Update from Yuan and Associates on US Ag Purchase Halt and Status of Tariff Exemptions on Cotton

>  China’s Purchases of US Ag Products: Suspended

The spokesperson of Ministry of Commerce (MOFCOM) said on August 6th, 2019 that China will suspend the tariff exemptions for US ag products purchases for deals made after August 3rd, and so Chinese enterprises have suspended the purchase. The announcement not only indicates that SOEs will follow the instruction but also sends signals to private sector to reconsider purchase decisions. China reiterated that US accusations that it hasn’t yet begun buying US agricultural products are groundless. National Development and Reform Commission (NDRC) explained and listed specific trade numbers on August 5th, and that since the Osaka meeting China had started to purchase ag products from US. Specifically, for cotton, China has purchased 25,000 tons from US recently.

>  Tariff Exemption: On hold but not rejected yet

According to our communication with China Cotton Association (CCA) today, the application remains status quo. Right now, no news is good news – as China did not stop the review of application or reject it already, which means 1) the review clearly ties with the political consideration; and 2) China leaves room for recovery of ag trade once the negotiation is back on track. 

Chinese authorities feel the US has adopted the strategy of suppressing China and use the trade war as an approach, while China hopes to “agree with disagree” by renegotiating trade terms.  China’s agreements on purchasing of ag products from the US has been used as a tool to show good political wills and keep the trade talks on the right track to avoid further escalation.

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