Chocolate makers buck plan to reduce tariff on cocoa powder

Many of the country’s chocolate and confectionery makers will have to close shop and government stands to lose potential huge revenues if tariff officials decide to abolish the duty on imported food processing inputs, including cocoa powder.

The Cocoa Foundation of the Philippines, Inc. (Cocoaphil) issued this warning amid reports that a leading juice company has sought government action on its petition for tariff cuts on its input imports.

Cocoaphil president Edward F. David instead urged the Tariff Commission to maintain the tariff rates for cocoa powder at seven percent and three percent on cocoa beans.

In a Letter to Tariff Commission Chairman Emmanuel Velasco, David said "this does not make any economic sense since cocoa beans are the raw material to produce cocoa powder."

Further cutting the rate to zero would be disastrous, he said.

Local grinders pay the three percent duty when they import 90 to 95 percent of their cocoa beans requirements due to supply unavailability from local sources. After adding processing, packaging and other costs to make cocoa powder, they find themselves competing with imported cocoa powder prescribed with the same three percent duty.

"How could we be competitive under such conditions, and even worse, if the duty for cocoa powder is reduced to zero?" David asked.
Most chocolate making plants would be forced to shut down resulting in joblessness, he said.

On the other hand, when grinders import cocoa powder instead of cocoa beans, the country would lose some $14 million, "the average value of our cocoa butter exports for the last 10 years," he said.

David also asked the government to reduce the tariff rate for imported sugar to seven percent from the present high of 65 percent "if we are to compete with processed food manufaturers in the Asean (Association of Southeast Asian Nations) region."

"For us, sugar is a very important raw material," David, who is also chairman of the Philippine Food Processors and Exporters Organization (Philfoodex) said.

"The government, desirous as it is to push exports, should institute sound, consistent, fair and reasonable tariffs that would protect the interest of local food processors, including chocolate and confectionery makers," he said, adding that "our economic policies should uphold global competitiveness and government should see to it that its implementation is credible and favorable to local industries."