BEIJING/SINGAPORE (Reuters) – China has granted tariff exemptions for some crushers to import U.S. soybeans, five sources told Reuters, in line with a plan it announced in February, aiming to fulfill commitments under its Phase 1 trade deal with the United States.
The exemption, which will take effect from the day of issue, will be valid for a year, sources briefed on the matter said.
“Many companies have applied for the exemption and got the approval. It was not difficult,” said one of the five sources, who all sought anonymity because they were not authorized to speak to media.
As part of January’s Phase 1 deal, China promised to buy at least an additional $12.5 billion worth of U.S. farm products in 2020, and at least $19.5 billion in 2021, over the 2017 level of $24 billion.
The government has asked applicants for monthly purchase plans, said a second source with a major trading house, who has applied for the exemption.
Late in February, Beijing announced it would grant exemptions on retaliatory duties imposed against 696 U.S. goods, including soybeans and grains.
Soybean importers will be exempt from the extra tariffs imposed on U.S. cargoes during a tit-for-tat trade war, which stand at 27.5% in total, after a small cut on Feb 14.
China has also granted tariff exemptions for some importers to buy U.S. sorghum, wheat and distillers’ dried grains (DDGs), among products on its list, traders said.
“I think it applies to everything on the list,” said a grains trader with a state-owned firm.
“As long as you apply for the tariff exemption, you can get it. There is basically no obstacle,” the trader said.
Chinese importers have bought a large volume of U.S. sorghum in recent weeks.
Though prices for U.S. sorghum and wheat are good without the additional tariffs, soybeans, America’s top agricultural export to China, face strong competition from Brazilian cargoes.
“In reality , U.S. beans will only start trading Aug/Sept onward as Brazil has a bumper crop,” said one Singapore-based trader.
For April shipment, Brazilian beans to China cost about $382 a tonne, including cost and freight versus U.S. prices quoted at $395 per tonne, he said.
Chinese crushers, lured by good profits, have made large purchases of Brazilian beans in recent weeks.
“It doesn’t make sense to crush U.S. beans now, even without the extra tariffs. Brazilian beans are much cheaper,” said a manager with a major crusher in northern China, whose plant is well covered until June, mostly with Brazilian soybeans.
“I think the tariff exemption mainly serves as a hint to importers that it is OK now to book U.S. soybeans for future months, maybe after September,” he added.
“But, in the end, it still depends on prices.”