SMC seeks zero import tariff on raw materials for beer

San Miguel Corp. is asking the government to lower the tariffs on raw materials for beer manufacturing, such as malt and hop pellets, from the present three percent to zero percent ad valorem.

The request was tabled for a hearing by the Tariff Commission early this week. SMC is asking for a reduction in the duties for various products including raw materials and products used in the manufacture of metal closures, flexible laminates, glass bottles and containers.

In its request, SMC said malt, hop cones in pellets and its saps and extracts are major inputs of beer. These products are not produced locally since the process is power-intensive and it is cost-effective if they are produced at the source of the raw material.

The reduction of the tariff rates, according to SMC, would address the current cost disadvantages that Philippine brewers face against their foreign counterparts and improve local brewers’ competitive position.

In 1997, SMC said the country imported 128.6 million NK of malt worth $43.315 million and 47,061 NK of hop cones valued at $103,760. By 1999, malt imports had increased to 138.9 million NK valued at $37.163 million while hop cones went up to 129,410 NK worth $537,401.

SMC said Australia is the country’s lead supplier of malt with a percentage share of 78 percent, while Belgium contributed 17 percent and France, 12. Hops, saps and extracts, on the other hand, come mainly from Germany and the US.

Under the most favored nation scheme of the World Trade Organization and the Common Effective Preferential Tariff of the ASEAN Free Trade Agreement, the duty on malt, hop cones in pellets and hops extract is at three percent.

SMC asked for the reduction of the tariff duties to zero percent on various articles used in the manufacture of metal closures such as crowns and caps, flexible laminates and glass bottles and containers.

SMC said there is no local industry to protect anyway and the elimination of tariffs on these items would offset the relatively high cost of business that local companies had no control over such as the cost of credit, power, infrastructure and transport.

The loss of customs revenues, according to SMC, will be offset by direct taxes on viable and on-going businesses.