Groups of local flour and feed millers denied the report that some food-grade wheat imports last year were allegedly misdeclared as feed wheat to avoid paying higher tax duties.
The Philippine Association of Flour Millers Inc. (Pafmil) said the claim of Philippine Maize Federation Inc. (PhilMaize) that some flour millers were using feed wheat for flour was “ridiculous”, and the insinuation of technical smuggling done by wheat importers was “baseless”.
“While the report did not mention Pafmil, the association takes these accusations seriously and feels the need to respond as the industry to which it belongs has been put to question,” Pafmil Executive Director Ric Pinca told the BusinessMirror.
Pinca said his group sees no economic sense for any flour miller to even consider declaring its milling wheat imports as feed wheat to supposedly avoid payment of the 12-percent value-added tax (VAT) after sales.
“Flour millers pay an output VAT for every bag of flour sold in the market. If the miller did not pay an input VAT [by declaring his wheat import as VAT-free feed wheat], then the company cannot claim any input VAT, and will have to pay 12-percent VAT on a higher-value finished flour product from which no input VAT can be deducted,” Pinca said.
Earlier PhilMaize President Roger V. Navarro urged the Department of Agriculture (DA) to investigate the importation of feed wheat last year, as they received reports showing misdeclaration of imports.
Navarro claimed that not all of the feed wheat imported last year went to feed millers. Based on PhilMaize’s estimate, some 300,000 metric tons (MT) of imported feed wheat out of the 1.6 million MT imported last year were really for flour milling, Navarro added.
“In our estimate, there’s a big entry of feed wheat, which seems suspicious. To avoid paying the 12-percent VAT for subsequent flour sales, food-grade wheat was declared as feed wheat,” Navarro told reporters in a recent interview.
“The government should really investigate this, [especially since] the consumption of feeds by the livestock and poultry sectors is not increasing,” Navarro added.
Pinca also said feed wheat does not meet the quality standards required by the local bakery industry that demands quality flour for its bread products.
“Considering the highly competitive flour market, no Pafmil member would risk losing the bakery market that has taken the milling industry almost seven decades to develop,” he said.
“Flour-milling business requires its wheat grains to be of consistent protein level, gluten content, moisture, granulation and other quality indicators that feed wheat does not meet. Thus, feed wheat is declared by the exporting country as such due to the product’s failure to meet milling wheat export-quality standards,” Pinca said.
Pafmil is comprised of seven member mills: Liberty Flour Mills, RFM Corp.,
Wellington Flour Mills, General Milling Corp., Universal Robina Corp., Philippine Flour Mills and Pilmico Foods Corp., according to Pinca.
The Philippine Association Feed Millers Inc. (Pafmi) also denied the claim of PhilMaize of technical smuggling, saying they are not aware of such incident last year, especially within their group.
“Feed wheat is always of lesser quality, hence it is used only for feed rations. We are not aware if this is used otherwise, since we do not know how companies, who import these, make use of their importations,” Pafmi President Estefania de Vera said in a text message to the BusinessMirror.
Citing data from the Bureau of Customs, Pinca said the Philippines imported a total of 2.6 MMT of milling wheat in 2016, 4 percent higher than the 2.5-MMT recorded volume in 2015.
Currently, milling-wheat imports are exempt from tariffs, but are subject to a 12-percent VAT on the subsequent flour sales, payable at the time the wheat was imported, according to a Global Agricultural Information Network (Gain) report.
Both feed-wheat imports and wheat- flour imports are subject to a 7-percent duty. The Gain report also noted that feed-wheat imports are exempted from the 12-percent VAT. Milling and feed- wheat imports from signatories to the Asean-Australia-New Zealand free-trade agreement are duty-free.
“Milling wheat imports over the past several years have remained in the range of 2.1 MMT to 2.3 MMT per year, but are expected to increase as additional capacity becomes operational,” the report read.
“The increase in imports has come from feed wheat, which reached around 2.5 MMT in calendar year 2016, according to industry data,” it added.
Earlier, Navarro told the BusinessMirror that the decline in the farm-gate price of corn was caused by the massive importation of feed wheat, an alternative to yellow corn, used in manufacturing animal feeds.
The importation of feed wheat has displaced the space for yellow corn in the warehouses of livestock stakeholders, Navarro added.
“The government must intervene or else we will issue a request compelling the livestock sector to calibrate their importation in a way that will not affect our local producers,” Navarro said in a separate interview.
Data obtained by the BusinessMirror from the Bureau of Plant Industry (BPI) showed that feed wheat purchased abroad last year increased by more than half, or by 71.17 percent, to 1.591 MMT from 929,871.20 MT recorded imported volume in 2015.
More than a third, or around 36.75 percent, of the total imported feed wheat last year by the Philippines came from Ukraine. Feed wheat purchased from Ukraine reached 585,041.26 MT, more than two-thirds, or 70.22 percent, higher than the 343,697.77-MT recorded volume in 2015, according to BPI data.
However, data from the attached agency of the DA showed that the country’s purchases of wheat grain and wheat flour abroad declined in 2016. The Philippines imported 2.093 MMT of wheat grain last year, 14.50 percent lower than the 2.448 MT imported volume in 2015, according to BPI data.
Meanwhile, the country’s purchase of wheat flour abroad last year declined by a third, or by 33.94 percent, to 86,635.75 MT compared to the 2015 imported volume of 131,149.17 MT.