Colombia modifies PE import tariffs

30 September 2008 21:29  [Source: ICIS news]

HOUSTON (ICIS news)--The Colombian government has changed import tariffs for polyethylene (PE) resins in an effort to keep its domestic industry competitive, market sources said on Tuesday.

The presidential decree lowered the import tariff for low density polyethylene (LDPE) to 10% from 15% effective on 12 September, and would eliminate the LDPE tariff altogether on 1 January.

The decree also would put a 5% import tariff on linear low density polyethylene (LLDPE) and high density polyethylene (HDPE), which presently do not have a tariff. The tariff on LLDPE and HDPE would take effect on 10 November.

The plan to eliminate the LDPE tariff has raised some eyebrows because Colombia already produces the material.

The elimination of import tariffs for resins that are produced in Colombia and higher tariffs on resins that are not produced by domestic sources would at first glance appear to be harmful to the local producers, but a trader explained that the prospect of a free-trade agreement (FTA) with the US was the source of the changes.

The possibility of tariff-free LDPE from the US prompted Colombia producer Ecopetrol to seek to remove the tariff from all LDPE imports in order to make the market more competitive, the trader said.

At the same time, Ecopetrol is working to expand its LDPE capacity, the trader said.

The government will review the tariffs for LDPE in 2012 at the end of the year 2012, when Ecopetrol expects to have enough production to cover 100% of the internal demand.

However, US President George Bush’s free trade agreement proposal has hit a roadblock in the US Congress due to human rights issues.

As a result, import tariff hikes for LDPE ahead of the 2012 deadline should not be ruled out, a local source said.

The 5% tariff for LLDPE and HDPE resins, which are not manufactured in Colombia, was applied to discourage substitution of LDPE with those other lower resins. This measure protects Ecopetrol, the source said.

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By: George Martin
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