China Ends U.S. Dry Distiller Grains Dumping Investigation
Investigation Dropped By Chinese Ethanol Plants After 18 Months
Dumping (in an economic context) usually occurs in International Trade when one country manufacturers a product and sells it to another country at a price below what they can manufacturer it at.
In China, three ethanol producers, AnHui Ethanol Co. Ltd., Jilin Fuel Alcohol Co. Ltd. and Meihekou Fukang Alcohol Co. Ltd., accused the U.S. ethanol industry of dumping Dried Distiller Grains (DDGS). They filed an anti-dumping suit against U.S. Ethanol Producers in December of 2010.
Note: Dried Distiller Grains are a co-product that are produced by ethanol plants that use corn as a feedstock during the ethanol production process. They are usually used as a food for livestock.
The Chinese ethanol producers argued that because corn in the U.S. could be produced at a cheaper price and because imported DDGS were being sold for cheaper than what Chinese manufacturers could sell them at that U.S. Ethanol Producers were dumping DDGS in China. Chinese ethanol producers were hoping to get the Chinese government to put an import tariff on U.S. DDGS imports.
The Chinese government launched an investigation into the DDGS dumping accusation. They began the investigation by working in conjunction with USGC (United States Grain Council) and 80 U.S. ethanol producing facilities that volunteered to help. The Chinese government personally selected Big River Resources, United Wisconsin Grain Producers, and Golden Grain Energy to help investigate U.S. DDGS production prices and costs in the U.S. ethanol industry.
With the investigation underway, the U.S. ethanol industry began preparing a defensive argument. The ethanol defense argued that they weren’t injuring the Chinese DDGS markets, and they also argued that importing U.S. DDGS was improving the commodities market in China by bringing down high prices caused by a growing demand for food in China. Helping keep food prices down in China was in the public’s best interest.
In June of 2012 China’s Ministry of Commerce dropped the investigation after the Chinese ethanol producers dropped the charges they had filed. In the meantime no additional tariffs will be added to DDGS imported to China from the U.S. Whether or not the investigation and defense argument played a part in the dropping of the case has not been determined.
U.S. DDGS imports into China are very important for the U.S. ethanol industry, as China imported more than 2.5 million metric tons of U.S. DDGS or about 28% of the total DDGS produced by the U.S. ethanol industry that year. However, the suit dropped U.S. DDGS imports into China by 15% from 2010 to 2011 due to fears of a tariff being instated. Exports of DDGS went up by 84% in 2012, and with the announcement of the case being dropped it is likely that U.S. DDGS exports will continue to rise.
China is currently the largest importer of U.S. produced DDGS and this relationship is important to the continued growth of the U.S. ethanol industry and the Chinese commodities market.