Agriculture Industry Update - May 11, 2018

Dear USCBC members following agriculture and food safety:
 
It has certainly been an eventful month in the US-China trade relationship, especially for the agricultural sector. As one of the US’ largest categories of exports to China and one of the few areas where the US maintains a trade surplus with China, US agriculture has always been particularly vulnerable to bilateral trade tensions. Just in the past month, we have seen China propose retaliatory tariffs that would hit major agricultural exports like soybeans, impose large anti-dumping tariffs on US sorghum, increase inspections of US fruit and pork, and purchase lower quantities of US soybeans than usual.
 
Please see below for the recent policy and news developments covered in this update:
 
Agriculture
Trade

• China Customs Steps Up Inspections of US Fruit Imports
• Threat of Tariffs Harms US Soybean Exports
• China Lowers VAT on Agricultural Products by 1 Percent
• Chinese Initial Anti-Dumping Ruling Slaps Large Tariffs on US Sorghum
• Changes to Pre-Notification Process and Increased Inspections Hold up US Pork Imports
• President Trump Instructs US Secretary of Agriculture to Formulate a Plan to Protect US Farmers
• Proposed Chinese Tariffs Include Soybeans, Beef, Grains, and Tobacco Products
• China Publishes Lists of Feed and Feed Additives Approved for Export from the US

Domestic Agricultural Policy

• China Begins 2018 Sales of Stockpiled State Corn
• China Issues 2018 Agricultural Support Policies
• Director of Grain Reserves Bureau Discusses New Agency’s Priorities

Biotechnology

• China Cracks Down on Illegal GMO Seeds
• Chinese Scientist Sentenced to 10 Years in US Prison for Theft of Engineered Rice
• Plant Variety Rights Singled Out in Policy on the Transfer of Intellectual Property Rights to Foreign Parties

Standards

• Seven Departments Jointly Issue Guidance to Standardize the E-Commerce of Agricultural Products
• China Notifies WTO of Draft Standard on Preventing Aflatoxin in Food

 
Food Safety

• SAMR Clarifies that Food Safety Work Will Follow Original Procedures During Institutional Reform Period
• Changes to Chinese Regulations on Pet Food
• China Clarifies Labeling Requirements for Functional Claims of Health Food
• New Agricultural Product Quality and Safety Performance Review Standards Implemented for City Mayors
• National Health Commission Solicits Comments on Food Safety Standards Development
• MARA Investigates Cases of Water-Injected Beef in Dongguan
• MARA Releases 2018 First Quarter Agricultural Product Quality and Safety Inspection Results

 
Below please find English summaries and related links for the listed developments. If you have any questions on these or other developments, please do not hesitate to be in touch.
 
For members in the Washington, DC area, I also wanted to highlight an upcoming event: on Monday, May 21, the Walmart Food Safety Collaboration Center and the US-China Agriculture and Food Partnership will hold the US-China Agricultural Trade Forum at Georgetown University. Please click here for details, and RSVP to [email protected] if you are interested in attending.
 
If you find this update useful, please forward it to your colleagues and encourage them to subscribe! If there are any major developments that we missed or issues you follow that we did not include, please let us know so that we can continue to improve our industry updates.
 
Best,

_________________
 
Agriculture
 
Trade
 
China Customs Steps Up Inspections of US Fruit Imports
On May 7, the General Administration of Customs (GAC) issued a notice to intensify inspections of American apple and wood imports. If disease symptoms or living pests are found, GAC will take samples and the cargo will be held by customs during the testing period. Previously, customs officers had let cargoes through while they checked samples. If the cargo is confirmed to have pests or disease, it will be returned or destroyed. Several Chinese industry sources also told Reuters that US citrus fruits and apples were being detained by Chinese customs authorities, and several batches of US apples had failed quarantine inspections and were sent back to the US.
GAC: 动植物检疫监管司关于加强对进口美国苹果和原木检验检疫的警示通报
Reuters: China Customs Expands Checks on US Fruit Imports: Sources
Reuters: China Steps Up Quarantine Checks on US Apple, Log Imports
 
