China MOF to Remove Tariff on U.S. Commodities by Exemptions

SCI99

2020-02-19

China MOF to Remove Tariff on U.S. Commodities by Exemptions

According to the Ministry of Financial (MOF)’s statement on February 17, 696 products in 8 tariff categories will be removed from the countermeasures again U.S. Section 301 from one year period from March 2, 2020, including crude oil, LNG, propane and butane and other agricultural, energy and other commodities.

The new rule requires importers to submit applications for exemptions from March 2, but the approval of applications will be restricted by an uncertain quota for each product. With the previous two waivers of tariff on U.S. farm products, China is clearing the way to execute the first trade deal signed on January 15, in which China pledged to purchase U.S. goods and services by $200 billion over the next two years, including $77.7 billion for manufactured goods, $37.9 billion for services, $52.4 billion for energy and $32 billion for agricultural products.

As for LNG imports, the timing of this announcement is subtle. The Northeast Asia spot LNG price was sunk by the extremely mild winter demand and the public health event in China, and it had dropped below $3/mn Btu from February 6, a record low ever in history. LNG carries got stuck or rerouted frequently those days, according to AIS data, and the U.S.-origin LNG had no advantage in prices. During this severe market atmosphere, the 25% tariff removal on U.S. LNG will not give too much confidence to the U.S. exporter. However, the big players of the two countries had already in talks on long-term contracts even before the start of the trade conflict, and the negotiation slowed down but never halted during the past 20 months. According to sources, CNPC and Sinopec are both intend to sign long-term deals with U.S. LNG exporters such as Cheniere, and the progress of negotiation may be accelerated in 2020, propelled by the first phase trade deal, the removal of 25% tariff, the extremely low price, the global supply glut and more serious situation in the U.S. It is expected the two sides will reach a firm deal within 2020, but before that, China will welcome low-priced spot cargoes first from the U.S.

.......

Please click "Read more" for more information