China Ends 95% Sugar Tariffs But Keeps Tight Grip on Imports

(Bloomberg) -- China has done away with massive import tariffs on additional sugar shipments, but is keeping a tight hold on how much it buys in an attempt to protect its domestic industry.

The country is bound by its membership agreement with the World Trade Organization to allow sugar purchases of as much as 1.95 million tons a year under a low-tariff quota scheme. For shipments exceeding that, China issues an import permit that is subject to a 50% tax, and in the last three years, an additional 35% to 45% duty.

Though the additional duty expired at the end of last week, the 50% tariffs remain. What’s more, China’s quota for extra imports so far this year amounts to 1.35 million tons -- the same as last year -- keeping overall shipments way below the almost 5 million tons bought in 2015.

“There’s little possibility that more permits will be issued as the domestic sugar industry is making losses based on current futures prices,” said Zhan Xiao, a fund manager with Shanghai Buyun Investment Co.

Sluggish demand following the coronavirus outbreak coupled with falling sugar prices abroad have pressured futures in China, which hovered near their lowest in more than a year.

China started an investigation into imports in 2016 after purchases surged and hurt the domestic industry. That led to an increase in import duties as well as a crackdown on smuggling from neighboring countries including Myanmar.

In terms of where China buys from, it may increase imports from Brazil, the largest supplier, after drought reduced output in Thailand, said Zhan. Imports from Brazil will exceed last year’s 2 million tons as it takes away market share from Thailand, he said.

Domestic consumption has rebounded after plunging in the first quarter of the year, said Cao Kai, an analyst at Xinhu Futures. Future import permits will be decided later, depending on how much demand recovers, he said.

©2020 Bloomberg L.P.

With assistance from Bloomberg