Threat of Tariffs Harms US Soybean Exports
Trade data from the past few weeks shows that China has been cancelling US soybean imports, despite tariffs not yet being in place. China has threatened to place a 25 percent tariff on soybean imports if negotiations with the United States to prevent US tariffs related to the 301 trade case are not successful. In the meantime, importers in China are concerned about the possibility US soybeans will face a large tariff by the time they arrive at port in China, and therefore are reluctant to purchase US-sourced product. While Chinese purchasers tend to import mostly from Brazil and Argentina in May because of lower prices during their harvest, orders of US soybeans for the rest of the month have declined sharply.
FT: Tariffs threat “already hurting US soybean sales”
Bloomberg: China Shunning US Soybeans on Trade Tensions, Bunge CEO Says
WSJ: US Farmers Are Already Suffering From Lost Chinese Orders for Corn, Soybeans, and Pork
 
China Lowers VAT on Agricultural Products by 1 Percent
The Ministry of Finance (MOF) announced that effective May 1, the value-added tax (VAT) on sales and imports of agricultural products originally taxed at an 11 percent rate (which include grains) would be reduced to 10 percent. The VAT applied to products taxed at a rate of 17 percent (including food products) would be reduced to 16 percent. In 2017, China had already reduced the VAT on certain agricultural products from 13 to 11 percent.
USDA: China Lowers VAT on Agricultural Products, Again
MOF: 关于调整增值税税率的通知
 
Chinese Initial Anti-Dumping Ruling Slaps Large Tariffs on US Sorghum
On April 17, MOFCOM made an initial ruling in its anti-dumping investigation against imports of grain sorghum from the United States that was launched back in February. In its initial ruling, MOFCOM claims that US dumping caused damage to the Chinese sorghum industry. A countervailing duties investigation into US sorghum is still ongoing.
 
Starting April 18, the government will require all importers to provide deposits to Chinese Customs at 178.6 percent of the value of the sorghum they import, and MOFCOM will continue its investigation and come to a final ruling. According to China’s Anti-Dumping and Countervailing Regulations, this kind of deposit is a temporary measure that China can implement after an initial anti-dumping ruling for up to nine months. If the final duties are higher than the temporary deposit, the difference will not be collected, and if they are lower, the difference will be returned to the importer. If anti-dumping duties are not implemented, the deposit will also be returned to the importer.
 
Sorghum can be a corn substitute in animal feed. Exports of US sorghum to China skyrocketed after corn was blocked from the Chinese market in 2013 due to shipments being rejected for traces of unapproved GMOs. China also placed steep tariffs on US distiller's dried grains with solubles (DDGS), which is also used in animal feed, in 2016.
 
In a MOFCOM press conference, Wang Hejun, head of the Trade Remedy and Investigation Bureau under MOFCOM, said that the duty rate on US companies was relatively high and uniform because US companies failed to submit complete questionnaires as required.
MOFCOM: 商务部公布对原产于美国的进口高粱反倾销调查初步裁定
LA Times: Sorghum, Targeted by Tariffs, is a US Crop China Started Buying Only Five Years Ago
Reuters: US Sorghum Armada U-Turns at Sea After China Tariffs
Reuters: China's Sorghum Importers Plead for Help on Tariff as Trade Tumult Deepens
Reuters: US Ethanol Makers Snap Up Cheap Sorghum After China Tariffs
 
Changes to Pre-Notification Process and Increased Inspections Hold up US Pork Imports
Recent changes to Chinese customs procedures and increased inspections have held up imports of US pork. On April 16, China stopped using the electronic Trade Document Exchange System (eTDE) to accept pre-notification information for US pork shipments and erased all previously sent information. China requires that all meat shipments be pre-notified before clearing customs. When the product arrives in port, the pre-notification information is then compared to the original export certificate. Without the information from eTDE, Chinese customs was unable to clear US pork shipments until a new process was implemented to verify pre-notification information, holding up US pork imports. In order to clear shipments stuck at port or already on the water, the Chinese authorities required the US Food Safety and Inspection Service (FSIS) to re-verify the shipments and send the information over in a spreadsheet. For all shipments certified by FSIS after April 19, a new process similar to that of US beef imports is being used. Pork shipments are already being cleared under the new process, although at a slow pace.
 
