consistent with guiding principles MAV Advisory Council (MAC)   DA Official, as Chair, plus members from the private sector (nominated by sector and appointed by the DA Secretary) Advice MMC on matters relating to the allocation of the MAVs and review result of audit of MAV implementation MAV Secretariat   Composed of staff from DA, headed by an Executive Director Carry out day-to-day administration of the MAV mechanism

Thank You

Definition of Terms

    Tariffication: lifting of existing quantitative restrictions such as import quotas or prohibitions imposed on agricultural products and replacing these with tariffs Quantitative restrictions (QRs): non-tariff measures such as import quotas or prohibitions used to limit the amount of imported commodities Tariff: tax levied on a commodity imported from another country Bound rate: maximum limits on tariffs as committed in the WTO

Definition of Terms

   Applied rate: rate of import duty that is actually used by Customs in collecting revenues In-quota tariff rate: tariff rates for the minimum access volumes committed in the WTO; Out-quota rate refers to the higher rate of duty that is levied on the quantities of an imported product in excess of such volumes Minimum access volumes (MAVs) or tariff quotas: volume of specific agricultural product that is allowed to be imported with a lower tariff as committed in the WTO