Petrochemical & Chemical Working Group Advocacy Success (2002)

In early 2002, member companies in the Petrochemical and Chemical Working Group reported the non-compliance of the Sino-Russian Border Trade Treaty with the WTO agreement, and expressed concern about the unfair competition that it was creating.

The treaty has allowed Russian companies to import their products at half duty and half VAT for trade within 20km of the border. In reality, however, the imported Russian products have been transported beyond this limit to other parts of China, resulting in unfair competition to EU petrochemical companies and price depression of some 10-15% for certain chemical products. Some of our member companies experienced very unfair trading conditions and this led to losses in some areas of business.

At the beginning of the year, a senior State official visited Manzhouli near the border and it was then ordered that full VAT should be paid for products traded outside the 20km zone, although there was no clear directive about the import duty. A few weeks after the visit of the border, Customs Office claimed that as there was no clear direction from Beijing to continue the full VAT order, the VAT had been halved again. This coincided with the visit of a high-level Russian delegation to Beijing.

In follow-up to our members’ concerns, we have discussed this with the EU Delegation in Beijing who were very supportive and wrote officially to MOFTEC on the issue with the data provided by the working group. We have also raised the issue in the presentations when we met with MOFTEC and SETC this year. In addition, we have also raised it with senior counsellors of the various member state embassies and visiting delegations.

In follow-up to our multi-channel advocacy approaches with the EU Delegation in Beijing, the Ministry of Finance has issued an urgent official notice ((2002) No. 108) on 1st July 2002 which stated that half duty and VAT preference of imported caprolactum (HS29337100) by border trade has been cancelled.

This article was published in the inaugural edition (October 2002) of EURObiz.