China invites applications for tariff exemptions

Chinese buyers of US coking coal can apply for exemptions from US tariffs starting from September if they are able to justify their need for the exemptions, China's ministry of finance said yesterday.

But coking coal market participants say it is unlikely that steel and coke producers will feel motivated to apply for exemptions, mainly because US coking coal made up less than 5pc of total Chinese imports even before a 28pc tariff was imposed in retaliation to US tariffs on Chinese goods.

Applications for exemptions on goods listed in the first round of tariffs can be accepted anytime between 3 June and 5 July, and goods listed in the second round of tariffs are open for applications between 2 September and 18 October. The first round, which took effect on 6 July 2018, imposed a 25pc tariff on $34bn/yr of US imports of mainly agricultural products. Coking coal was listed in the second round, which imposed a 25pc tariff on $16bn/yr of US imports from 23 August.

The ministry also outlined some justifications that are deemed acceptable grounds for exemptions. For instance, buyers may apply for exemptions when they have faced considerable difficulty in finding alternative imports in the wider market. Exemptions may also be granted in instances where the tariffs have resulted in economic losses, or where the tariffs may have impeded a company's ability to develop, advance technologically or protect the environment.

But both buyers and sellers of US coal are doubtful that this will invite any applications for exemptions from buyers.

"The grounds for exemptions are quite difficult to prove," a Beijing-based trader said. "Besides, coking coal of a similar quality to US can be easily found either domestically, or imported from other countries such as Mongolia, Russia and Canada."

"We have not seen any company going out of business just because of the tariffs placed on US coal," the trader added.

Sellers of US coking coal have also pointed out that it might be awkward for Chinese steel producers to apply for such exemptions since many of them are state-owned enterprises. "At the end of the day, applying for exemptions is probably more troublesome than finding alternatives, which most buyers should already have done by now anyway," the seller said.