By Megan J. Penick and Jeffrey A. Rinde
China Initiates 178.6% Tariff on U.S. Sorghum Imports
In its latest salvo in the U.S.-China trade dispute, China has imposed a 178.6% tariff on sorghum imports from the U.S., claiming the U.S. is unfairly dumping sorghum on the Chinese market.[1] The U.S. is the world’s largest producer of sorghum, a cereal crop used for cattle feed, among other things. [2] The U.S. was expected to export some 168,000 metric tons of grain sorghum during the 2017/2018 marketing year, some 90% of which was destined for Chinese markets.[3] The U.S. began exporting sorghum to China in large amounts beginning in 2013 when Chinese farmers found that it was a cheap alternative to their higher cost corn feed.[4] Sorghum is also used as a sweetener in many products, including China’s traditional alcohol, baijiu.[5] Since 2013, the U.S. sorghum industry has been exporting between $1-2 billion worth of sorghum to China annually.[6] Thus, China’s imposition of this large tariff on sorghum imports is likely to have a deleterious effect on U.S. sorghum growers and sorghum producing states such as Kansas and Texas. Since imposing the 178.6% tariff, Chinese importers have begun looking for sorghum imports from other countries, such as Australia, and U.S. sorghum growers have seen their crop prices drop by 20-25%.[7]
China Brings its Dispute with the U.S. to the World Trade Organization
On April 4, 2018, China initiated a dispute through the World Trade Organization against the U.S. claiming the U.S.’s imposition of tariffs of 25% and 10%, respectively, on steel and aluminum imports was inconsistent with the WTO’s General Agreement on Tariffs and Trade (GATT) 1994, as well as the Agreement on Safeguards, which sets forth the means for safeguarding the measures outlined in GATT 1994.[8] President Trump imposed the tariffs by Presidential proclamation on March 9, 2018. The Trump Administration later temporarily suspended the tariffs for several U.S. trading partners, including Mexico, Canada, Argentina, South Korea, Brazil, Australia and the European Union. Notably absent from that list is U.S. ally Japan.[9]
China’s dispute, called a “Request for Consultation,” raised the following issues:
Since China initiated the action, India, Russia, Thailand and Hong Kong have each filed a “Request to Joint Consultations,” allowing them, essentially, to piggyback on China’s claim.
On April 17, 2018, the U.S. formally responded to China’s Request for Consultation with its own communication, stating, in essence, that China’s letter does not meet the WTO’s procedural requirements for filing a dispute as China’s letter only addresses “proposed tariff measures,” and does not address a matter that is specifically directed at China. Nonetheless, the U.S. stated in its response that it is open to negotiations and consultations with China and stated that the U.S.
“looks forward to hearing from China [concerning] how it intends to address China’s trade-distorting policies....”[11]
On April 25, 2018, China responded to the allegations made by the U.S. While China set forth that it was “confused by the logic taken by the U.S.,” it nonetheless indicated its willingness to engage in negotiations with the U.S. at a mutually agreed upon time in accordance with WTO rules.
CKR’s China Practice Team is closely monitoring developments in the trade conflict between the U.S. and China and will publish weekly updates for our readers.
Jeffrey Rinde - jrinde@ckrlaw.com
Megan Penick - mpenick@ckrlaw.com
Ning Zhang - nzhang@ckrlaw.com
DISCLAIMER: This article is not intended to provide legal advice, and no legal or business decision should be made based on its contents.
[1] See https://www.npr.org/sections/thetwo-way/2018/04/17/603103680/in-latest-trade-salvo-china-imposes-179-percent-tariff-on-u-s-sorghum.
[4] See https://www.npr.org/sections/thetwo-way/2018/04/17/603103680/in-latest-trade-salvo-china-imposes-179-percent-tariff-on-u-s-sorghum.
[5] See https://www.npr.org/sections/thetwo-way/2018/04/17/603103680/in-latest-trade-salvo-china-imposes-179-percent-tariff-on-u-s-sorghum.
[6]See https://www.wsj.com/articles/china-targets-american-farmers-with-sorghum-surcharges-1523952633.
[10] See https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds543_e.htm for a the full complaint from China.
[11] See https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds543_e.htm for the full response from the U.S. to China’s complaint.