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Rice tariffs in European market ‘almost certain’

Sangeetha Amarthalingam / Khmer Times No Comments Share:
A worker moves sacks of rice in a warehouse. KT/Chor Sokunthea

The noose around the Cambodian rice sector is tightening as the European Commission (EC) is almost certainly implementing the safeguard measures on rice exports from Cambodia and Myanmar from mid-January onwards, said a source close to the issue.

For in depth analysis of Cambodian Business, visit Capital Cambodia

The action is expected to culminate in the regressive tax imposition, beginning with 175 euros per tonne on Jan 15, 150 euros per tonne a year later, and 125 euros the subsequent year.

“I hate to break the news but we have learned that the EC will implement the safeguard clause with immediate effect for varieties of rice customs codes.

“This affects rice with a ratio more than three (not broken rice), while those with a ratio below three are allowed access. It is bad news for Cambodia as the only quality we will be able to export is broken rice, since all others are subject to tax,” said the source who declined to be named because of the issue’s sensitivity.

Tariffs will only apply to milled Indica rice from Cambodia and Myanmar with CN codes 1006 30 27, 1006 30 48, 1006 30 67 and 1006 30 98, according to the source.

According to Confagricoltura, an organisation that represents Italian agricultural businesses, a written procedure to activate the tariffs started on Jan 4 following a hung verdict a month earlier when EU members failed to come to a consensus over the tax imposition. As a result, the EC was tasked with issuing a final decision on the subject by Jan 15.

Last March, the EC launched an investigation to ascertain whether imports of semi-milled and milled Indica rice from Cambodia and Myanmar resulted in serious difficulties to European Union producers of similar or competing products.

“In this safeguard thing, Cambodia loses out big time as the EC imposes duties on all rice over ratio three, which means only broken rice can be imported tax-free. Anything above ratio three will be taxed.

“Myanmar has been exporting primarily broken rice to EU all this time, representing 70 to 80 percent of their exports to EU, whereas Cambodia doesn’t export broken rice as ours is not competitive at all. Our broken rice is mainly sold in the domestic market because it fetches a higher price,” the source said.

Data from the Secretariat of One Window Service for Rice Export showed that between January and November 2018, Cambodia exported 497,420 tonnes, down 13 percent compared to the corresponding period in 2017. That year rice exports rose 17.21 percent to reach 635,325 tonnes, with a total value of $333.1 million.

Cambodian rice exports in 2017 represented 1.6 percent of global rice exports, World’s Top Exports research portal showed.

That year Cambodia was the ninth biggest exporter in the world, while Myanmar held the tenth spot.

Observers argue that, unlike the proposal to withdraw Cambodia’s Everything-but-arms (EBA) status, the rice tax imposition is not politically motivated.

“We definitely cannot save the rice issue but we still have good hope that we can avoid the EBA revocation. They seem to be separate issues. Unlike the EBA revocation where ample notice will be given, there is no grace period for safeguards,” the source said.

Yesterday, Khmer Times reported that local exporters rued over the lack of clarity that was causing delays of shipments, with buyers reluctant to go ahead with exchanges.

Chan Sokheang, chairman and CEO of Signatures of Asia, said if the EU activates the tariffs, many buyers might cancel their orders, inflicting pain to the rice sector.

To this, the source said zero import duties should apply to rice consignments that were already on the way to the EU on the regulation’s enforcement date.

“EC’s Directorate General for Trade has indicated that a bill of lading dated prior to the date of entry into force of the tariffs could be used to demonstrate that the rice is already on the way,” the source added.

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