China on Thursday issued limited tariff exemptions for strategically important special grade plastic raw materials it imports from the United States.
The Ministry of Finance said the new list of import tariff exemptions covers six chemical and oil products from the United State and will last for only one year starting Dec. 26. It did not reveal value for the imports excluded from duties. It further said duties already imposed on U.S. products won't be refunded.
The tariff waivers will cover four chemical products. These products are metallocene high-density polyethylene (HDPE); a special grade of linear low-density polyethylene (LLDPE); refined oil products that include white oil, and food-grade petroleum wax. China is the world's largest importer of polyethylene. Metallocene HDPE and LLDPE are high-end special grade plastic raw materials used for packaging and pipes.
"The exemptions could see China resume buying more HDPE and LLDPE from the U.S., reversing the trade flow, as the U.S. supplies have been diverted to Latin America and Europe while China has been importing mostly from the Middle East," said Kelly Cui, principal analyst with consultancy Wood Mackenzie.
China imported some 6.86 million tonnes of HDPE and 4.46 million tonnes of LLDPE in 2018. These imports had a combined total value of $14 billion, according to Reuters.
China imported 1,108 tonnes of petroleum wax worth $3.2 million from the U.S. in the first 10 months of 2019. This amount was equivalent to 10% of China's total imports of the product, according to JLC Network Technology Co. Ltd, a leading information provider in China. While oil imports from the U.S. amounted to 3,490 metric tons worth $8.7 million during the same period. This amount comprised 6% of China's total imports.
Cui said the tariff exemptions on the chemical products will benefit companies such as The Dow Chemical Company, Exxon Mobil Corporation and Chevron Phillips Chemical. Since 2017, these multinationals have been adding shale-based ethylene production facilities and targeting China as the main export market for the production of this plastic.
China said it will continue to issue more product exemptions and release a second list of waivers at the appropriate time. Analysts, however, said any second list will depend on the signing of the phase one interim trade deal agreed to last week. Phase one was announced last week after more than two years of on-and-off trade talks.
China's Ministry of Commerce said the signing of phase one will see lower U.S. tariffs on Chinese goods and higher purchases of U.S. farm, energy and manufactured goods by China. Gao Feng, a spokesman at the the commerce ministry said there is no specific information on the deal to disclose.
"After the official signing of the deal, the content of the agreement will be made public," said Gao.
