China’s U.S. DDG AD/CVD Investigation Results Likely Timed After Obama Visit

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Results of an investigation by China into imports of U.S. distiller’s dried grains (DDGs) is expected to come soon from the Chinese Commerce Ministry, according to signals from U.S. trade and industry sources.

“The ball is in MOFCOM’s court,” U.S. Grains Council President and CEO Tom Sleight told Inside U.S. Trade, referring to China’s Ministry of Commerce (MOFCOM). US companies have filed requested paperwork with the Chinese agency which allows for the investigation to be completed, he noted.

Further, U.S. DDG exporters have had “superb” communication with both USDA and the Office of the US Trade Representative on the matter, Sleight observed, as the companies have responded to what he labeled a complex questionnaire. China’s Commerce Ministry is currently review the information provided relative to the antidumping (AD) and countervailing duty (CVD) investigations.

While an investigation on this front in 2010 did not result in a formal determination by China on the U.S. DDG shipments to the country, Sleight indicated this time China is going “all the way” on the investigation. Given that some 50 to 60 firms submitted a joint response to the Chinese ministry, something Sleight said was deemed inadequate and could mean those companies would be subject to “punitive” duty rates if AD or CVD duties are imposed.

The investigation this time, as it did in 2010, resulted in a downturn in U.S. DDG shipments to China. USDA data indicate DDG exports to China dropped 25 percent between September 2015 and June 2016. But the U.S. industry opted to expand their export efforts to other markets, resulting in a 6 percent rise in total U.S. DDG exports over that period.

The decline in U.S. DDG prices has helped make US supplies more competitive on the world market, helping to offset the impacts from a fall in the level of U.S. DDG exports to China. However, Sleight said it is not clear the rise in shipments has made up for the value downturn in the shipments to China.

Given that U.S. ethanol producers have access to corn priced cheaper than domestic Chinese supplies available to their ethanol producers, U.S. DDGs are still competitive in the Chinese market.

Comments: When President Obama visits China in September, word is that officials from both countries will be discussing an investment agreement. If one is reached, some sources say it could help lower the friction regarding the DDGs topic. If not, sources signal a Chinese announcement on the DDG matter would come after Obama’s visit. During the eight-day trip, scheduled from September 2-9, Obama will attend the G20 summit in Hangzhou, China and hold a private meeting with Xi, the White House said in a statement.

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