Reuters reported on May 8 that industry sources say China has also stepped up inspections of US-origin pork. It is now taking US pork up to two weeks to clear customs instead of a few days. The shipments are not in danger of perishing, however, since they are mostly frozen. One Shanghai-based meat trading firm said that customs authorities increased the amount of samples that they took from US pork, but not from imports from other locations.
USDA: China Changes Pre-Notification Process for US Pork Imports
Reuters: Exclusive: China Ramps Up Checks on US Pork Imports in Potentially Costly Slowdown
 
President Trump Instructs US Secretary of Agriculture to Formulate a Plan to Protect US Farmers
As President Trump announced that he had instructed the United States Trade Representative to look into an additional $100 billion in tariffs on Chinese products, the administration also ordered its Secretary of Agriculture Sonny Perdue to implement a plan to protect US famers and agricultural interest. On April 5, the day after China released a list of proposed tariffs on $50 dollars of US products, a US Department of Agriculture (USDA) Farm Production and Conservation Under Secretary Bill Northey told Reuters that there were discussions on a plan, but no specific proposals yet. He said that USDA needs to “see the reaction of what tariffs will be and what the reaction of markets are.”
White House: Statement from President Donald J. Trump on Additional Proposed Section 301 Remedies
White House: What You Need to Know About President Donald J. Trump’s Actions Responding to China’s Unfair Trade Practices
Reuters: USDA Looking for Ways to Protect Farmers in China Trade Dispute: USDA Official
 
Proposed Chinese Tariffs Include Soybeans, Beef, Grains, and Tobacco Products
On April 4, China announced plans for 25 percent tariffs on $50 billion of US exports to match proposed US tariffs in relation to its Section 301 investigation into China’s intellectual property and technology transfer practices. China’s list included significant US agricultural exports such as soybeans, beef, certain grains, and tobacco products. The US exported $12.36 billion in soybeans to China in 2017. While beef only regained market access in June of 2017, the US exported 3,000 metric tons of the product to China valued at $31 million over the remainder of the year. The tariff list also included grains like corn, wheat, and sorghum, as well as other agricultural products like tobacco, orange juice, cranberries, and whiskey.
USDA: China Responds to US Section 301 Trade Action Announcement
USCBC: China Responds Quickly to Proposed US Tariffs
USCBC: Shots Fired in US-China Trade Dispute, But Significant Battle Unlikely Until Early Summer; USCBC Member Feedback Requested on Proposed US Tariffs
MOFCOM: 中国商务部公布对美国加征关税商品清单
 
China Publishes Lists of Feed and Feed Additives Approved for Export from the US
On March 1, the General Administration for Quality, Supervision, and Inspection (AQSIQ) released two lists that updated US feed and feed additives approved for export to China. For feed or feed additives to be exported to China, a manufacturer must 1) obtain an import registration license from the Ministry of Agriculture (MOA); 2) apply for market access with AQSIQ; and 3) register their facility with AQSIQ. However, products considered to be “traditionally traded” can continue to be exported to China while undergoing the second two steps. The registration process with MOA typically takes several months, while applying for market access and registering a facility with AQSIQ can take two or more years. One of the recently released lists lays out which products are considered “traditionally traded” products for the first time. Products not on this list are unable to be exported to China.
USDA: AQSIQ Releases Two Lists of US Feed and Feed Additives Approved for Export to China
AQSIQ: 允许进口饲料添加剂及添加剂预混料国家（地区）及产品名单(更新至2018年3月1日)
AQSIQ: 允许进口饲料原料、宠物食品及配合饲料国家（地区）产品名单(更新至2018年3月1日)
 
Domestic Agricultural Policy
 
China Begins 2018 Sales of Stockpiled State Corn
China began its first sales of state stockpiled corn reserves in 2018 on April 12 and 13. This will offer livestock farmers respite from rising feed costs as US-China trade tensions escalate. The floor price of the corn being auctioned is significantly lower than current physical prices. Most of the corn is from the 2014 crop and is likely to be low in quality, making it suitable for industrial applications like ethanol production. China amassed large corn stockpiles during a state stockpiling program, and it is now attempting to reduce its corn reserves. China sold around 50 million tons of corn from these reserves in 2017, and is estimated to still have 179 million tons in warehouses. The sale of corn reserves will likely hurt demand for imported corn, for which Ukraine is China’s top supplier.
Reuters: China to kick off state corn sales as feed costs surge on trade war
 
