August 30, 2002

The trade has yet to see how exactly China's bureaucracy will handle its new responsibilities and commitments under the World Trade Organization, according to the U.S. Meat Export Federation (USMEF). China's meat import and quarantine authority - the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) - has just published new post-WTO membership meat and livestock product import regulations and procedures.

Posted on the AQSIQ web page (http://www.ciq.gov.cn/doc/english/) in early August without notification to foreign supplying governments, the regulations are due to go into effect Sept. 1. The regulations codify many of the meat import procedures that have been in effect since China joined the WTO, such as the role of the Beijing AQSIQ office in approving import requests and the documentation required to obtain such approvals. The regulations also specify that approvals for import permits will take up to 30 days and that the permits are valid for three months.

Traders did not immediately react to the new regulations, as they went mostly unnoticed until USMEF and the USA Poultry & Egg Export Council (USAPEEC) started to circulate copies. In recent days, there has been some concern by USMEF over a stipulation in the new regulations stating that only product accompanied by health certificates listing the Chinese consignee will be allowed entry at ports.

Currently, a significant tonnage of frozen meat and poultry entering China is accompanied by health certificates listing Hong Kong consignees, as most frozen meat and poultry trade is transshipped through Hong Kong. In addition, it is widely known that many approved poultry and meat importers in China routinely transfer their import rights and approved permits to other trading entities. According to the regulations, this will become illegal as only goods accompanied by health certificates bearing the approved consignee's name will be allowed access. According to USDA/Beijing, in an Aug. 22 telephone call, AQSIQ verbally confirmed that they intend to enforce this new rule Sept. 1, said USMEF.

The rules come on the heels of a rocky trading summer for meat and poultry. Trading margins have been low for poultry and pork, and a major crackdown on Nanjing gray channel traders a month ago chilled traders' enthusiasms and resulted in a serious stock oversupply situation in Hong Kong, according to USMEF. More inspections and confiscations were reported last week in the southern port of Panyu, but as of the end of this week, product flow had improved. However, traders noted that buyers are cautious pending implementation of the new regulations.

Despite the post-WTO accession trade problems, the total volume of pork and pork variety imports into Hong Kong from all sources, a good proxy for the health of the China trade, was up 11% for the first six months of 2002 compared to the pace of last year.

USMEF said Hong Kong import and U.S. export statistics give conflicting stories of the U.S. position, with Hong Kong imports showing an increase in U.S. pork and pork variety meat arrivals, while U.S. exports show a 9% decline for the first half of the year. Although total pork trading volumes have held, total Hong Kong poultry imports are down 10%. Beef shipments have been the least affected, and low trading margins for pork and poultry have encouraged some traders to expand their business scope into bovine products.