On Dec. 28, 2010, the Chinese Ministry of Commerce (MOFCOM) began an anti-dumping investigation into the import of distiller’s dried grains with or without solubes (DDG(S)) originating from the United States.
Production of the feed co-product, which is derived from corn during the ethanol making process, has increased steadily in the United States over the past three years. Meanwhile, China’s need for high-energy feed ingredients has increased sharply, so livestock producers boosted their U.S. DDGS purchases. As a result, shipments to China shot up from almost nothing in 2008 to more than 2 million metric tons in 2010.
Four Chinese DDGS manufacturers, who represent half of the domestic industry, claim they have lost significant sales due to the surge in U.S. origin DDGS sold at lower than market prices, and initiated an anti-dumping investigation.
In response to the investigation, the U.S. Grains Council, the organization responsible for developing export markets for U.S. barley, corn, grain sorghum and products and their co-products, has coordinated an industrywide registration process for interested parties. The deadline for registering was Jan. 17, and 68 companies registered with the council. MOFCOM has begun conducting a dumping investigation of a sample of these companies while simultaneously carrying out an industrywide injury investigation. They will issue a final determination on Dec. 28, one year from its start date.
If the Chinese government concludes based on their investigation that the United States is dumping DDGS and injuring the domestic industry, it could impose punitive tariffs on imports of U.S. DDGS to China.
Provisional tariffs on DDGS could begin during this summer. China is expected to make a decision on its findings by Dec. 28, but the deadline may be extended by six months if needed.
Rebecca Bratter, USGC director of trade development, sat down with Feed & Grain to answer questions about the basis of the case, MOFCOM’s methodology, and the potential outcome and impact on U.S. DDGS producers.
F&G: What is the basis of the dumping claim being made by the domestic Chinese DDGS industry?
Bratter: China hadn’t made any significant purchases of corn since 1995, and in the last year it bought 1.4 million metric tons of corn and nearly 3 million metric tons of DDGS.
That is a pretty significant ramp up in a very short time period. The case is based on a claim by the domestic industry that the United States is dumping DDGS in China causing economic harm.
F&G: The USGC responded by helping U.S. companies register as interested parties. What does being an interested party mean, and why was it advantageous for U.S. DDGS producers to do so?
Bratter: Companies that registered as an interested party are seen as cooperative entities by MOFCOM and are entitled to receive more favorable tariffs when applied.
Sixty-eight DDGS exporters registered through the USGC, and about 10 other companies registered on their own.
When the Chinese start to assess duties, whether they’re preliminary — meaning during the course of the investigation — or in the final determination, there are different levels of duties assessed. One level goes to interested parties, which on a preliminary basis will be more favorable than if you were a non-interested party. Companies not registered as an interested party will be in a category called “all others,” which is subject to higher tariff rates.
F&G: How will the Chinese government investigate the interested parties in the United States?
Bratter: The case will proceed on two tracks, a dumping investigation covering the period from July 1, 2009, to June 30, 2010, and an investigation of injury to the local industry during the period from Jan. 1, 2007, to June 30, 2010. The entire industry is investigated for injury, but only a sampling of firms is investigated for dumping.