China to Reimburse Tariffs for State Reserve Soybeans
(Bloomberg) -- China will reimburse the buyer for the cost of the 25 percent tariff on soybean imports from the U.S. if the cargoes are for state reserves, according to people familiar with the matter.
Extra duties were applied to a range of U.S. farm products from July 6 in retaliation for President Donald Trump’s tariffs on $34 billion of Chinese goods. State reserve buyers will pay the additional tariff before they’re later reimbursed by the government, according to the people, who asked not to be identified because they’re not authorized to speak to the media. Sinograin, the group that handles state stockpiles, wasn’t available to comment.
At least one U.S. soybean cargo currently on the water is destined for state reserves, according to the people. Still, most of about 20 cargoes purchased earlier for state reserves have already been canceled, said Li Qiang, chief analyst with Shanghai JC Intelligence Co.
“There could be some kind of compensation,” because the cargoes were purchased on behalf of the government, Li said, though he added that he doesn’t think this can be considered as "direct tax refunds." Chinese companies canceled and resold some U.S. soybean purchases on Friday.
China’s commerce ministry also said late on Monday that China will encourage imports of farm products, including soybean and soybean meal from other countries while evaluating the impact that the China-U.S. trade spat has on domestic companies.
A shipment that lost its race to reach China before the tariffs took affect remained idled about 19 miles off the port of Dalian on Monday.
The cargo on board the bulk carrier Peak Pegasus will be subject to the 25 percent tariff because it missed the cut-off, said a person with knowledge of the matter, who asked not to be identified because the matter is private. The port is congested by heavy arrivals of soybean cargoes and unloading may take weeks, the person said. The cargo isn’t destined for state reserves.
Click here to track the path of the Peak Pegasus
The government holds an unknown amount of soybeans in reserves as part of its food security strategy. While it suspended its direct purchase of domestic oil seeds for state reserves, it’s likely that imports by state-owned companies have contributed to the stockpiles, according to the U.S. Department of Agriculture.
Soybeans have been a key battleground in the escalating trade tensions between the two countries as China is the world’s biggest importer and America’s largest customer in a trade worth $14 billion last year. The Asian country’s imports may top 100 million metric tons in 2018-19, the USDA predicts.
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