China Cracks The Door

Dried distillers grains with solubles will again be allowed into the country without additional tax.

DDGS are loaded onto a barge headed downriver. News of the removal of China’s 11% value-added tax on U.S. DDGS helped pushed prices higher soon after the announcement, Image courtesy of CHS Inc.

China’s Ministry of Foreign Affairs is again allowing U.S. dried distillers grains with solubles (DDGS) to be imported without charging an 11% value-added tax. The move could alter the global market dynamics for the better.

U.S. Grains Council (USGC) president and CEO Tom Sleight says the move “opens the door a little” for U.S. imports of the product. “We are pleased to see this move, which we’ve been working toward for months,” he explains. While the value-added tax has been removed, however, the antidumping and countervailing duties remain in place.

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Those duties followed investigations by China’s Ministry of Commerce in January 2016. That resulted in a final ruling against the U.S. in January 2017, setting antidumping duties at a range from 42.2 to 53.7%, while antisubsidy tariffs were between 11.2 and 12%. Sleight says that meant an end to the “ongoing exemption from paying the value-added tax.

“The combination of the duties and the value-added tax made U.S. DDGS exports to China even less competitive, affecting market prices and export flows globally,” he explains.

Those “penalties,” applied to U.S. DDG exports with or without solubles, caused U.S. exports to China to fall from 5.4 million metric tons (mmt) in 2015 to 3.3 mmt in 2016 and 739,000 tons in 2017.

USGC staff members have been working closely with the U.S. government at the highest levels for nearly a year to emphasize the importance of this $1.5-billion market for the U.S. grains and ethanol industries.

“This change will immediately improve the competitiveness of U.S. DDGS in what was once our top market, which is a very positive thing,” Sleight says. He adds this may be a step, albeit small, toward a possible negotiation over the stiff duties and tariffs U.S. DDGS exports to China still face.

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