China to drop VAT on US DDGS imports from December 20: USGC

China is to abandon charging value added tax on imports of US dried distillers grains from December 20, according to reports both in China and in the US.

The move was originally announced on November 13 during the recent presidential tour of Asia as part of a package of measures aimed at bolstering Sino-US trade relations, but the effective date was released by the Chinese Finance Ministry Tuesday.

Initially introduced in January 2016 as trade relations between the two countries deteriorated, VAT has been levied at 11% since then, with the change cited as a major reason for exports from the US to China dropping off dramatically in the months
following its application.

According to the US Grains Council, DDGS exports stood at 5.4 million mt in 2015 but slumped to 3.3 million mt in 2016 and currently stand at 739,000 mt so far in 2017.

DDGS are a protein-rich by-product of the ethanol production process used as animal feed. Their value can have a major impact on the margins for producers and the viability of ethanol production and consequent demand for corn.