Northern Foods pushes 2-tiered tariff on tomato paste

Northern Foods Corp. (NFC), the country’s only tomato paste producer, is asking the Cabinet-level Tariff and Related Matters (TRM) committee to grant its petition for a two-tiered import tariff to shield the struggling local tomato industry from the influx of cheap tomato paste from China.

Bernardo Jorge B. Mitra, NFC president and chief executive officer (CEO), said that aside from its previous plea for the TRM to increase current import tariff on tomato paste from 10 percent to 30 percent for 28-30 Brix content, it also wants additional protection by having a different import tariff for tomato paste with Brix content exceeding 30.

Brix is the standard unit of measure of the percentage of natural tomato soluble solids (NTSS) which is the value used to measure the solids attributes of a tomato product. Tomato paste must not contain less than 24 Brix NTSS.

NFC currently produces an average of 6,000 metric tons (MT) tomato paste yearly with 28-30 Brix content, the same kind being exported into the Philippines by China at about 4,000 MT, while Italy and the United States bring in tomato paste with 32 Brix and above.

Mitra said the proceeds from the tariff on the 28-30 Brix could be used to upgrade the facilities of the 20-year old tomato processing plant and keep it at par with competition.

"Our plant could use that money to upgrade our facilities which are close to becoming obsolete. With new facilities, we could increase our production and efficiency, and with that, buy a bigger volume from tomato farmers. Eventually, we could even improve further and be able to produce the higher-end 32 Brix and expand our market," explained Mitra.

In contrast, China’s close to 50 tomato processing plants are constantly being upgraded, enabling them to expand their capacity.

Mitra said that while a 30-percent tariff hike should be imposed on tomato paste with 28-30 Brix, the NFC is comfortable with maintaining or lowering the tariff for the 32 Brix tomato paste.

"We don’t produce it anyway. But if we could upgrade our plant, we will be able to produce the 32 Brix. What this means is the likes of major food processing companies like Del Monte Philippines which imports about 10,000 metric tons annually can start buying from us. That would also translate into significant foreign exchange savings," said Mitra.

Previously, the TRM said it still has to review NFC’s petition. Economic Planning Secretary Romulo Neri who heads the committee said the inflationary impact of a tariff hike would still be studied.

NFC desperately needs funds to upgrade its plant because previous fund-raising attempts such as applying for a low-interest loan under the Department of Agriculture’s (DA) Agricultural Competitiveness Enhancement Fund (ACEF) was turned down.

"The rules were changed after we submitted our proposal for rehabilitation. The ceiling for loans was lowered at P30 million, we need P195 million to upgrade our plant," said Norberto D. Mendoza, NFC vice president for operations.

Meanwhile, the NFC is planning to revive its anti-dumping case against China filed with the Department of Agriculture in 2001.

"We filed our petition but no action has since been taken by the department. It was the first anti-dumping case in the agriculture sector and its outcome would be significant especially since the influx of imported agricultural products have already killed other sectors such as the onion and garlic industries," stressed Mitra.

NFC started operations in 1984 in its plant in Sarrat, Ilocos Norte and is currently the supplier of tomato paste for customers like Jollibee Foods Corp., its biggest customer, Genosi which toll packs for McDonalds Phils., California Manufacturing Co. Inc., RAM Food Products Inc., Del Monte Phils., Heinz-UFC Phils. Inc., San Miguel Foods, Purefoods-Hormel, major fishcanners, toll packers and sauce and ketchup manufacturers.

Ilocos Norte Chamber of Commerce and Industry president Manuel M. Ablan said it is critical to keep the NFC open.

"It is the only agro-processing industry in the province, the other manufacturing concern is Coca-Cola Bottlers. It provides livelihood to more than 3,000 farmers. Even if farmers continue planting after Northern Food closes, there is no longer a guaranteed price for their produce so the old cycle is revived with traders dictating the price, it will be them that will benefit from the closure of the plant," said Ablan.