China Trade Developments

China Trade Developments

NAEGA continues to follow developments related to U.S. trade with China. Overall we continue to directly address U.S. government policy toward China and potential Chinese retaliation. Currently, Section 232 tariffs are in place against Chinese steel and aluminum products. In response, the Chinese government is enforcing retaliatory tariffs related to these duties a number of U.S. products, including pork. Meanwhile, the Section 301 investigation into Chinese intellectual property rules is ongoing. While no tariffs have been set on either side related to Section 301, Chinese authorities have released a retaliatory list of products that includes soybeans.

U.S. Soybean exports to China
Since December 13, 2017 NAEGA and several other industry representatives have raised concerns about the uncertainty and lack of predictability that has arisen from the lack of clarity on how APHIS and AQSIQ will instruct and control exports and imports given the new measures deployed on January 1, 2018. These concerns include the placing by APHIS of an additional declaration indicating Foreign Material that exceeds 1 percent on the APHIS issued phyto-sanitary certificates for applicable U.S. shipments of soybeans to China.

The uncertainty and lack of predictability has resulted in diverted shipments and sales. For 4 months NAEGA has reported that some CIQ officials have threatened or arbitrarily enforced on U.S. shipments the Decree 177 provision that might require imports to meet or exceed all factors of China #1 grade soybeans.

In order to help reduce the uncertainty and lack of predictability and mitigate these adverse impacts, industry has sought explanations and documentation from both AQSIQ and APHIS. Fortunately, on December 27, 2017 USDA FGIS provided a directive # 9180.85 “INCLUDING A FOREIGN MATERIAL STATEMENT ON FGIS 921-2 FOR SOYBEAN SHIPMENTS TO CHINA”,   Unfortunately, since this time the sparse, uncodified and inconsistent information coming from both AQSIQ and APHIS has only served to increase apprehension.  For example, APHIS has explained that their agreement with AQSIQ on how to proceed is unwritten. In reference to a document APHIS provided and identified as an excerpt from the signed minutes of a bilateral meeting during the first week of December 2017, which indicates that “expedited” treatment will be afforded by AQSIQ for imports of U.S. soybeans that do not have the additional “FM” declaration, AQSIQ has responded that expedited is not a correct word and that “differential” treatment is more accurate.  APHIS is proceeding with our support to deploy elements of a “Systems Approach” it has crafted with our assistance intended to reduce weed seeds in U.S. soybeans.  APHIS has indicated they are not acting on the elements of the Systems Approach that address China’s practices.

While little has been done to address the trade frustrations, solutions are apparent in the short term.  Moreover, longer term process improvements are apparent that can and should be implemented to prevent similar consequences in the future. NAEGA is taking and recommends a number of actions in response.  Our focus has been, and continues to be, to provide for regulatory and commercial best practices within the parameters of sound science, legal compliance and international convention to provide for the least trade distortion and best environment for all stakeholders.  Among those actions:

  1. Cooperating with USDA by contributing to and communicating our concerns and possible solutions as part of the USDA Systems Approach on Weed Seeds. Unfortunately, APHIS has no current plans to address the “Trade Support” elements that would address China’s practices and provide for leveling the playing field for U.S. exports.
  2. Supporting the establishment of a new protocol to provide for consistent application of more predictable and transparent Chinese soybean import requirements that are science based and consistent with the International Plant Protection Convention’s International Standard for Phytosanitary Measures Number 32.
  3. Completing work to establish U.S. official and commercial practice as sufficient to meet China’s Administrative Measures of Inspection and Quarantine for the Entry and Exit Grain issued by the General.

NAEGA is working aggressively across US government agencies and with the White House to encourage global coordination with soybean origins as well as with China to address barriers soybean trade.  We are specifically pressing the U.S. government to work immediately to: Establish new protocols to meet China’s Decree 177 needs to provide for consistent application of more predictable and transparent Chinese soybean import requirements that are science based and consistent with the International Plant Protection Convention’s International Standard for Phytosanitary Measures Number 32. As such this protocol would eliminate the AD.  In addition, we are pressing the U.S. government to closely examine and report on the unwritten agreement between APHIS and AQSIQ and actions taken by U.S. officials that led to the current circumstances.

In addition, NAEGA is gathering information from members regarding the treatment of imported U.S. soybeans and reporting findings to US Government officials in an effort to provide support for bi-lateral negotiations.

Sorghum AD/CVD Case
NAEGA continues to lead a Special Interest Group (SIG) of companies and organizations interested in responding to China’s filing of an anti-dumping (AD) and countervailing duty case (CVD) against U.S. sorghum. Last week, China took the first steps to deploy a tariff on U.S. origin sorghum imports with requirements for the payment of a non-refundable deposit of  179 percent effective on Monday April 16.  The SIG is sharing information on industry and USG responses to the AD and CVD cases brought by China’s MOFCOM and is considering options for future engagement with both U.S. and Chinese governments. Membership in the SIG is still open to all NAEGA members and interested parties. Please contact Ryan for more information.

Meanwhile NAEGA is working to provide U.S. officials with current assessments to support a negotiated solution to preempt tariff escalation. We have emphasized that the sudden implementation of new tariffs is very problematic as again commercial contracts are being cut across with serious short-term cost implications as well as long term ramifications.  Specifically, we are pressing for a retroactive 30 to 45 days runway / transition before deployment of the deposit for the market to adjust.

Please let us know if you have any information or advice regarding ongoing trade developments with China.