China will remove the value-added tax on imports of distillers dried grains (DDGS), the foreign ministry said recently, a move that could boost purchases from top exporter the United States, although other import tariffs remain in place.
The news followed talks in Beijing between President Xi Jinping and his U.S. counterpart, Donald Trump.
No timeline was given for the removal of the 11 percent tax, but such a reduction on the animal feed ingredient, a byproduct of corn-based ethanol, had been widely rumored in the market for months ahead of Trump’s visit.
Punitive anti-dumping tariffs on imports of U.S. DDGS from the United States remain in place, but traders and analysts said the step could still boost demand by Chinese buyers.
U.S. DDGS exports to China through September fell to 337,348 tonnes, valued at $56.1 million, compared with 2.1 million tonnes of U.S. exports valued at $428 million for the same time period last year, according to U.S. Department of Agriculture data.
“Nearly 80 percent of the import duty remains,” he said. “I wonder if China’s government would reduce it by half at least. Then, we could resume business,” said a US trader.
Imported DDGS arriving at southern Chinese ports costs around $10 per tonne more than domestically produced ingredient, priced at 2,200 yuan ($331) per tonne.
“The import margin is still not there, but if the corn price in the U.S. falls, then probably people will start to import again,” said the trader in Beijing.
Market expectations that Trump’s visit could lead to an overhaul of tariffs had already triggered a few small, test shipments in recent days, said the trader.
In January, Beijing slapped anti-dumping duties on DDGS imports from the United States of up to 53.7 percent. Anti-subsidy tariffs range between 11.2 percent and 12 percent.
Rumors have also swirled in recent weeks that China could agree to lower import tariffs on ethanol. Beijing hiked import duties to 30 percent this year, effectively shutting down a booming trade in imports.