Can the Marcos admin stop rice smuggling?

Figure this out: Philippine consumers are paying more for a kilogram of rice than any of our Asean neighbors, yet our rice farmers remain in the poorest sector in the country. There are many reasons why the sector is underperforming, which limits the income of farmers. But one major constraint that has been ravaging not only the rice sector but the country’s agriculture industry for the longest time is the unabated practice of smuggling.

According to the Customs Modernization and Tariff Act, “smuggling refers to the fraudulent act of importing any goods into the Philippines, or the act of assisting in receiving, concealing, buying, selling, disposing or transporting such goods, with full knowledge that the same has been fraudulently imported.”

The Bureau of Customs intercepted the unloading of allegedly smuggled rice worth P1 billion in Iloilo City last week. In a statement, Customs Commissioner Yogi Filemon Ruiz said the BOC is coordinating with other government agencies and stakeholders involved in the release of the shipment.

“An investigation on the four alleged smuggled rice shipments that arrived on board 20 vessels at the Port of Iloilo is ongoing. We are still awaiting the official report on the matter from the Port of Iloilo. Coordination has been made with various public and private organizations involved in the inspection of shipments, such as the Bureau of Plant Industry of the Department of Agriculture; Societe Generale de Surveillance, the world’s leading inspection, verification, testing, and certification company; and the Asean Trade in Goods Agreement/Asean Industrial Cooperation Scheme,” the BOC chief said.

The Federation of Free Farmers (FFF) earlier asked President Marcos to investigate the rampant and worsening undervaluation of rice imports, which is estimated to have shortchanged the government by as much as P3.84 billion during the first seven months of the year.

“Recently, the Bureau of Customs intercepted a shipment of 38,400 tons of rice being unloaded at Iloilo port on suspicion of smuggling. BOC Region 6 officials quickly claimed that the shipment was above board and that the importers had even paid Customs duties amounting to P83 million,” the FFF said. The farmers’ group said the BOC “should have collected at least P350 million on the P1 billion shipment based on the official tariff rate of 35 percent, indicating that the imported rice was undervalued by as much as 75 percent.”

Data from the BOC shows that this is not an isolated case, according to the FFF, which said that between January and June 2022, at least 85 percent of the 2.28 million tons of imported rice were undervalued by an average of P5,664 per ton.

“Despite repeated dialogues with the BOC and several Senate hearings, very little has actually been done to curb undervaluation of rice imports. There is a lot of attention on smuggling but government losses from undervaluation are probably much larger. And it is easier to plug loopholes to prevent undervaluation than to run after smugglers,” said Raul Montemayor, FFF National Manager.

The FFF lamented the fact that the BOC inexplicably stopped publishing reference prices starting August 2021 for certain rice grades that were being regularly imported. As a result, the FFF said 14 percent of the import volume in the first seven months of 2022 could not be checked for undervaluation, compared to only 7 percent in 2021.

The FFF also asked President Marcos to investigate the pattern of imports in certain ports of entry. “It is difficult to understand why importers are unloading huge volumes in Iloilo, when the province, and the whole Region 6, is the rice granary of the Visayas. It would be more logical to bring them directly to deficit provinces like Cebu, Samar and Leyte. To make matters worse, the imports are coming in just when farmers in Iloilo are just about to start harvesting,” said Montemayor.

A BusinessMirror columnist once said that smuggling is the worst kind of economic sabotage because it hits the country multiple times in many fronts—on top of the reduction in government revenues from uncollected taxes and Customs duties, smuggling steals from local producers, which leads to production slowdown and bankruptcies on the part of the legal business sectors.

Transparency can play a big role in the fight against rice smuggling because it lowers the information barrier, allowing for scrutiny and monitoring. It would do well for the Marcos administration to order the Bureau of Customs to resume publishing the reference prices for rice grades that are being regularly imported. This will help deter corruption by increasing the chances of getting caught.