Pre-mix juice import tariff sends conflicting signals

Government’s policy on sugar product imports has been placed in turmoil following a controversial ruling made by the Valuation and Classification Review Committee (VCRC) on the pre-mix juice importations of Kraft Foods Philippines Inc., the maker of powdered juice brands Tang and Kool Aid.

The VCRC assumes jurisdiction in setting applicable tariffs on importations that have already entered the country but are being questioned by concerned parties.

The VCRC ruled last month that the powdered pre-mix pineapple and orange-flavored juice imports of Kraft should be classified as sugar products subject to a tariff rate of 48 percent.

In May last year, however, the VCRC had ruled that Kraft’s powdered pre-mix juices are composite concentrates for simple dilution with water to make a non-alcoholic beverage and should be subject to a tariff of only three percent.

The VCRC, thus, effectively reversed itself with its recent decision.

In making its latest decision, the VCRC relied on a Cabinet-level Tariffs and Related Matters (CTRM) committee decision in March last year which was intended to plug a loophole that has resulted in import misdeclaration of sugar products.

The import misdeclaration of sugar products had reportedly resulted in losses for the sugar industry amounting to P1.2 billion in 2003 alone.

The CTRM committee had approved the revised description of sugar to include articles of food and sugar with added flavoring or color matter products and those containing more than 65 percent sugar by dry volume. Such sugar products would now be subject to correct and higher duties.

The reclassification would stop the increasing importation of sugar allegedly coming in as concentrates and premixes which only carries a tariff of one percent under the Most Favored Nation (MFN) category and zero under ASEAN’s Common Effective Preferential Treatment (CEPT) scheme.

The CTRM decided that the articles/food preparations containing over 65 percent dry weight sugar be classified under HS 1701 heading. Under HS 1701.91, sugar products carry five percent CEPT and 50 percent MFN tariff rates, while HS 1791.99 carry a 48 percent CEPT and a 50 percent to 65 percent MFN tariff (50 percent for quota and 65 percent for non-quota markets).

The recent ruling of the VCRC now puts into question the future classification of powdered pre-mix juice importations.