RCEP Agreement Is Officially Signed, Rubber Tariffs Are Expected To Be Lowered

- Nov 19, 2020-

On November 15, 2020, the "Regional Comprehensive Economic Partnership Agreement" (hereinafter referred to as "RCEP") was formally signed under the organization of the 2020 ASEAN Chairmanship Vietnam. According to official media reports, the RCEP Agreement has achieved fruitful results in the liberalization of trade in goods. Tariff reductions among members are mainly based on the immediate reduction of tariffs to zero and the commitment to zero tariffs within ten years. Disposable nitrile gloves making machine.The free trade zone is expected to achieve significant results in a relatively short period of time. Phased construction results. The Ministry of Finance conscientiously implements the decisions and deployments of the Party Central Committee and the State Council, actively participates in and promotes the RCEP agreement, and has carried out a lot of meticulous work on tariff concessions on trade in goods. In the next step, the Ministry of Finance will actively do a good job related to the tariff reduction agreement.

   1. The signing of the RCEP agreement is good for the natural rubber industry

It is understood that the "Regional Comprehensive Economic Partnership Agreement" (RCEP) negotiations were initiated by 10 ASEAN countries (Indonesia, Malaysia, Philippines, Thailand, Singapore, Brunei, Cambodia, Laos, Myanmar and Vietnam) in 2012 and in 2013 The first round of negotiations was launched in May, and six countries including China, Japan, South Korea, Australia, New Zealand and India were invited to participate. It has been 8 years so far. Among them, India has not joined the agreement temporarily because of "important issues that have not yet been resolved."

According to statistics, the output of natural rubber in the Asia-Pacific region accounts for about 91% of the global output. The main rubber-producing countries are Thailand, Indonesia, Vietnam, China, Malaysia, and India. The output of natural rubber in Africa accounts for about 7%, mainly producing rubber. The countries are Côte d’Ivoire, Liberia, Nigeria and Cameroon; the natural rubber production in the Americas accounts for about 2%, and the main rubber producing countries are Brazil and Guatemala.

According to the data provided by the Association of Natural Rubber Producing Countries (ANRPC), Thailand, Indonesia, and Vietnam are the top three exporters of natural rubber in the world; China and India are the main importers of natural rubber; Malaysia is both an importer and a natural rubber importer. A rubber exporting country, for the first time in 2019, it changed from a net exporter of natural rubber to a net importer.

   It is worth mentioning that China is the world's largest importer of natural rubber, with an import dependence of about 85%. The import sources are Thailand, Malaysia, Indonesia, Vietnam, Myanmar, Laos and Cambodia and other RCEP members. Since 2010, Thailand has been China’s largest source of natural rubber imports, accounting for more than half of its imports; the proportion of natural rubber imports from Malaysia and Indonesia has gradually decreased from about 20% to about 10%; from Vietnam, Myanmar and The proportion of natural rubber imports in Laos has gradually increased, but the proportion has not exceeded 8%.

   Therefore, the official signing of the RCEP agreement is conducive to the healthy and rapid development of the natural rubber industry. In particular, the reduction or reduction of tariffs will further promote natural rubber trade and accelerate industrial cooperation to promote the development of China's overseas natural rubber industry.

   2. China's natural rubber import tariffs may be lowered

   Before 2004, China's natural rubber imports had a quota, and the preferential tariff within the quota was 2%. In 2004, China abolished the natural rubber tariff quota system, and the import tax rate of smoked sheet rubber and standard rubber was increased from 12% to 20%. At the beginning of 2007, the two tariffs were adjusted to 20% or 2600 yuan/ton from the lower choice tax system. On December 25, 2018, China issued the "2019 Temporary Import and Export Tariff Adjustment Plan", which will adjust the import and export tariffs of some commodities from January 1, 2019. Raw materials such as natural rubber and synthetic rubber will be adjusted. Import tariffs in some countries continue to be reduced, and import tariffs on some large-size tires have been significantly reduced. According to the "Notice of the Customs Tariff Commission of the State Council on the 2020 Import Tentative Tariffs and Other Adjustment Plans", China's natural rubber import tariffs in 2020 will continue to extend the 2019 tariffs. The tax rate is as follows: The 2020 provisional tax rate of 40011000 natural latex is 10% or 900 yuan/ton, whichever is lower. The provisional tax rate of 40012100 natural rubber smoked film is 20% or 1500 yuan/ton, whichever is lower. 40012200 Technical classification of natural rubber (TSNR) in 2020, the provisional tax rate is 20% or 1,500 yuan/ton, whichever is lower. The most-favored-nation tax rate for 2020 is all 20%.