China Issues 2018 Agricultural Support Policies
On April 3, the Ministry of Agriculture and Rural Affairs and Ministry of Finance issued support policies for agriculture this year, stating that the central government will increase the budget to support agriculture. There are 37 policies including direct subsidies to farmers, efforts to restructure agriculture, promotion of environmentally friendly and high efficiency technologies, pollution prevention, disaster prevention, and incentive policies. In China’s main agricultural provinces of Liaoning, Jilin, Heilongjiang, and Inner Mongolia, the government will provide higher subsidies to soybean growers than corn farmers.
Xinhua: 农业农村部和财政部共同发布今年财政重点强农惠农政策
 
Director of Grain Reserves Bureau Discusses New Agency’s Priorities
The director of the State Administration of Grain and Reserves discussed how the new agency would prioritize the quality of grain reserves in an April 3 interview with the People’s Daily. This bureau replaced the State Administration of Grain (SAG) in the government restructuring announced by the State Council in March. Zhang Wufeng, who led SAG, continues to be in charge of the new agency. Zhang will lead efforts to dispose of excessive stockpiles of corn and rice, and will set minimum prices for wheat and rice. The grain reserve will conduct a “quality grain project” aimed at improving the quality of China’s grains and edible oils. Under this project, China will aim to improve post-production services, establish a national system of third-party grain testers, and update quality guidelines. The bureau is also developing a national electronic grain exchange to broker inter-provincial grain trade.
Dim Sums: Food Security AND Quality Promised by China Grain Reserve
People’s Daily: 张务锋：粮食安全什么时候都不能轻言过关
 
Biotechnology
 
China Cracks Down on Illegal GMO Seeds
Chinese authorities in major agricultural provinces have recently made statements promising to crack down on illegally planted genetically modified crops as the spring planting season begins. In March, authorities in Heilongjiang, one of China’s largest grain-producing provinces, warned farmers not to purchase GMO seeds and promised to conduct tests on crops. Authorities in Shandong, another major agricultural province, announced a campaign to crack down on organizations illegally researching and producing GMO crops on April 9. Inner Mongolian officials also promised to crack down on the illegal sale of GMO seeds on April 9.  Many analysts believe that significant amounts of GMO crops are being grown illegally in China’s northeast, despite the fact that the commercialization of most GMO crops is prohibited in China.
Dim Sums: Spring GMO Seed Crackdown in China
 
Chinese Scientist Sentenced to 10 Years in US Prison for Theft of Engineered Rice
Chinese scientist Zhang Weiqiang was sentenced to 121 months in a federal prison on April 4 for conspiring to steal bioengineered rice seeds from a Kansas research facility. Zhang acquired the seeds from Ventria Bioscience, where he worked as a rice breeder, and stored them at his apartment. In 2013, he was visited by personnel from a Chinese crop research institute, and US Customs and Border Protection found rice seeds belonging to Ventria in the luggage of Zhang’s visitors as they were leaving. Ventria had spent millions of dollars developing the seeds, which produced rice genetically programmed to express proteins that could be extracted for use in biopharmaceutical applications. Zhang was convicted in February 2017.
SCMP: Chinese Scientist Gets 10 Years in US Prison for Stealing Engineered Rice from Research Facility
US Department of Justice: Chinese Scientist Sentenced to Prison in Theft of Engineered Rice
 
Plant Variety Rights Singled Out in Policy on the Transfer of Intellectual Property Rights to Foreign Parties
On March 29, the State Council issued trial measures for the transfer of intellectual property rights (IPR) to foreign parties. The measures increase scrutiny of the transfer of Chinese IPR to a foreign company, individual, or other organization. They require a security assessment if the IPR transfer involves patents, exclusive rights to integrated circuit designs, computer software copyrights, or new plant varieties. National security and China’s core technology innovation capacity in important areas will be factors considered in the assessment. For the transfer of plant variety rights, the agriculture or forestry authorities will assess the impact of the transaction on agricultural security, especially grain and seed security.
State Council: 国务院办公厅关于印发《知识产权对外转让有关工作办法（试行）》的通知
WilmerHale: China Tightens Scrutiny Over the Transfer of Intellectual Property Rights to Foreign Parties
 
