THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
INTRODUCED BY HON. MANUEL B . VILLAR, JR. 
EXPLANATORY NOTE 
Pursuant to the government's thrust of achieving food security in an efficient, 
transparent and cost-effective manner, a measure to abolish the sole power of the 
National Food Authority to import rice specially during shortages is necessary. 
The proposed legislation shall be called the "Rice Safety Net Act of 2004," which 
adopts the use of tariffs in lieu of non-tariff import restrictions to protect local paddy 
producers in a direct and transparent manner and at the same time generate revenues 
required to provide the infrastructure and finance the programs that improve farmers' 
productivity. 
The economic as well as political benefits of the tariffication of rice are 
enormous. 
Firstly, this is congruent with the government's thrust to reduce graft and 
corruption and to rely on the private sector to make timely decisions of when and how 
much to import. As NFA continues monopoly on international trade in rice, all rice 
imports are subject to bureaucrqtic decision-making -- open to political influence, 
corruption, inflexibility and bad timing. A case in point, is the inclusion of rice imports 
in PL 480 during the Estrada administration which in the past eight (8) years has been 
used solely for soybean meal importation. The 104,000 MT of rice imports contracted 
in year 2000, over and above the approved inter-agency rice imports of 650,000 MT 
have been left rotting in a private warehouse in Mabini, Batangas. These excess 
importations have been blamed for the decline of farm gate prices of palay in the last 
two years. 
Secondly, tariffication of rice will stop the highly destabilizing burden of NFA's 
intervention mechanisms oil the Philippine budget. From 1986 to 1998, NIA's 
operation resulted in annual losses amounting to P980 trillion on the average. In 
addition to operational subsidies, the NFA has been receiving equity infusion from the 
government since 1994 in amounts ranging from P78 million to P435 million. 
Moreover, the bulk of NFA's financing comes from loans which comprised 52% 
of its total assets. Of this amount, the NFA owed P16.96 billion to the government, 
banks and other creditors-with current liabilities comprising P 14.7 billion of total 
debt. 
Thirdly, expected revenues of the government at 90'% to 100% tariff rate is at 
P1.38 billion annually. The tariff revenue can be directly channeled to affected rice 
farmers or used to increase their productivity with rural investments in infrastructure. 
Fourthly, this move would be in line with our commitments with Multilateral 
trade organizations, During the WTO-GATT negotiations in 1995, the Philippines 
negotiated for the exemption of rice from tariffication under "Annex 5" of WTO 
Agreement. However, this exemption expires on December 31, 2004. Only three 
countries got exemption an rice: RP, South Korea and Japan. Japan has declared 
intention to give up rice QR. The Philippines has also committed to ASEAN to include 
rice in the AFTA-CEPT scheme by January 1, 2005. The Philippines is the only ASEAN 
member that continues to have rice quantitative restrictions (QRs). Other ASEAN 
members are advocating for the Philippines to adopt rice tariff. 
To address the fears and concerns of farmers, the revenues that will be 
generated shall be collected into a special fund to be called the Rice Farmers 
Development Fund for the purpose of providing the necessary support services such 
as, but not limited to, irrigation, farm-to-market roads, post-Harvest equipment and 
facilities, credit, research and development, extension services, other market 
infrastructure and market information. 
Clearly, there is a need for government to review and define clearly its food 
security strategy in view of the need to increase resources to other industries in order 
I 


t 
maximize their growth and trade potential. For example, it is likely the marginal 
returns to government investments would be higher if rice farmers would be enabled 
to shift to high-value crops simply because this strategy has not been emphasized for 
so long when the market potentials of these other crops have been so big. We believe 
that this is the only way to increase our farmer’s income and spur agro- 
industrialization. 
MANUEL B. VI LAR, JR. 
f 
Senator 


THIRTEENTH CONGRESS OF THE 
First Regular Session 
REPUBLIC OF THE mrmmms 
INTRODUCED BY HON. MANUEL B. VILLAR, JR. 
