RP to export crude coconut oil to EU tariff-free by 2005

Starting next year, the country will be allowed to export crude coconut oil to the European Union (EU) without paying tariffs as the Philippines has been included in the list of countries or sectors accorded the Generalized System of Preferences (GSP).

At the same time, the Philippines will be able to export refined coconut oil to EU at a cheaper duty rate of 6.1 percent, or 3.5 percentage points lower than the 9.6-percent tariff it imposes on vegetable oil suppliers from other countries under its most favored nation (MFN) scheme.

The EU last month revised its GSP scheme to favor developing countries like the Philippines. Under the new regulation which takes effect in January 2005, exports of Philippine farm and fishery products such as coconut oil will benefit from the 3.5-percentage point reduction of the MFN rate.

"The revised regulation is generally a very positive development for us because our coconut oil exports will be more attractive to European buyers, and this would translate to higher demand and increased production," Agriculture Secretary Luis Lorenzo Jr. said.

Lorenzo said the favorable EU regulation should improve the country’s coconut oil exports to Europe which dipped to only 1.9 percent of Europe’s total import requirements of the commodity in 2001.

The country’s share of Europe’s total import requirement for crude coconut oil was placed at 52.5 percent in 1999, sliding to 39 percent in 2000, but bouncing higher to 72.7 percent in 2001. The country was slapped a 2.9-percent tariff by the EU for its crude coconut oil exports in 1999 but this was reduced to 2.5 percent in 2000.

With a 3.5 percentage point reduction in the tarriff on crude coconut oil starting next year, the MFN rate will effectively drop to zero percent.

The Philippines however, should step up efforts to curb the high aflatoxin level in copra meal and hydrocarbon content in coconut oil which could threaten export revenues worth more than $500 million as the EU is moving to impose more stringent health and sanitary standards on these products.

The EU already reduced last July, the maximum limit on aflatoxin content in copra meal from 200 parts per billion (pbb) to only 20 parts per billion (pbb), resulting in the suspension of Philippine copra meal exports in Europe.

This year, on the prompting of the EU, the Codex Alimentarius, the international body tasked by the Food and Agriculture Organization and World Health Organization to develop food standards and guidelines, is expected to also cut the maximum allowable hydrocarbon content in CNO.