Standards
 
Seven Departments Jointly Issue Guidance to Standardize the E-Commerce of Agricultural Products
Seven departments, including the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), Ministry of Industry and Information Technology (MIIT), Ministry of Agriculture (MOA), Ministry of Commerce (MOFCOM), State Forestry Administration, State Post Bureau, and China Federation of Supply and Marketing Cooperatives issued the Guidance on Establishing Standards for the E-Commerce of Agricultural Products. The guidance sets goals and establishes a framework to standardize agricultural product e-commerce. The standards will focus on quality ranking, processing, packing, and delivery and will be established at the state, industry, regional, community, and enterprise level.
SAC: 七部委联合出台《关于开展农产品电商标准体系建设工作的指导意见》
 
China Notifies WTO of Draft Standard on Preventing Aflatoxin in Food
On March 16, China notified the World Trade Organization (WTO) on its draft standard, Code of Practice for the Prevention and Reduction of Aflatoxin Contamination in Food. The standard applies to peanuts, corn, cottonseeds, tree nuts, and dairy cow feed. Aflatoxins are poisonous carcinogens produced by certain molds that can grow on improperly stored agricultural products. Animals that eat feed contaminated by the toxin can pass it on to products such as eggs, milk, and meat. The deadline for comments on the draft standard is May 15. Comments can be sent to [email protected].
USDA: China Notifies Standard for the Prevention and Reduction of Aflatoxin in Food
WTO: SPS/N/CHN/1068
 
Food Safety
 
SAMR Clarifies that Food Safety Work Will Follow Original Procedures During Institutional Reform Period
According to the State Council’s March government reorganization plan, the State Administration for Industry and Commerce (SAIC), the China Food and Drug Administration (CFDA), as well as many functions of the General Administration for Quality, Supervision, and Inspection (AQSIQ) were merged to form the new State Administration for Market Regulation (SAMR). All of the restructured agencies will be required to formulate plans on “three determinations” (determining responsibilities, internal departmental organization, and staffing structure). On April 10, SAMR issued a notice stating that before the agency’s “three determinations” plan is released, which is expected to happen before the end of September, procedures originally under the jurisdiction of the CFDA will be handled according to original regulations. These include the approvals, supervision and examination, testing, enforcement, complaint reporting, and information disclosure for food, drugs, medical devices, cosmetics, health food, infant formula, and foods for special medical purposes.
SAMR: 国家市场监督管理总局 国家药品监督管理局 关于做好机构改革期间食品药品监管工作的公告
CIRS: The Supervision for Health Food, Infant Formula Milk Powder, and FSMP Remain Unchanged during SAMR Institutional Reform Period
 
Changes to Chinese Regulations on Pet Food
The Ministry of Agriculture and Rural Affairs (MARA) recently issued new regulations for the pet food sector, setting requirements for the production, import, and labeling of pet feed and additives. On April 27, MARA published Notice No. 20, which issues a series of normative documents regulating the pet food sector according to the Feed and Feed Additive Management Regulations. The notice stipulates a transition period for enterprises to operate by these normative documents.  On April 27, the Ministry of Agriculture and Rural Affairs (MARA) issued Notice No. 21, which adds 78 feed additives including Vitamin K1 to the Feed Additive Varieties Catalogue (2013) and to expands the application scope of some additives to facilitate the development of the pet food sector. The document also makes restrictions regarding the use of the additive sodium nitrite. Related government agencies are required to implement this notice immediately.  
Chongyejia.com: 最新 | 宠物食品规范性文件及宠物食品和食品添加剂管理条例出台
MARA: 中华人民共和国农业农村部公告 第20号
MARA: 中华人民共和国农业农村部公告 第21号
 
