Kraft Foods may raise tariff dispute with BOC to WCO

Kraft Foods, the world’s second largest food and beverage company is contemplating on seeking the intervention of the World Customs Organization (WCO) to settle its tariff dispute with the Bureau of Customs (BOC).

"We are exploring other avenues with which to resolve the tariff issue," said Tod Gimbel, Kraft Foods Asia Pacific corporate and government affairs director.

Gimbel said Kraft Foods local unit, Kraft Foods Philippines, has filed a petition with the Court of Tax Appeals (CTA) seeking to reverse the BOC order that categorized the food manufacturer’s premix juice imports under tariff heading 2106 and imposed duties of 38 percent. However, the company is seriously considering elevating the contentious issue to international trade organizations such as the WCO, as well as lobbying before the Philippine Congress to possibly amend existing tariff rules. Gimbel added the company has also been trying to get the support of various business groups such as the US Chamber of Commerce and Industry in the Philippines.

The WCO is an independent intergovernmental body which promotes instruments for the harmonization and uniform application of simplified and effective customs systems and procedures governing movement of commodities, people and conveyances across customs frontiers.

Currently, Kraft is paying three percent duty on its premix juices under the common effective preferential tariff (CEPT) rate of the Association of Southeast Asian Nations (ASEAN) while other importers like San Miguel Foods are paying a 38-percent tariff rate.

The local sugar sector has been opposing Kraft’s three-percent tariff, saying that only products with sugar content of less than 65-percent categorized under tariff heading 1701 are allowed to pay the minimum three-percent tariff.

Gimbel contended however, that Kraft, prior to issuance of Executive Order 204 in 2004 was already paying a three percent tariff for its powder juice mixes such as Tang and Kool Aid brought in from its manufacturing base for these types of products in Thailand.

"We would like to think that we were not targeted intentionally when the EO was issued, because its primary intent at that time was to stop the prevalent smuggling of sugar. We however, seemed to have gotten caught in the net. We did not change our product, it always has been determined to have sugar content of more than 65 percent, but that does not necessarily mean that our products are all sugar. We incorporate or blend in other components of our products such as vitamins, flavorings and other fortifiers," explained Gimbel.

"It is the government that has changed the rules in the middle of the game and we are very much concerned. We have been in the Philippines for the longest time, in fact, it was our first manufacturing base in Asia when we put up the first plant here in the early 1960s," said Gimbel, adding that Kraft would also seek clarification on the parameters of EO 204.

Gimbel said that if Kraft loses its case, the company will have to pass on the added cost to its consumers in the Philippines.

"Increasing the tariff would be very detrimental to our business and to consumers," said Gimbel.

He said the company has not gotten any notice from the BoC which earlier said it would allow Kraft to continue paying the contested low three percent duty on its imports of premix juices but also required the food manufacturer to post a bond equivalent to the 38-percent tax imposed on high-sugar content beverages pending the resolution by the CTA of its case.