Tariff hike on steel can generate up to P5-B annual revenues, says lawmaker

The government can generate P5-billion annual revenues if duty rates for steel are pegged at seven to 10 percent, an administration lawmaker said yesterday.

Rep. Alipio Cirilo Badelles of Lanao del Norte said that both the consumers and the government never benefited from the prevailing zero-tariff duty imposed on certain steel products.

Tinplate is one steel product that has been enjoying zero tariff since year 2000. Tinplate is used in manufacturing tin cans of canned sardines.

"During the period 2000 to 2004, the years when tariff duty of tinplate for tin can was zero, the price of canned sardines did not decline correspondingly," Badelles said citing a DTI report on its price monitoring of basic commodities.

He said that instead of prices going down when the government totally removed the import duty on tinplate, canned goods have become even more expensive.

"When tariff was seven percent in 1998, the price of canned sardines was P7.57 but when the tariff is zero percent in 2000-2004, the price of canned sardines have gone up to P8.50," Badelles pointed out. 

Lanao del Norte, the province of Badelles hosts the giant steel plant of Global Steelworks International Inc., the former National Steel Corp. (NSC).

Records from the National Statistics Office and Tariff and Customs Code also showed that when the government acceded to the clamor of tin can manufacturers to rescind the import duty in 2000, it spawned avenues of foregone government revenues.

From 2000 to 2003, steel import volumes increased in tonnage terms. However, government revenues, which should have been earned out of enhanced import demand, did not materialize.

Records also indicated that the negligible zero to three percent duty imposed on steel products from 2000-2003 led to a government loss of P3 billion in revenues.

"The conclusions, therefore, are clear. Savings generated as a result of zero-import duty by intermediate processors like tin can manufacturers are never shared with the consumers," Badelles noted.

"The double whammy effect is the government also lost much-needed revenues," he added.

The Department of Trade and Industry (DTI) earlier appeared amenable to a proposal to impose a five-percent tariff on hot-rolled coils and seven percent on cold-rolled coils and tinplates, while maintaining zero tariff on steel billets.

However, Trade and Industry Secretary Cesar V. Purisima is insisting that a dialogue with downstream steel industry players be held to hear their view on the proposed tariff and to be able to assess the impact of such tariff imposition on them.

Global Steelworks International Inc. (GSII) is petitioning for tariff protection for its products comprised of steel billets, cold and hot-rolled coil and tin plates.

Purisima has not taken any position on the tariff request and is specifically asking for the meeting to determine NSC’s needs and the concerns of downstream steel industry players.

GSII wants tariff protection to enable it to recover while it starts up manufacturing operations.

On the other hand, downstream steel industry players argue that they would be adversely affected by a rise in tariff rates especially since NSC does not have the capacity to provide the needs of the local downstream industry players.

Even in the past, the downstream steel industry players said, NSC was never able to be competitive even with tariff protection and only penalized the local downstream steel industry players through higher prices.