Thursday, June 19, 2014

High customs valuation rates affecting prices of goods in Philippine markets

Government is investigating the possibility that a cartel is manipulating prices in the market. Mr. President, you don't have to look far. The "cartel" or "group" that is severely affecting the market right now is, you guessed right, this present administration.

Why are prices rising? Ask importers of essential goods and they'll tell you that government is the one to blame for this.

The flow of goods into the market is being impeded by many factors, including stiff fees being imposed by the Bureau of Customs. Sources say, it is BIR commissioner Kim Henares, who is a very close associate of Finance secretary Cesar Purisima, who now dictates how Customs determine the tariff rates of certain products.

Because of the unusual rates being imposed by Customs, several importers have ceased importing these goods, causing a major disruption in prices in the market. DTI secretary Greg Domingo will tell you that at least 60-70% of our food supply comes from abroad. Now, if you put a high tax on these imported goods before you allow them entry into the Philippines, chances are these will discourage importers from importing these goods. Or, many of them will just pass the costs of paying for these legitimate fees to their customers.

Aside from paying high valuation fees, importers are likewise affected by the truck ban imposed by the City of Manila, plus high storage fees imposed by the Customs thru the use of their warehouses by importers. These are additional costs which importers then charge back to their customers.

Is this bad? Yes it is. Some importers say the valuation made by Customs is very high compared with global prices. For example, a kilo of nails is valued by Customs at 10/kilo while the global prices is at 5/kilo. Why will you then import when the valuation is higher by 100%? You'll probably be forced to manufacture those nails here so that it would be cheaper. Yet, we don't have existing industries or manufacturing facilities anymore because of past policies that forced traders to just import instead of making those goods here.

I know government knows about this problem already. DTI secretary Greg Domingo should exercise government regulatory powers to keep prices from spiralling out of control.