The Department of Trade and Industry (DTI) wants to retain the zero tariff on cement and wheat flour to ensure prices of both commodities would be kept at reasonable levels despite industries’ stance to restore tariffs saying the duty-free privilege has not really trickled down to the masses and would only encourage surge in imports.

The Tariff Commission held a hearing on Wednesday on Executive Orders 863 (flour) and 862 (cement), which are due to expire next month, August. If ever the Commission decides in favor of DTI, this would be the second extension of this duty-free privilege for both commodities.

DTI Undersecretary for consumer welfare Zenaida C. Maglaya has explained to reporters the zero tariff on cement is a government option in preventing local cement manufacturers from raising their prices further.

“If local prices of cement go up because we lifted the 5 percent tariff, then there is no more incentive for imported cement to come in. At zero tariff it is easier to import because there is certain margin. So, it is better keep it at zero,” Maglaya said.

On milling wheat, Maglaya said he has instructed Bureau of Trade Regulation and Consumer Protection director Victorio Mario Dimagiba to check the trend in prices of wheat because the zero tariff is supposed to translate to P20 reduction per bag of locally-milled flour.

Maglaya said that ex-plant prices of flour have remained at P740 to P760 per bag.

“If the 3 percent tariff on wheat is discontinued, prices of locally-milled flour could go back up to P760 to P780 per bag,” she said.

Maglaya would like to find out if the trend in wheat prices in the international market would point to a declining trend and if it could offset the higher prices as a result of the restoration of the import duty.

Meantime, the Philippine Association of Flour Millers (PAFMIL) has formalized its position against the extension of Executive Order No. 863 allowing the zero rate of import duty on milling wheat.
In a letter to Tariff Commission chairman Edgardo B. Abon, PAFMIL executive director Ric Pinca said

that while flour prices have indeed dropped from P770-790 per 25 kg bag, ex mill in February 2010 to only P690 - P710 per bag this month, bread prices have not moved down at all. Loaf breads in supermarkets still retail at P55.00 or more per 600 gm piece.

“The government should change tact. With the intent of EO 863 unmet and consumers not benefitting at all from the tariff cut, why continue losing so much revenue from zero duty wheat? It is time the government restores the three percent import duty instead of losing this needlessly,” Pinca said.

Based on 2009 import figures, Pinca also said that the government lost around P1B in foregone import duty on milling wheat.