China Cuts In Half Its Tariff On U.S. Crude Oil
BEIJING–In a positive development for U.S. producers, in separate February announcements, China first said it was cutting its 5.0% tariff on imports of crude oil from the United States to 2.5%, and then indicated it would consider exempting both crude oil and liquefied natural gas imports from tariffs.
According to published reports, the Chinese Ministry of Finance announced Feb. 6 that it was cutting in half, 5%-10% tariffs on 1,717 U.S. products effective Feb. 14. The affected tariffs were imposed by China on $75 billion worth of U.S. goods effective Sept. 1 (AOGR, September 2019, pg. 14).
The “phase one” trade deal with China, which was signed by President Trump in January, included a pledge from China to purchase at least $52.4 billion more in U.S. energy products, but did not specify that the Chinese government would alter its tariff on crude oil (AOGR, February 2019, pg. 18).
Following announcement of the phase one deal, Frederick Lawrence, vice president of economics and international affairs at the Independent Petroleum Association of America, told AOGR that “progress on (Chinese tariffs) could lead to 500,000 barrels a day more U.S. crude exports (January 2019, pg. 26).”
On Feb. 18, additional reports say, China’s Ministry of Finance announced it would begin accepting applications for tariff exemptions on 696 U.S.-origin goods–including crude oil, LNG and refined products–effective March 2. Other commodities eligible for exemptions, the reports say, include petrochemicals, agricultural products, and coal and metals.
The exemptions will last for one year, starting from the date of approval, and will be granted on the basis of market value, the reports add, quoting “a company source” as saying that state-owned China National Offshore Oil Corp.–China’s top LNG importer–is likely to apply for tariff exemptions.
Those reports note that China imported 1.53 million and 1.64 million tonnes of U.S. LNG in 2017 and 2018, respectively, but only 258,955 tonnes in 2019.
Other reports mention that Cheniere Energy has a 1.2 million tonne-a-year contract with PetroChina, but say that while cargoes under the contract have continued to be lifted, they have been diverted since China raised its tariff on U.S. LNG last year from 25% to 10%.