China Doubles Levy on Some Sugar Imports

(Beijing) — China, the world’s largest sugar consumer, will almost double tariffs on some imports of the commodity to protect the domestic industry which the government says is being damaged by a flood of cheaper purchases from overseas.

Imports of sugar above the annual quota of 1.95 million tons will face an additional levy of 45% on top of the existing 50% tax from now until May next year, the Ministry of Commerce said on Monday. The rate of the extra tariff will reduce to 40% from May 2018 to 2019 and to 35% the following year, according to the ministry’s ruling which followed a six-month investigation.

“The surging volume of imports has caused significant damage to the domestic sugar industry,” the ministry said in a statement on its website announcing the tariffs. Under World Trade Organization (WTO) rules, countries can take so-called safeguard actions to protect domestic industries from a surge in imports that cause or threaten to cause injury to domestic production.

China’s sugar imports jumped by 66% to 4.84 million tons in 2015 from 2.92 million tons in 2011, according to government data. Domestic production rose 24% to 9.7 million tons from 2011 to 2014 but fell to 8 million tons in 2015.

The commerce ministry started its investigation in September 2016 after a complaint from the Guangxi Sugar Industry Association on behalf of domestic sugar mills and farmers. The Guangxi Zhuang autonomous region in southern China is the country’s main sugar-producing region.

The Chinese sugar industry has been in the red since 2013, and racked up a cumulative loss of 7.9 billion yuan ($1.1 billion) by the end of the first quarter of 2016, according to data compiled by Sublime China Information Group, a commodity market information service provider.

“The additional tariffs will increase the costs of sugar imports, which will push sugar prices higher in the domestic market,” said Sun Yue, a sugar analyst with Sublime China. “The policy will be favorable to the domestic sugar industry.”

As part of commitments made when China joined the WTO in 2001, the government agreed to allow 1.95 million tons of sugar imports per annum at a tariff of 15% starting in 2004. Imports above that amount were subject to a 50% duty.

The additional safeguard tariffs will be levied on raw sugar made from sugarcane and beet, and white sugar and dark brown sugar largely used in cooking, according to the ministry’s statement. Sun said raw sugar accounts for about 90% of China’s total imports of the commodity.

Brazil, the world’s biggest producer and exporter of sugar, Australia, South Korea and Thailand are among the countries affected by the ruling, according to the ministry, which said they were informed of the outcome of the investigation in April.

Brazil accounts for as much as 70% of China’s imports and Unica, the Brazilian Sugarcane Industry Association, estimated Monday that exports to China could fall to 2.2 million tons from 3 million tons in the first 12 months of the higher tariff.

The association said meetings between representatives of the two countries will take place in coming weeks to discuss the levies.

Contact reporter Pan Che (chepan@caixin.com)

This story has been corrected to reflect the volume to which Brazilian exports of sugar to China could fall.