Government asked to stop Kraft from importing pre-mixed juices at low tariff

The local sugar sector is asking government to stop allowing Kraft Foods Philippines Inc. from importing premixed juices at a very low common effective preferential tariff (CEFT) rate of only three percent.

"More than the industry, it is the National Government that is placed at a gross disadvantage. Where revenue should be flowing in terms of tariff, it is being curtailed," said Jose Maria Zabaleta, executive director of the Philippine Sugar Millers Association (PSMA).

Industry sources said Kraft was able to go around an earlier ruling by government that it should be paying a 38 percent tariff for pre-mixed juices because these have more than 65 percent sugar content.

Zabaleta said PSMA previously submitted a sample of Kraft’s Tang powdered juice drink to the US Bureau of Customs for analysis following reports of a tariff preferential treatment given to Kraft.

"Based on the findings, and this was confirmed to us by the US BOC, Kraft’s Tang with its more than 90 percent sugar content is classified as sugar per se," noted Zabaleta.

A separate analysis conducted by the Sugar Regulatory Administration’s Agro Industrial Laboratory (Airlab) showed that Kraft’s products "Tang" and "Kool Aid Juicers" imported from Thailand contain 90.12 percent sucrose on its pineapple flavored juice while its orange flavored powdered juice contains 91.67 percent sucrose.

PSMA said Kraft Foods is able to import sugar for its premixed juices at three percent tariff instead of 38 percent because of an oversight by the Department of Finance’s Bureau of Customs (BOC).

Under Executive Order 295 signed in March 2005, a 48-percent tariff should be imposed on products falling under the tariff heading 2106 whose sugar contents exceed 65 percent in dry weight. Products with less sugar content classified under 1701 are imposed a three-percent tariff.

Kraft has been bringing in Tang powdered juice from Thailand where sugar is cheaper.

The PSMA said there is no reason to continue allowing Kraft to import sugar because world sugar prices are not at par with domestic sugar prices.

"At this time when local sugar prices is almost parallel to that of the world market, Kraft and other juice manufacturers, for that matter, should be sourcing their requirements locally," said Zabaleta.

PSMA computations show the government is losing annually an estimated P500 million as a result of the three-percent tariff on Kraft’s premixed imports.

It added that government losses in terms of foregone revenues due to increasing importation of misdeclared sugar went up to P1.2 billion.

The local sugar producer said Kraft is setting a bad precedent because it would embolden other juice makers to do the same.

There are several local premixed juice manufacturers complaining about the preferential treatment Kraft is getting. Some in fact, are mulling relocating operations in Thailand or Malaysia where production costs are cheaper compared to the Philippines.