Phase One Trade Agreement Provisions Implemented, Expanding Access for U.S. Beef in China

On March 20, the USDA Food Safety and Inspection Service (FSIS) updated its Export Library for China to reflect expanded access for U.S. beef and pork. These changes were among the provisions negotiated in the U.S.-China “Phase One” trade agreement.

Access for U.S. beef has expanded significantly, explains Joel Haggard, USMEF senior vice president for the Asia Pacific. Many more U.S. facilities are now eligible to export beef to China, and exports are no longer limited to beef from cattle less than 30 months of age. China is also adopting international standards for growth hormones commonly used in beef production, rather than enforcing a zero tolerance policy. Haggard notes that in a another positive development, China is allowing importers to apply for relief from retaliatory duties on U.S. beef. When successful, this process can lower the effective tariff rate on U.S. beef entering China from 42% to the most-favored-nation (MFN) rate of 12%.

U.S. pork will also benefit from market access gains negotiated in the Phase One agreement. Under the changes posted on Friday by USDA, more facilities are eligible to export pork and pork products to China, and the FSIS Export Library now clarifies that this includes processed pork products and pork trimmings. Importers may also apply for tariff relief on U.S. pork entering China. When successful, this process can lower the effective tariff rate on U.S. pork muscle cuts from 63% to 33% and on pork offals from 67% to 37%.

(NOTE: U.S. beef entering China is subject only to retaliatory duties imposed in response to U.S. Section 301 tariffs, which is why China's tariff exclusion process may lower the effective rate to the 12% MFN rate. U.S. pork is subject to retaliatory duties imposed in response to both Section 301 and Section 232 tariffs. So when an importer's application for Section 301 relief is successful, the effective rate for pork muscle cuts drops to 33% (8% MFN rate + 25% Section 232 duty) and for pork offals the rate drops to 37% (12% MFN rate + 25% Section 232 duty).

Transcript

Joe Schuele: Implementation of Phase One trade agreement commitments has made more U.S. beef and pork plants eligible to ship a much wider range of products to China. U.S. Meat Export Federation Senior Vice President for the Asia Pacific Joel Haggard has more specifics on the beef side in this USMEF report.

Joel Haggard: USDA’s Food Safety Inspection Service posted new eligibility requirements for U.S. beef exports to China, which should see larger volumes shipped there. All beef and beef products, including processed beef items from cattle of all ages will be eligible to ship to China. And China has moved toward the adoption of international standards by establishing maximum residue levels for commonly used hormones in cattle production. They also recognize the efficacy of the U.S. cattle traceability system. The announcement followed the listing on the China side of hundreds of new eligible U.S. plants, so China has managed, even during this great health crisis, to follow through with its Phase One deal obligations. And again, obviously at a very important time for our exporters. We believe the change in rules will get more segments of our cattle and beef industry interested in producing for the China market, which last year with imports of over 1.6 million tons of beef from all suppliers was by far the largest beef importing country globally.

Joe Schuele: These changes also come at a time when U.S. red meat could be eligible for tariff relief in China.

Joel Haggard: The U.S. has faced a flurry of challenges for its beef exports to China since the 2017 late spring market reopening. Import conditions were strict, U.S. products faced high duties, 47% at one point compared to mid-single digits for our main competitor Australia. Another tailwind which should compel interest in China is that importers in mid-February were afforded an opportunity by China’s tariff commission to apply for duty exclusions, and we heard of shipments being cleared at the old 12% MFN duty rate just a day after those applications were allowed to be submitted – a very positive new there.

Joe Schuele: For more information, please visit USMEF.org. For the U.S. Meat Export Federation, I’m Joe Schuele.

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The U.S. Meat Export Federation (www.USMEF.org) is the trade association responsible for developing international markets for the U.S. red meat industry. It is funded by USDA; the beef, pork, lamb, corn and soybean checkoff programs, as well as its members representing nine industry sectors: beef/veal producing & feeding, pork producing & feeding, lamb producing & feeding, packing & processing, purveying & trading, oilseeds producing, feedgrains producing, farm organizations and supply & service organizations. USMEF complies with all equal opportunity, non-discrimination and affirmative action measures applicable to it by contract, government rule or regulation or as otherwise provided by law. USMEF is an equal opportunity employer and provider.