China Clarifies Labeling Requirements for Functional Claims of Health Food 
Regulators recently further clarified labeling requirements for dietary supplements, which are regulated as “health food” in China. After the release of the Notice on Regulating the Function Claim Marks of Health Food on February 13, the newly established State Administration for Market Supervision (SAMR) further clarified regulations on the functional claim labeling of health food on April 17. The document explained the correct ways to show whether a product’s functional claims were supported by animal testing or human trials, as well as time requirements for compliance under different situations.  
SAMR: 《关于规范保健食品功能声称标识的公告》（2018年第23号）有关问题的解读
 
New Agricultural Product Quality and Safety Performance Review Standards Implemented for City Mayors
Ministry of Agriculture and Rural Affairs announced that it would add agricultural product quality and safety into the performance evaluation of 36 city mayors in 2018. The “vegetable basket” criteria that mayors will be evaluated on includes production capability, market logistics, the ability to supervise quality and safety, regulation and control capabilities, and residents’ satisfaction levels. If emergency incidents related to product quality and safety occur during the evaluation period, the mayor will fail the evaluation and be reported to State Council and the CCP Organization Department.
Phoenix News: 农业农村部联合十部委首开“菜篮子”市长负责制考核
NDRC: 国务院办公厅关于印发“菜篮子”市长负责制考核办法的通知
 
National Health Commission Solicits Comments on Food Safety Standards Development
On April 4, National Health Commission (NHC) issued a notice soliciting public comments on projects that will revise and optimize food safety standards. NHC is looking for projects that will revise the standards in key areas such as inspection methods of food pollutants and nutrition indices, and the inspection methods for maximum residue limits of pesticides and veterinary medicine in food. The NHC is considering the establishment of a working group that includes the government, enterprises, and third party testing institutions in order to work with a wide range of stakeholders. Comments are due May 28 and can be submitted via the website of the China National Center for Food Safety Risk Assessment.
 
China has engaged in ongoing efforts to establish a system of food safety standards. On April 19, a an NHC official announced that China had set 1,224 standards regarding food safety, covering 20,000 food safety indices and roughly all food products consumed on a regular basis. To optimize the food safety standards system, NHC has established a risk monitoring and evaluation system that consists of building food contamination monitoring sites and designating certain hospitals nationwide to collect data on foodborne illnesses.
National Health Commission: 关于公开征集2018年度食品安全国家标准立项建议的通知
Xinhua: 国家卫生健康委员会：我国已制定食品安全国家标准1224项 基本覆盖日常消费食品品种
Xinhua: 国家卫生健康委员会就食品安全标准立项广征建议
 
MARA Investigates Cases of Water-Injected Beef in Dongguan
On May 3, the Ministry of Agriculture and Rural Affairs (MARA) issued a notice on the investigation of the case where three slaughterhouses in Dongguan produced and sold water-injected beef. This incident was exposed by the media on April 10. Local police arrested 32 individuals and detained 15 individuals involved in this incident, and slaughterhouses that failed to meet required operating conditions were shut down. MARA promised to take measures to strengthen the supervision of slaughtering factories, such as the strict enforcement of responsibilities, the implementation of specialized supervision campaigns, and the strengthening of public information monitoring.
The Jiemian: 东莞多家屠宰场制作贩卖注水牛肉 农业农村部：15人被刑拘
MARA: 农业农村部办公厅关于广东东莞部分屠宰场注水牛肉问题查处情况的通报
 
MARA Releases 2018 First Quarter Agricultural Product Quality and Safety Inspection Results
On April 23, director of Agricultural Products Quality and Safety Supervision and Management Bureau of Ministry of Agriculture and Rural Affairs (MARA) Guang Defu said at a press conference that 97.3 percent of the seventy-eight varieties of agricultural products tested passed evaluations. Products with the highest passing rates included cabbage, mushrooms, and melons. According to MARA, the scope of this year’s investigation has further broadened compared to previous years. Guang said that the results indicate the overall stability and improved safety and quality of agricultural products. He also mentioned that a significant number of pollution-free, green, and organic agricultural products were verified during the first quarter.
MARA: 农业农村部发布2018年第一季度国家农产品质量安全例行监测（风险监测）信息
China News Service: 农业农村部：蔬菜水果等四大类产品抽检合格率97.3%