Taiwan distributors, traders see no tariff benefits from China deal

18 January 2011 09:01  [Source: ICIS news]

By Amanda Zhang

SHANGHAI (ICIS)--Taiwan’s distributors and traders have not benefited from the Economic Cooperation Framework Agreement (ECFA), which took effect on 1 January, a source from a major producer in Taiwan said on Tuesday.

The ECFA is a landmark accord that seeks to reduce tariffs and commercial barriers between Taiwan and China.

However, Taiwan’s traders and distributors were not entitled to the lower tariffs because they could not produce a certificate of origin for their exports, the source said.

It is difficult for them to apply successfully for the certificate because the producer’s cargo price must be included in the certificate, and traders and distributors are not able to include this detail as their prices are not the same as those of the producers.

Only the governments of Taiwan and China could resolve this problem by amending the accord, the source said.

On 1 January, China lowered the tariff on n-butanol (NBA), epichlorohydrin (ECH), base oils and epoxy resin imported from Taiwan to 5%, according to ECFA. The tariff would be removed on 1 January 2012. Previously, the tariff was 5.5% on NBA and ECH, 6% on base oils, and 6.5% on epoxy resin.

The most affected product - because of the specific requirements of the accord - was base oils, as nearly 40% of the exports to China in 2010 were handled by distributors or traders in Taiwan, an industry source said.

China’s top four import sources for base oils in 2010 were Singapore, South Korea, Japan and Taiwan, according to China energy market intelligence service C1 Energy.

C1 Energy is an ICIS service owned by C1 Energy (Guangzhou), which is a joint venture between ICIS and CBI.

China imported 236,000 tonnes of base oils from Taiwan from January to November 2010. This was 12% of its total imports during that period.

Taiwan was likely to overtake Japan as China’s third-largest source of base oils, provided the trade accord did not ward off Taiwan distributors, according to C1 Energy.

The major base oil producers in Taiwan are CPC Shell Lubricants and Formosa Petrochemical Corp (FPCC).

Meanwhile, Formosa Chemicals & Fibre Corp (FCFC) was enjoying the lower tariff on a number of its chemicals, such as acrylate, ECH, epoxy resin and NBA, a company source said.

FCFC is a major chemical producer in Taiwan and exports many of its products to China.

The lower tariff on NBA would not have much of an impact on the cost as the tax differential was only 0.5%, but this would change when the tax would be cut to zero in 2012, said an NBA trader in south China.

“We benefit from [the] tax breaks as most of our imports from Taiwan are directly sold by [the] producers,” an east China-based trader of ECH and epoxy resin told ICIS in Mandarin.

Cargoes shipped directly from refineries in Taiwan are given the tax reliefs because they can produce the certificate of origin, the source from the major Taiwan-based producer said.

Additional reporting by Shirley Xu

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By: Amanda Zhang
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