As you may have heard on the media over the weekend, President Trump and Chinese President Xi reached an agreement at the G20 summit in Buenos Aires that resulted in the temporary suspension of the additional 15% duty on Chinese products imported into the US, that was set to go in effect on January 1st, 2019.
The “Section 301” ruling was released back in September, as part of the US’ continuing response to China’s abuse of intellectual property and forced transfer of American technology. This rule included the immediate assessment of an additional 10% duty on some 6000 items (List #3), including all food products that we import from China. According to this rule the 10% duty was to increase to 25% with respect to products entered into the US after January 1, 2019.
However, China has just agreed to start purchasing agricultural products from US farmers immediately and to also buy substantial amount of energy, industrial and other product from the US to reduce the trade imbalance between our countries. They have also agreed to begin negotiations “on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture”, according to the joint statement of the two countries. “Both parties agree that they will endeavor to have this transaction completed within the next 90 days. If, at the end of this period of time the parties are unable to reach an agreement, the 10% tariffs will be raised to 25%”, the announcement said.
Packing is in the finishing stages in the largest growing area in China, Fujian Province. Raw material prices didn’t change too much during the season and the fluctuation wasn’t more than +/-10% before and after Chinese New Year.
Since there are only a handful of packers that can export to the U.S. without having to pay a high anti-dumping duty, they have been holding their prices firm. The largest Indian packer normally matches the Chinese prices, but good fresh-pack Chinese Champignon mushroom pieces and stems that we carry under the Ambrosia brand will always be more desirable than the much larger and darker Indian mushroom pieces. We may see cheaper offers for Indian mushrooms on the short-run as the largest packer is trying to get rid of some unsold inventories.
Tuna is a quota item, meaning that after a certain quantity of tuna is imported, the duty rate is increased. The quota is so low that it is used up in the first business day of the year.
The duty rate under quota is 6.5% (loosely, what people refer to as ‘single duty’ tuna); after the quota is reached, the rate goes to 12.5% . Since so much tuna is ‘entered’ on the first business day of each year, it takes US Customs a few months to figure out how to fairly calculate each ‘entry’s’ proportion of the lower duty rate. We typically find out around May. For example, it may work out that all the tuna we ‘entered’ on the first day of the year will take a duty rate of 10%, instead of the lower 6.5%, or post quota rate of 12.5%. So, in reality, there is rarely a 6.5% rate.
This duty reduction law expired December 31, 2010, but was renewed by President Obama on October 20, 2011. This will allow us to continue to offer many of our products at prices without duty. From January 1 until now, we have not known if renewal of this GSP law would be renewed or not. All importers have been in this dilemma not knowing how to cost out many of our imported goods. We are back on firm footing now, until July 31, 2013. For background information on this issue, please refer to our Blog of June 6, 2011.
New crop Capers, processed in Turkey, are very strong in price compared to last season. In addition, it seems fairly common that most importers are now adding in duty to their cost that was previously free, due to the GSP laws which expired December 31, 2010 (see Blog from June 6). Add together higher raw material cost of the capers, and duty, and prices are moving up rapidly. Product has been very slow to come out of the producing areas of Turkey, Uzbekhistan, and Morocco.
We have adequate supply of all 3 sizes, Nonpareilles (small), Surfines(medium), and Capotes(larger), and our product is now packed in PET! Those chefs that want glass out of the kitchen can now do that with our PET packed Capers!
Generalized System of Preferences (GSP): This is a law initiated in 1976 that gives preferential treatment to certain developing countries of certain commodities, to exempt these items from duty when imported into the USA.
The concept was a simple one: “Trade not Aid”. Many importers use this law to import food products from these countries at a lower duty rate than other exporting countries, in an effort to reduce the total landed cost. Typically, the GSP law is renewed for 1 to 3 years at a time. Historically, Congress has not renewed this GSP law prior to its expiration of December 31, but has always renewed it retroactively. Elimination of this 35 year old law would change the countries that many food importers buy from, and would raise the prices of many food products to the end user.
As of today, the GSP law has not been renewed for 2011, and Congress will be breaking for the Summer soon. It is likely that importers will have to begin adding duty to their cost to correctly capture the true cost-of-goods. Items affected would be Capers, Baby Clams, Roasted Peppers from Turkey, and Baby Corn.