BOC requires Kraft Phils to post bond for imports

The Bureau of Customs (BOC) is allowing Kraft Foods Philippines Inc. to continue paying the contested low three-percent duty on its imports of pre-mixed juices. However, the BOC has 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 Court of Tax Appeals (CTA) of its case.

Kraft Foods has filed a petition with the CTA seeking to reverse the BOC order that categorized the food manufacturer’s premix juice imports under tariff heading 2106 whose sugar content exceeds 65 percent in dry weight. Under the ASEAN, member countries are slapped duties of 38 percent while under the World Trade Organization, the commodity is slapped a 48-percent tariff.

"We have yet to hear response from Kraft, although a memorandum has been sent to them already, and while they are still allowed to pay the low duties, they have to post bonds with the monetary equivalent of 35 percent or the tax differential pending the resolution of the case" said BOC commissioner Napoleon Morales.

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

Only products with sugar content of less than 65-percent categorized under tariff heading 1701 are allowed to pay the minimum three percent tariff.

The local sugar sector has been urging government to stop allowing Kraft Foods from importing premix juices at a very low tarift.

"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 alleged 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 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.