Republic of the Philippines
HOUSE OF REPRESENTATIVE
Quezon City

‘THIRTEENTH CONGRESS
First Regular Session

273

House Bill No.

Introduced by HONORABLE JOSE C. DE VENECIA, 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 Authotity 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 liew 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 would 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
bureaucratic 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 imposts contracted in year 2000, over and above the
approved infer-agency rice imports of 650,000 MT’ have been left rotting in 2 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 on the Philippine budget. From 1986 to 1998, NFA's operation
resulted in annual losses amounting to an average of P980 million. In addition to operational
subsidies, the NFA has been receiving equity infusions from the government since 1994 in

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amounts ranging from P78 million to P435 million, Moreover, the bulk of NFA's financing
comes, from loans which are guaranteed by the government. In 1998, its total debts soared
to P27.6 billion 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 P14,7 billion of total debts.

‘Thitdly, expected revenues of the government at 90% to 100% tatiff rate is at P1.38
billion annually. The tariff revenue can be directly channeled to affected tice 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 on 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 2 special fund to be called the Rice Farmers Development Fund for
the purpose of providing the necessaty support services such as, but not limited to,
issigation, farm-to-market roads, post-harvest equipment and facilities, credit, research and
development, extension services, other market infrastructure and market information.

Cleat, there is a need for government to review and define cleatly its food security
strategy in view of the need to increase resources to other industries in order to maximize
their growth and trade potential. For example, itis 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
farmers’ incomes and spur agro-industrialization,

In view of the foregoing, immediate passage of this bill is sought.

E C, DE VENECIA JR.



Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

‘THIRTEENTH CONGRESS
First Regular Session

House Bill No. 273

Introduced by HONORABLE JOSE C. DE VENECIA, 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".

SEC. 2. Declaration of Policy. It is the policy of the State to enhance farmers’
incomes and ensure food security by increasing the productivity of the 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 2 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 State shall endeavor to raise tice farm productivity by providing the necessary support
services such as, but not limited to, isrigation, 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 from the revenue collections from agricultural tariffs


SEC. 3. Definition of Terms. - For the purposes of this Act, the following terms
are defined as follows:

(@) Quantitative import restrictions - refer to non-tariff restrictions used to limit
the amount of imported commodities, including but not limited to discretionary
import licensing and import quotas, whether qualified or absolute;

(0) Rice - refer to tice in the husk, husked rice, semi-milled or wholly milled rice ot
broken rice, classified Linder the Harmonized System of Commodity
Classification as used in the Tariff and Customs Code oil’ the Philippines, and

(©) Tariff rate equivalent - refers to the rate of tariff that will allow tile same
protection _given by existing quantitative import restrictions, reflected by the
average price gap between domestic prices and world prices.

SEC. 4, Repeal, - Subparagraph (xii), paragraph (1) Section 6 of Presidential Decree
Number 4 (National Grains Authority Act of 1972) as amended by Republic Act 8178
(Agricultural Tariffication Act of 1996), which reads:

"Sec. 6 (a) Powers. "(xil) 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.

"In the exercise of this power, the Council after consultation with the Office of the President shall
fist certify to a shortage of rice that may occur as a result of a shortfall in production, a critical
demand-supply gap, a state of calamity or otber verified reasons that may warrant the need for importation:
Provided, That this requirement shall not apply to the importation of rice equivalent fo the Minimum
Aucess Volume obligation of the Philippines under the WTO. The Authority shall undertake direct
importation of rice or it may allocate import quotas among cerifed and licensed importers, and the
distribution thereof through cooperatives and other marketing channels, at prices to be determined by the
Council regardless of existing floor 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
ice 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.

SEC. 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 2002 to
accord transparent trade protection for rice producers.

SEC. 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


(COCAEM). Provided further, that program implementation shall be validated and evaluated
by the COCAFM.

SEC. 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 Development Program.
The Governor of the Bangko Sentral ng Pilipinas or his representative shall serve as the
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.

SEC. 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.

SEC. 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 the COCAFM / Chairman of the Senate Committee on
Food and Agriculture;

Vice-Chairmen: DA Secretary and the Vice-Chairman of COCAFM

Members:

Peasant Sector Representative, House of Representatives; and,

‘Two representatives of national associations of rice farmers appointed for two-year
terms 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 under-take its operational activities.
‘The budget 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.

SEC. 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 the Minimum Access
Volume (MAV) commitments under the WIO 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 regulations governing the importation of rice under such tariff rate quota,
including the allocation of the quotas among importers. Provided, that tariff proceeds from
such imports shall accrue to the Rice Farmers Development Fund.

SEC. 11. Separability Clause. - The provisions of this Act are hereby declared to be
separate and, in the event any such provision ate declared unconstitutional, the other
provisions, which are not affected thereby shall remain in force and effect,

SEC. 12. Repealing Clause. - All laws, decrees, rules and regulations, executive ot
administrative orders and such other -presidential issuances as are inconsistent with any of
the provisions of this Act are hereby repealed, amended or otherwise modified accordingly.

SEC. 13. Effectivity, - This Act shall take effect thirty (30) days following its
Publication in a newspaper of general circulation.

Approved