China to allow US coking coal tariff exemptions

Buyers of US coking coal can apply for tariff exemptions starting from 2 March, the Chinese finance ministry said on 18 February.

Steel producers that want to apply for exemptions must also submit "necessary justifications, such as the effect of the imposition of the duties" on the price of the product in question. The exemption will be applicable for one year.

The exemptions will only apply to tariffs that were imposed as part of the US-China trade war. This means the original import tax of 3pc placed on US coal imports into China before the trade war would still be applicable to buyers.

China imposed retaliatory tariffs on US coal imports in August 2018. China committed to increasing US coal imports in a "phase one" trade deal with the US last month and followed up by reducing tariffs on US coking coal by 2.5pc to 30.5pc.

An exemption would eliminate 27.5pc in tariffs and put the effective tax rate at 3pc "for US coking coal buyers in China, should their tariff exemption applications be approved", a US coal seller said.

China imported 1.12mn t of US coking coal in 2019, down by 60pc from 2.82mn t in 2017, the last full year before tariffs were imposed.

The ministry of finance announcement stressed that applications will only be reviewed "one-by-one", but sellers of US coal in China told Argus that they were optimistic that applications will be approved.

Buyers remained cautious. "From what I can see, the application process seems to be quite complex," a US coal buyer in north China said. "We will need to further study how it works once it is implemented."

Others were more pessimistic. "Even if the tariff exemptions are approved and granted, customs clearance for imported coal remains a headache, and we do not see that going away any time soon," a Beijing-based trader said.

By Rou Urn Lee