China's tariff cut suspensions to have limited impact: FPG subsidiary

Taipei, May 31 (CNA) Formosa Petrochemical Corp. (FPC) said Friday it has been working to diversify its business to other potential markets for some time, in response to China's announcement that it will expand the suspension of preferential tariff rates on some Taiwanese imports.

Chen Bao-lang (陳寶郎), chairman of FPC, one of the Formosa Plastics Group's (FPG) major subsidiaries, told CNA that the company began diversifying exports of its base oils for lubricants to markets other than China three years ago.

His remarks came after Beijing announced early Friday a plan to further suspend tariff concessions on 134 Taiwanese products under the Economic Cooperation Framework Agreement (ECFA), effective from June 15.

According to China's Ministry of Finance, those items include base oils for lubricants, racing bicycles and textile products, manufactured in Taiwan.

Chen said FPC's base oils for lubricants remain the only items that will be affected by the tariff suspension.

Three years ago, the Chinese market accounted for 50-60 percent of FPC's base oil exports, but that figure dropped to 32 percent in 2023, Chen said, adding that the company will continue to actively tap into potential markets in Southeast Asia and other places.

FPC produces about 700,000 metric tons of base oils annually, of which about 200,000 metric tons is sold domestically while the rest is exported to overseas markets.

The amount shipped to China accounts for roughly 30 percent of the company's related exports, according to the Yunlin County-headquartered company.

As the item currently accounts for only 1 percent of FPC's revenue, the company has assessed that the preferential tariff suspension will have only a limited impact on its business, it said.

Meanwhile, an executive with the FPG said it was still evaluating the situation regarding the tariff suspension and whether it will impact its other subsidiary companies.

Later Friday, another FPG subsidiary Formosa Chemicals & Fibre Corp. (FCFC) said the suspension could impact three of its exports to China, including SAN (styrene-acrylonitrile resins), HIPS (high impact polystyrene) resins, and PC (polycarbonate) resins.

FCFC Chairman Hong Yuan-fu (洪福源) said China began imposing a 9 percent anti-dumping duty on PC April 20, which is scheduled to last for a period of five years.

The tariff suspension as announced by Beijing on Friday means that tariffs on Taiwan-produced PC will return to around 6.5 percent, which on top of an anti-dumping duty, will be a lot for FCFC to shoulder, Hong said.

Hong also said, however, the company has been working to diversify its business to other markets since China began considering the imposition of anti-dumping duties on PC imported from Taiwan.

As most taxes on FCFC exports to China are shouldered by businesses in China, the preferential tariff rate suspension will have a smaller impact, Hong added.

According to FCFC, it expects to be hit by an estimated US$6.9 million in tariffs this year.