The Customer Calls The Shots

Every export market provides challenges, and, for a variety of reasons, agricultural products are especially vulnerable to regulatory complications. China and DDGS are no exception. The bad news is that it takes a good deal of time and effort to comply with China’s plant registration requirements. The good news is that there is light at the end of the tunnel, a clear pathway to approval, and an experienced guide—the U.S. Grains Council’s China office—to simplify the process and keep your registration on track.

“We’re here to help,” says Bryan Lohmar, director of the USGC’s China office. “There are many sensitive issues, both trade and nontrade, complicating the U.S.-China relationship right now, but we want our members to be compliant with the law in China and are available to help with this at any time.”

International trade gets complicated fast, but with approximately one quarter of U.S. DDGS being exported, the complications must be mastered. China began importing DDGS in 2007. By 2010 it had rocketed to the top of the list of U.S. export destinations. An anti-dumping case, now withdrawn, was one bump in the road. Recurring concerns about unapproved biotech events are another. China’s current DDGS plant registration requirements are a third. But given China’s appetite for DDGS, and its long-term growth potential, it is a hurdle that companies wishing to export to China must overcome.

China’s registration requirements are not new, but the decision almost two years ago to begin enforcing them still came as something of a surprise. China had first announced a registration process in 2010, just as DDGS imports began to increase rapidly. The regulation, however, was not initially enforced. Instead, an antidumping suit was filed against U.S. DDGS. Thanks to a vigorous response from U.S. producers and Chinese end-users, the antidumping suit was dropped in June 2012. This was followed shortly by the announcement that the registration requirements would now be implemented, effective Jan. 1, 2013. This set off a scramble to get registered.

To date, 51 U.S. plants have successfully navigated the registration requirements, all but three of them facilitated by the council’s China office. Eight more plants have finished their dossiers and are in the process of submitting samples for testing. Another eight are currently preparing dossiers for submission.

While the first couple of registrations were difficult—but not unusual when a new regulation is being implemented—the process is by now well-established. It involves some work, but the process is orderly and reasonably predictable.  So, if you have an eye on the China market—and who doesn’t?—come on in, the water’s fine.

The process has three major steps:

• Preparation of the dossier. This first step can take anywhere from two months to more than a year.
Notarization, authentication and preparation of the GMO Safety Certificate are the most time-consuming elements. 

• Submission of samples. After the dossier is completed, a plant moves to the second stage, and
submits samples to China for testing. This will require the assistance of a trader to bring the samples through customs and may take an additional month or two.

• Final approval. Finally, the dossier is submitted to the Ministry of Agriculture (MOA) and samples are sent for a recheck to a lab designated by MOA. This final stage typically takes about four months, including 20 business days for dossier approval and three months for a completed test. Assuming all goes well, MOA will then prepare and issue the registration certificate.

Frequent changes make it even more important to manage the process carefully to avoid delay, and to work closely with a facilitator familiar with China’s regulatory system. The council’s Rachel Du, who has successfully managed dozens of registrations from her post in Beijing, notes that the details are subject to change. “Since the beginning of this year, for example, the Chinese Embassy in the U.S. has stopped accepting mail applications for authentications. China now requires that samples must be submitted within one month of dossier approval, and customs checks have been tightened so it is now more time-consuming to mail samples to China. Fortunately we are in daily contact with MOA, which makes it much easier to keep up with the changing requirements.”  

The stakes are high. China has leapfrogged Canada and Mexico to become the world’s largest and fastest growing DDGS importer. And it will continue to be a growth market, as China’s surging middle class continues to demand steadily improving diets. 

Policy considerations in China are also a factor. China remains committed to food security, and its definition of food security calls for self-sufficiency in wheat and rice. Corn is a more complicated story. China is the world’s second-largest corn producer and had traditionally insisted on self-sufficiency (defined as 95 percent domestic production) in corn. As soaring protein demand has made that target increasingly difficult to meet, China has recently expressed greater flexibility. This liberalization, however, remains controversial in China. Corn is a staple of Chinese agriculture and China supports domestic producers through a tariff rate quota, which limits import volume and maintains a domestic corn price well above world market levels. 

This policy mix inevitably creates additional demand for replacement feed ingredients. Last year, for example, China surpassed Mexico as the top U.S. export destination for sorghum, which is not subject to the tariff rate quota. While DDGS has been mainstreamed as a conventional feed ingredient, there is undoubtedly additional demand stimulated by the artificial barriers to corn. Policy continues to evolve in many areas in China, and from a Council standpoint, trade liberalization and streamlined approval of biotech events are key concerns. 

“We take a broad view,” said Lohmar. “In 2012, the Council celebrated its 30th anniversary of working in China. Most of our efforts over the years have been focused on technical assistance to the feed and livestock industry to build demand for feed grains, and these efforts have paid off as China is emerging as a top market for U.S. agricultural exports. With growing exports, problems will continue to arise, but we remain focused on where we need to be, both now and 10 and 20 years down the road. China’s status as the world’s top importer of DDGS is a tremendous success story, and we will work to keep that growth on track.”

Individuals wishing to learn more about the registration process in China are invited to contact Alvaro Cordero, manager of global trade in the council’s Washington, D.C., office, at [email protected], or Bryan Lohmar, director of the council’s China office, at [email protected]

Author: Tom Sleight
President and CEO, U.S. Grains Council
202-789-0789
[email protected]