Increasing competition? China’s lower import tariffs will benefit nutrition imports and domestic market - experts

China adopted provisional duty rates​ for 883 imported goods which are already subjected to the most-favoured nation (MFN) tariffs – applicable to imports originating from World Trade Organisation (WTO) member countries that apply the MFN treatment clause.

The goods impacted include fish oil soft gel capsules, Chinese liquorice (甘草), FSMPs, lactoferrin, FSMPs for low birth weight and pre-term infants.

For instance, the provisional duty rate of fish oil soft gel capsule is 6%, lower than that of the tariffs subjected to the MFN at 12%.

For pre-term/low birth weight infant formula FSMPs, the provisional duty rate of fish oil has dropped to 0% from 15%.

That of Chinese liquorice and lactoferrin have dropped from 6% to 0% and 10% to 5% respectively.

On the other hand, China also reduced the conventional duty rates to certain goods from APAC countries including Australia, New Zealand, and South Korea.

These countries already enjoy preferential duty rates via regional trade agreements with China.

The reduced conventional duty rates apply to retail packets of infant formula powder, where the duty rate is now 0% for Australia and New Zealand.

It also applies to Chinese liquorice, which has also become 0% for Australia, New Zealand, and South Korea.

The reduction in both duty tariffs for MFN and countries which have signed regional trade agreements could lead to more competition for certain products.

“Countries which have already signed Free Trade Agreements with China might not have a stronger competitive edge as compared to before as a result of the introduction of the provisional duty rates ,” ​Zhang Zhong Peng, director at China Chamber of Commerce for Import and Export of Medicines and Health Products (CCCMPHIE) told NutraIngredients-Asia. ​ 

This can be seen in the case of Chinese liquorice, where the duty rate is now 0% for countries which previously signed conventional duty rates with China and WTO countries under the MFN principle.

On the other hand, the provisional duty rate for fish oil soft gel capsule – a finished product predominantly imported from Australia and New Zealand – has been reduced to 6%.

This means that Australia and New Zealand could face more competition from other exporters of fish oil soft gel capsules.

“The adjustment in duty rates does not impact only the nutrition industry, it is targeted at multiple industries and impact many products.​

“In recent years, China’s has been reducing its duty rates for imported goods, its national strategy is to expand imports to meet domestic demand,”​ Zhang said.

Fish oil is one of the most sought-after imports, as China has extremely low production locally, secretary-general of the China Nutrition and Health Food Association, Lu Yan Ni, said in a commentary.

Similarly, she pointed out that the country also relied heavily on imports for lactoferrin. The cost of the raw material has been increasing since 2017 and is now at about RMB$30k (US$4667) per kg.

Boosting local competitiveness​

Encouraging imports will also boost the competitiveness of the local nutrition industry, according to Lu.  

“The adjustment of policies on tariffs also led to a stronger competitive framework, urging local Chinese manufacturers to improve their product quality and technical strengths,”​ Lu said.

Lastly, she added that the reduced import tariffs would also lower retail prices of certain nutrition products for consumers.

This would in turn weaken the daigou trade, protect the country’s tax income and protect consumer safety.