MDM tariff brought back to 5% by new E.O.

CONCERNED over the possible spike in the prices of processed meat products due to higher tariff for mechanically deboned meat (MDM) of chicken and turkey, President Duterte finally signed a new executive order (EO) bringing down the import duty for the food additive to 5 percent.

On Monday, Malacañang disclosed Duterte signed EO 123 on January 15, 2021, reimposing the rate stipulated under EO  82, which is 5 percent.

EO 82 expired on December 31, 2020, which caused the tariff for MDM for chicken and turkey to revert to its original rate at 40 percent.

Duterte approved the recommendation of the National Economic and Development Authority (Neda) to restore the 5-percent tariff for MDM to prevent possible inflation as prices of processed meats go up.

MDM products serve as key component for hot dogs and canned luncheon meat, among other so-called everyday fare for ordinary households.

“Upon the effectivity of this Order, all articles, which are specifically listed in Annex A hereof and are entered into, or withdrawn from warehouses in the Philippines for consumption, shall be levied the MFN [most favored nation] rates of duty as therein prescribed,” Duterte said in his two-paged EO 123.

Among those listed by Annex A of EO 123 for coverage of the 5-percent tariff are mechanically deboned or separated meat of chicken and turkey.

The new EO will be in effect—until December 31, 2022—after it is published in the Official Gazette or in a newspaper of general circulation.

Once EO 123 expires, the tariff for chicken MDM and turkey MDM (out-quota) will revert to 40 percent.

President’s discretion

The Neda said the effectivity of the EO that set the tariff rate for MDM at 5 percent was based on the discretion of the Office of the President.

In a message to the  BusinessMirror, Neda Undersecretary for Policy and Planning Rosemarie G. Edillon said the decisions surrounding the setting of the 5-percent tariff were “thoroughly discussed” at the Technical Committee of Tariff and Related Matters (TCTRM).

This includes the setting of the 5-percent tariff, which according to Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua, was arrived at because it was the “prevailing” rate.

“This [tariff rate] is the recommendation of the CTRM [Neda Board Committee]. Needless to say, the matter has been thoroughly discussed at the TC-TRM. As to the effectivity, that was really a matter for the OP [Office of the President] to determine,” Edillon told the BusinessMirror.

On Monday, sources also said the legalities of the Executive Order went through the scrutiny of the Department of Justice and the legal team of the Office of the President.

This process includes not only the effectivity of the EO but also whether the rate will be retroactive. This is reviewed taking into consideration “previous issuances and related laws, rules and regulations for consistency.”

Prior to the new EO, the Bureau of Customs set the MDM tariff rate at 40 percent after EO 82 expired on December 31, 2020.

EO 82 initially set the MDM tariff rate at 5 percent after the country finally set a tariff for rice by virtue of the passage of the Rice Trade Liberalization (RTL) law.

Industry hails move

The Philippine Association of Meat Processors Inc. (Pampi) lauded Duterte’s decision to issue the EO.

The group, which petitioned for the retention of the lower tariff on the imported raw material, said the executive order is consistent with the administration’s “well-defined policy to promote the domestic manufacturing sector, generate employment, protect consumers and  ensure economic growth.”

“In seeking the retention of the 5-percent tariff on MDM, Pampi  had urged the government to assess minimum tariffs on imported raw materials used in manufacturing that are not locally available,” it said in a statement on Monday.

“MDM is not locally produced. It is a primary raw material in the production of processed meats such as hot dogs, sausages, canned meat products and similar items which provide the protein needs of our people at affordable prices,” it added.

Their products, particularly canned products, are among the “must items” in relief packs being distributed by government agencies during emergencies, the group added.

Meat Importers and Traders Association (Mita) President Jesus C. Cham said it would be “better” if the government maintained the lower MDM tariff for 5 years in line with the tariff review of the government.

Cham explained that processors would have to go through the same process of petitioning before the Tariff Commission if they seek an extension of the 5-percent tariff in two years.

“It would be better to do 5 years, incorporating in the upcoming revision of duty rates. Now processors will have to go through this again after 2 years, expending needlessly valuable energy and resources,” he told the BusinessMirror.

“A realistic assessment would show that [Philippines] will not be able to produce MDM competitively in the next 5 years,” he added.

Certain industry quarters of the industry earlier opposed the retention of the 5-percent tariff, arguing that a higher 40-percent tariff would result in a P5 billion additional revenue for the government.

The Samahang Industriya ng Agrikultura (Sinag) claimed that the additional revenue could be used to vaccinate about 11 million farmworkers.

However, Agriculture Secretary William D. Dar supported the retention of the lower tariff to keep the prices of processed meat products affordable to Filipino consumers.

The meat processing industry has warned for years now that a reversion to a 40-percent tariff on imported MDM, a key raw material used to produce hot dogs, luncheon meat, among others, would jack up retail prices of processed meat products.

Last year, San Miguel Food and Beverage Inc. (SMFBI) Senior Vice President for Corporate Affairs and Strategic Planning Group Rita Imelda Palabyab projected retail prices of hot  dogs rising about P20 per kilogram if the tariff rate applied on MDM of chicken reverts to 40 percent. Local economists have also backed the recommendation of the economic team to keep the 5-percent tariff on MDM.

With Jasper Emmanuel Y. Arcalas