We would like to share the latest Market Alert prepared by MATRADE Taipei on China's Suspension of ECFA Preferential Tariff of Selected Petrochemical Products on Taiwan.
Background
On 21 December 2023, the Ministry of Finance of the People’s Republic of China (Mainland China) announced that it will suspend tariff relief on the importation of the 12 Taiwanese petrochemical products into China under the Economic Cooperation Framework Agreement (ECFA), effective 1 January 2024.
Both Taiwan and Mainland China signed the ECFA in June 2010, which functioned as a free trade agreement between Taiwan and Mainland China. Under the Agreement, both sides offered list of manufactured goods that allowed to enjoy preferential import tariff for the products ranging from agriculture, petrochemical, machinery, textile, logistics and transportation, and other industrial produce such as iron & steel, cement, color die, aluminum & copper, compressor, mini home appliance, and optical device such as cameras.
Under the ECFA, Taiwan used to enjoy preferential tariff for exportation
of products to China with less than 2% import duty for
the 12 items under petrochemical categories, and these include 1)
Propene, 2) Buta-1, 3-diene, 3) Isoprene, 4) O-xylene, 5) M-xylene, 6)
P-xylene, 7) Mixed xylene isomers, 8) Dodecylbenzene, 9), Chloroform 10) Vinyl
chloride, 11) Ethylene-propylene copolymers in primary forms, and 12) Polymers
of other olefins, in primary forms.
With the fact that Taiwan is no longer benefit from the preferential tariff on petrochemical products under the ECFA, it is estimated that the Taiwanese petrochemical companies will have to bear extra cost of USD 529 million on the petrochemical produces exportation to Mainland China since the import tariff for the mentioned 12 items are now taxable between 2%-10%, from the previous preferential rate of 1% to 2%.
Export Opportunities for Malaysian
Petrochemical Companies to Mainland China
According to the General Administration of Customs of the People’s Republic of
China trade statistics, Mainland China’s total import for these
aforementioned photochemical products was USD 13.56 billion for the period from
January to November 2023. Korea, Japan, Taiwan, Brunei, Singapore were
Mainland China’s top 5 import sources with the total import shares
of 88.86%.
Malaysia ranked its 6th supplier with total import value at USD 463 million, accounted for 3.41% of Mainland China’s total import for the products consist of p-Xylene (HS 29024300), propene (HS 29024300), polymers of other olefins, in primary forms (HS 29029000), Buta-1,3-diene (HS 29012410) and ethylene-propylene copolymers, in primary forms (HS 29023010). Malaysia has a well-developed petrochemical ecosystem, with over 100 companies producing a wide range of petrochemical products, such as olefins, polymers, and aromatics, and to expand beyond the commodity products as industry players develop more complex, specialty downstream chemicals.
Malaysian petrochemical producers should seize the opportunities of China's suspension of ECFA tariff reductions of the selected petrochemical products on Taiwan. The petroleum and petrochemicals industry are one of the leading industries in Malaysia. From being an importer of petrochemicals, Malaysia today is in the top 10 list of sourcing countries of major petrochemical products. A wide range of petrochemicals are produced in Malaysia, such as olefins, polyolefins, aromatics, ethylene oxides, glycols, oxo-alcohols, ethoxylates, acrylic acids, phthalic anhydride, acetic acid, styrene monomer, polystyrene, ethylbenzene, vinyl chloride monomer and polyvinyl chloride, proofing Malaysia have the strengths and capacity in supporting global petrochemical demand supply chain.
Click here to view the Market Alert report.
.png){kind=small}