AN ACT 
TO PLACE SAFETY NETS FOR FILIPINO RICE PRODUCERS BY IMPOSING 
TARIFFS IN LIEU OF QUANTITATIVE RESTRICTIONS ON RICE IMPORTS, 
DIRECTING TARIFF COLLECTIONS FROM RICE IMPORTS TO PROJECTS 
AND PROGRAMS THAT ENHANCE RICE PRODUCTIVITY AND INCREASE 
FARMERS' INCOMES, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Short Title. -This Act shall be known as the "Rice Safety Net Act 
of 2004". 
SECTION 2. Declaration of Policy. - - It is the policy of the Slate to enhance 
farmers' incomes and ensure fool security by increasing the productivity of tile 
country's rice industry and making transparent and effective the protection accorded 
to rice producers. Towards this goal, the State adopts the use of tariffs in lieu of 
non-tariff import restrictions to protect local paddy producers in a direct and 
transparent manner and, at the sauce time, generate revenues required to provide the 
infrastructure aid finance the programs that improve farmers' productivity. 
The State shall endeavor to raise rice farm productivity by providing the 
necessary support services such as, but not limited to, irrigation, farm-to-market 
roads, post-harvest equipment and facilities, credit, research and development, 
extension services, other market infrastructure and market information. These 
support services shall, at least partially, be financed front the revenue collections from 
agricultural tariffs. 
SECTION 3. Definition of Terms. - For the purposes of this Act, the following 
terms are defined as follows: 
(a) 
limit the amount of imported commodities, including but not limited to discretionary 
import licensing and import quotas, whether qualified or absolute; 
(b) 
"Rice" shall refer to rice 111 the husk, husked rice, semi-milled or wholly milled 
rice, or broken rice, classified under tile Harmonized System of Commodity 
Classification as used in the Tariff and Customs Code of the Philippines; and 
(c) 
protection given by existing quantitative import restrictions, reflected by the 
average price gap between domestic prices and world prices. 
"Quantitative import restrictions" shall refer to non-tariff restrictions used to 
Tariff rate equivalent" shall refer to the rate of tariff that will allow the same 
SECTION 4. Repeal. - Subparagraph (si), paragraph (1) Section 6 of Presidential 
Decree Number 4 (National Grains Authority Act of 1972) as amended by Republic Act 
8 178 (Agricultural Tariffication Act of 1996), which reads: 
"Sec. 6 (a) Powers. "(xii) To establish rules and regulations governing the 
importation of rice and to license, impose and collect fees and charges for said 
importation for the purpose of equalizing the selling price of such imported rice 
with normal prevailing domestic prices. 
Yn the exercise of this power, the Council after consultation with the Of$ce of the 
President shall Frst certify to a shortage of rice that may occur (is a result of a 


short fall in production, a critical demand-supply gap, a state of calamity or other 
verified reasons that may warrant the need for importation: Provided, That this 
requirement shall not apply to the importation of rice equivalent to the Minimum 
Access Volume obligation of the Philippines under the WTO. The Authority shall 
undertake direct importation of rice or it may allocate import quotas among 
certified and licensed importers, and the distribution thereof through cooperatives 
and other marketing channels, at prices to be determined by the Council 
regardless of existing poor prices and the subsidy thereof; if 
any, shall be borne by the National Government." is Hereby repealed. 
All other laws or provisions of law prescribing quantitative import restrictions 
on rice or granting government agencies the power to impose such restrictions on rice 
are hereby repealed: Provided, however, that all such repeals shall become effective 
starting 1 January 2005. 
SECTION 5. Institution of Tariff Protection. - In lieu of quantitative import 
restrictions, the tariff rate of 100% shall be imposed on rice imports beginning 1 July 
2005 to accord transparent trade protection for rice producers. 
