December Report from Yuan and Associates

  • December report from Yuan and Associates including 2019 YTD.
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  • In December, Madam Gao Fang was promoted to President of China Cotton Association. 
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  • We have recently been in contact with by the Cotton Quality Supervision Division of State Administration of Market Regulation (SAMR) of China.  The Cotton Division is a newly established division after China’s government reshuffle in 2018. Their focus is on domestic cotton quality supervision, while the Department of Commodity Inspection of GACC remains in charge of the import inspection of cotton. Although they are not directly involved in imported cotton quality control, China’s future policy is to adapt same quality requirements and standards for both domestic and imported cotton, therefore, they are keen to learn the advanced experiences from the US cotton industry. One direct link with the imported cotton is that the division is responsible for the measures and guiding the government-run testing for the cotton to be put into the national reserves.

According to Yuan and Associates, we believe they are “nice-to-have” government allies for the US cotton in the long run. Sharing our experiences and expertise in cotton quality control framework and policies will enable the US cotton industry to have more influence if/when the division reviews and updates domestic requirements.

They will be sending a 2-4-person delegation led by their Director General to the 2020 ACSA Convention.  As we get closer, we will build specific time and agenda for the ACSA Board of Directors to engage with them.

Pakistan Import Permit Fumigation Requirements

Additional Guidance from USDA on Pakistan Import Requirements:

I just left a meeting with the director of USDA/APHIS/PPQ and received some additional guidance.  While there is lots of uncertainty regarding this issue the following is the current position of the USDA: 

  • USDA has received no formal notice of a rule change from Pakistan.
  • USDA has sent correspondence with ACSA concerns and data to the Pakistani Government, the US Embassy in Islamabad, and USDA Delhi, India (PAK Jurisdiction).
    • No formal reply has been received from Pakistani Regulatory Officials.
  • USDA will continue issuing Phytosanitary Certificates with the boll weevil free declaration only and not require IP reference. 
  • USDA feels strongly that Pakistan or other trade partners are bound by WTO rules to give official notice for requirement changes, which again, have not been received.
  • USDA has a scheduled Import Requirement Evaluation Meeting scheduled with Pakistan in February. 

The takeaway here is that they want us to continue “business as usual.”  This issue will be discussed in the February meeting where USDA will defend the science supporting the absence of fumigation requirements for US Cotton if the issue is still active.

Please let me know if you incur problems with these shipments so that I can keep USDA informed.  They have pledged to intervene in the event of an issue.  We will provide anything further upon receipt.  

Press Release: USTR on phase one of the China Trade Deal

OFFICE OF THE U.S. TRADE REPRESENTATIVE

FOR IMMEDIATE RELEASE

Friday, December 13, 2019

United States and China Reach Phase One Trade Agreement

The United States and China have reached an historic and enforceable agreement on a Phase One trade deal that requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange.  The Phase One agreement also includes a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years.  Importantly, the agreement establishes a strong dispute resolution system that ensures prompt and effective implementation and enforcement.  The United States has agreed to modify its Section 301 tariff actions in a significant way.

“President Trump has focused on concluding a Phase One agreement that achieves meaningful, fully-enforceable structural changes and begins rebalancing the U.S.-China trade relationship.  This unprecedented agreement accomplishes those very significant goals and would not have been possible without the President’s strong leadership,” said United States Trade Representative Robert Lighthizer.

“Today’s announcement of a Phase One agreement with China is another significant step forward in advancing President Trump’s economic agenda.  Thanks to the President’s leadership, this landmark agreement marks critical progress toward a more balanced trade relationship and a more level playing field for American workers and companies,” said Secretary of the Treasury Steven Mnuchin.

The United States first imposed tariffs on imports from China based on the findings of the Section 301 investigation on China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.  The United States will be maintaining 25 percent tariffs on approximately $250 billion of Chinese imports, along with 7.5 percent tariffs on approximately $120 billion of Chinese imports.

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CFTC Reauthorization

Today, the House Ag Committee held a business meeting to markup H.R. 4895, to reauthorize the Commodity Futures Trading Commission (CFTC or Commission).  The Committee reported the bill favorably to the House by a voice vote after adopting a manager’s amendment that makes few changes to the underlying bill.  At this point, it appears that the bill may be considered on the House floor in the near future.  The Senate is in the process of drafting its own version of the legislation. 

Some noteworthy sections in the bill include:

  • Grants the Commission the authority to adopt rules, after notice and comment, to safeguard proprietary information it obtains or receives and subsequently may share. (Section 114)
  • For contracts listed on DCMs or SEFs that reference a digital commodity available on a cash market, the bill directs the Commission to adopt rules detailing the content and availability of trade and trader data and other information a DCM/SEF must be able to access from referenced cash markets and data sources. (Section 109)
  • Makes amendments to the administration of SEFs. (Section 111)
  • Directs the Commission to establish and maintain research, development, demonstration, and information programs that: (a) facilitate the Commission’s understanding of emerging technologies, (b) provide an environment where emerging technologies may be explored; and (c) identify areas where the Commission should adapt technological advancements. (Section 118)
  • Establishes an Office of the Chief Economist to serve as an economic advisor to the Commission and perform functions such as economic analysis, regulatory cost-benefit analysis, and research. (Section 106)
  • Exempts qualified charitable organizations from regulation as commodity pool operators. (Section 108)
  • Expands the Commission’s fraud and manipulation authority to activities outside the U.S. that have or would have a reasonably foreseeable substantial effect within the U.S. (Section 112)

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.

China Includes Cotton on List to be Potentially Hit with High Tariffs

2018 April 4 –  Attached announcement regarding MOFCOM proposed list to levy retaliatory tariffs on Chinese imports  from the U.S. of agricultural and food products, including COTTON. 

 

 

2018-0404 China Responds to U S Section 301 Trade Action Announcement_4-4-2018

 

 

New Texas Law Requires Changes to Purchase Contracts

2017 JUL 11 – A NEW TEXAS LAW WILL APPLY TO ALL TEXAS COTTON PURCHASE CONTRACTS WITH PRODUCERS SIGNED ON OR AFTER  SEPT 1, 2017

A copy of HB 338 is attached. We are told this version was adopted by the legislature and signed by the Governor. Despite requests via the Senator from Lubbock and a search on line, the final signed copy is not yet available. However,  we are told this bill was not amended in the Senate or on the floor and that it is the final version of the law. When a signed copy is available we will verify that information.   Please consult your counsel concerning changes to your purchase contracts that will be needed.

Here are the highlights of HB338, and some comments:

HB 338 says that a contract to buy an agricultural product from a producer “must clearly and conspicuously state on its face” whether it is an acreage contract or a quantity contract.

Comment 1:

Comment 2:

  • HB338 does not say what the penalty will be if the contract does not comply, but one can be sure that a producer wishing to sell at a different price than the contract price will assert that a contract which does not comply is unenforceable.

Comment 3:

  •  If your acreage contract contains, as some do, a fixation provision that provides that that when a producer fixes the price he guarantees delivery of the number of bales fixed, we suggest that that such a contract requires special attention in drafting to make the change from an acreage contract to a quantity contract comply with the requirements of HB338.
  • HB338 says that a purchaser may not sue a producer for breach of an acreage contract “unless the producer knowingly fails to deliver all of an agricultural product grown on specified land as provided in the contract.”

Comment 4:

  • We believe the requirement of proof of “knowing” failure to deliver is an invitation to unscrupulous producers to shift the origin of cotton to their advantage, and then, if caught, assert that there was merely a clerical or other mistake. We suggest you and your attorney consider including tightened crop  progress reporting requirements.

 

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