   Although the Chinese tire industry and the China Rubber Industry Association have been calling for the reduction of natural rubber import tariffs, China currently imposes relatively high tariffs on natural rubber imports (see Figure 3). Investors are advised to pay close attention to whether the import tariff of China's natural rubber in 2021 will continue the 2019 tariff rate or will the import tariff rate be reduced accordingly? I tend to think that the latter has a higher probability. Three, mixed glue compound glue or will withdraw from the stage of history

In fact, "composite rubber" and "mixed rubber" are varieties with Chinese characteristics, mainly to avoid the high import tariffs of natural rubber. After all, mixed rubber and composite rubber are under the tariff rate of the ASEAN Agreement (with certificate of origin). All are zero.

   From the perspective of the composition of "composite rubber" and "hybrid rubber", both are excellent substitutes for natural rubber, and due to the adjustment of domestic trade policies, the two are showing a trend of declining development. In the past, China’s tariff for importing composite rubber from ASEAN countries was 5%, and the tariff for importing composite rubber from non-ASEAN countries was 8%. In 2009, China reduced taxes to various ASEAN countries by varying degrees. Except for Vietnam, which maintained 5%, the agreed tax rates of other ASEAN countries such as Thailand, Indonesia, and Malaysia dropped from 5% to 0%. After the implementation of zero tariffs, China's imports of composite rubber have increased significantly.

   However, the good times are not long. On July 1, 2015, the "General Technical Specifications for Composite Rubber" was formally implemented. The most important requirement is that the content of raw rubber in composite rubber should not exceed 88% (mass fraction). China's imports of compound rubber have shrunk sharply, and Chinese compound rubber has replaced it. According to the statistics of the General Administration of Customs of China, from 2015 to 2018, China's mixed rubber imports were 535,800 tons, 1.8198 million tons, 2,751,900 tons, and 2,951,100 tons, with a year-on-year increase of 729.66%, 239.63%, 51.22% and 7.20%. , And the annual import volume before 2009 was far below 10,000 tons, and the annual import volume from 2009 to 2014 was less than 80,000 tons.

Of course, in response to the sharp increase in China’s imports of mixed rubber since August 2015, on August 4, 2016, the China Natural Rubber Association and the China Synthetic Rubber Industry Association jointly issued the "General Technical Self-Regulations for Mixed Rubber". Of course, this standard is only for the industry. Self-discipline standards are not substantively binding. On April 28, 2019, the Customs Administration Department of the General Administration of Customs of the People's Republic of China issued a notice on clarifying the classification and identification of "mixed rubber" under tariff number 40028000. China Customs adjusted the standards for the import of mixed rubber, which resulted in a significant shrinkage of mixed rubber imports. Statistics from the General Administration of Customs of China show that in 2019, China's imports of mixed rubber amounted to 2,660,400 tons, a year-on-year decrease of 9.82%. However, in the first three quarters of 2020, China's mixed rubber imports have risen again, with a cumulative import volume of approximately 2,664,900 tons, which has surpassed last year's import volume, with a cumulative year-on-year increase of 47.23% (see Figure 6).

Although the natural rubber market has been hit by the new crown pneumonia epidemic this year, the zero-tariff blended rubber has shined in China's rubber imports in the first three quarters of 2020, far exceeding the import performance of natural latex (the cumulative year-on-year increase is only 0.16%). Other types of rubber have declined to varying degrees, especially the cumulative volume of standard rubber imports fell by 24.82% year-on-year.

If the "Regional Comprehensive Economic Partnership Agreement" (RCEP) is gradually implemented, is it possible to realize the long-term wish of China’s tire industry and the China Rubber Industry Association to "remove natural rubber import tariffs", and China’s unique hybrid rubber will also After experiencing brilliance with compound glue, it will gradually withdraw from the stage of history! After all, in the same environment with zero tariffs, the quality of mixed rubber composite rubber is completely uncompetitive compared with standard rubber!

   To sum up, the "Regional Comprehensive Economic Partnership Agreement" (RCEP) has been officially signed, and the next question is how to implement it. If China lowers import tariffs on natural rubber in 2021, it will have a certain impact on China’s domestic natural rubber industry in the short term, especially the high spot price of domestically produced latex, but in the medium and long term, it will help correct domestic and foreign similar products. The price difference of rubber is not normal, domestic rubber has regained the favor of downstream customers.

   It is worth mentioning that as China's natural rubber tariffs gradually drop to zero, the inferior and high-priced "hybrid rubber" that exists to avoid high tariffs will gradually withdraw from the stage of history like "composite rubber".