SECTION 6. Reduction of Tariff Rates - Any subsequent reduction of the tariff 
rate shall be based on the implementation of a comprehensive Rice Farmers 
Development Program to improve the sector's competitiveness. The Department of 
Agriculture shall develop the program in consultation with the rice sector farmers, 
stakeholders and the Congressional Oversight Committee on Agriculture and Fisheries 
Modernization(C0CAFM). Provided further, that program implementation shall be 
validated and evaluated by the COCAFM. 
SECTION 7. Rice Farmers Development Fund - The tariff revenues generated 
by the Government from rice imports shall be collected into a special fund at the 
National Treasury called the Rice Farmers Development Trust Fund created for the 
exclusive purpose of financing investments and expenditures under the Rice Farmers 
DevelopmentProgram. The Governor of the Bangko Sentral ng Pilipinas or his 
representative shall serve as tile Treasurer of the RDTF. The Bureau of Customs and 
the Department of Finance shall certify to the Department of Agriculture the volumes 
of rice imports and the tariff revenues generated from such imports at quarterly 
intervals. The Department of Budget and Management shall certify to the Department 
of Agriculture the allocation of such tariff revenues to the financing of public 
investments and support services in agriculture, as directed by the Rice Farmers 
Development Trust Fund Board. Provided, however, that the said special fund would 
be separate, distinct and in addition to the appropriations received by the Department 
of Agriculture. Provided, further, that any saving made each year shall accrue to the 
special funds set by this Act. 
SECTION 8. Anti-Rice Smuggling Fund - One percent (1%) of the Rice 
Farmers Development Fund shall be allocated to the Coast Guard and other 
concerned agencies in the prevention of smuggled agricultural products that enters 
the domestic market and in the implementation of the Anti-Dumping Act and the 
Countervailing Act. 
SECTION 9. Rice Farmers Development Fund Board. The Rice Farmers 
Development Trust Fund shall be managed according to policies set by the Rice 
Development Trust Fund Board. The Board shall be composed of 
Chairman: Chairman of tile COCAFM / Chairman of the Senate Committee oil Food 
and Agriculture; Vice-chairman: DA Secretary and the Vice-chairman of COCAFM 
Members: Peasant Sector Representative, House of Representatives; and Two 
representatives of nation4 associations of rice farmers appointed for two-year terns 
by the Secretary of Agriculture. 
The RFDF Board shall meet at least once each semester. The RFDF is 
empowered to organize a Technical Committee and Secretariat to undertake its 
operational activities. 


The bucget for the operations of the RTDF Board and Secretariat shall be 
approved by the Secretary of Agriculture and drawn from interest earnings of the 
RFDF. 
SECTION 10. Emergency Provisions - The President is empowered to allow the 
import of rice at a lower tariff rate to meet emergency requirements as well as the 
requirements of the government's rice distribution program which is targeted to the 
poorest of the poor. Provided, such imports may be treated as compliance to tile 
Minimum Access Volume (MAV) commitments under the WTO. The Secretary of 
Agriculture shall recommend the applicable rate and the volume to be imported on the 
basis of technical analysis and participatory consultation. 
The Secretary of Agriculture shall formulate and implement simple and 
transparent rules and regulation, governing the importation of rice under such tariff 
rate quota, including the allocation of the quotas among importers. Provided, that 
tariff proceeds such imports shall accrue to the Rice Farmers Development Fund. 
SECTION 1 1. Separability Clause - The provisions of this Act are hereby 
declared to be separate and, in the event any such provision arc declared 
unconstitutional, the other provisions, which are not affected thereby shall remain in 
force and effect. 
SECTION 12. Repealing Clause. -All laws, decrees, rules and regulations, 
executive or administrative orders and such other presidential issuances as are 
inconsistent with any of the provisions of this Act arc hereby repealed, amended or 
otherwise modified accordingly. 
SECTION 13. Effectivity - This Act shall take effect thirty (30) days following 
its publication in a newspaper of general circulation. 
Approved,