US ethanol industry concerned over Chinese anti-dumping tax hike

China has increased the anti-dumping duties and countervailing duties (AD/CVD) enacted on imports of US distiller’s dried grains (DDGS) from the levels proposed last year.

According to China’s Ministry of Commerce (MoC), the new anti-dumping duties will range from 42.2% to 53.7%, up from 38.8% proposed last September, while anti-subsidy tariffs will range from 11.2% to 12%.

The move can be seen as a victory for Chinese domestic ethanol industry, which this latest DDGS probe last January by claiming that US DDGS were sold in China at prices “below normal value”.

The MoC confirmed their stance with the ruling and said that it had found that the Chinese DDGS industry had “suffered substantial harm” due to subsidised imports from the US.

Tom Sleight, president and CEO at the US Grains Council, said the duties are “not supported” by evidence and they call China’s compliance with standard AD/CVD procedures and international obligations into question.

“Protectionist trade restrictions based on false allegations do not benefit either China or the US and represent a threat to a global trading system that has promoted consumer welfare and jobs around the world while lifting millions of families out of poverty,” Sleight said.

Harsh impacts

The decision might prove a punch in the gut for US ethanol industry, for whom DDGS exports to China represent a major revenue stream.

China is the world’s single largest importer of DDGS and a particularly important trade partner for the US, as it feeds nearly its entire demand for DDGS through imports from the US.

Additionally, the ruling came just 10 days after the MoC also increased tariffs on imported US ethanol from 5% to 30%, which effectively brought market growth for US ethanol producers to a halt.

Some Chinese companies had already began to back off from US imports in September when the preliminary ruling was made public.

"I don't buy DDGS from the US anymore and have turned to domestic DDGS, soymeal and rapemeal," a Mr. Hu, who is in charge of buying protein in southern China for feed manufacturer New Hope Liuhe, told Reuters.

But according to Sleight, US ethanol exporters might not be the ones to suffer most from the increased duties.

“While painful and damaging to the US DDGS industry, their biggest negative impact will ultimately be on China’s feed and livestock industries, which risk losing access to an important and cost-effective feed ingredient, and on millions of Chinese households that will likely face greater food price inflation and less access to affordable, wholesome pork, poultry, and dairy products,” Sleight said.

US DDGS shipments to China fell to 135,000 and 163,000 tonnes in last October and November, respectively, which is approximately a third of the total in August before the preliminary tariffs.

In the first 11 months of the year, imports were down 53% at just under 3 million tonnes.

This article was written by Ilari Kauppila, deputy editor at Biofuels International