Australian food exporters face regulatory roadblocks in China

By Michael Smith Nov 11 2019 / Financial Review

Shanghai | Chinese regulators are delaying the approval of new licences to Australian dairy and beef exporters looking to increase sales to China, in the latest sign that diplomatic tensions are hurting trade with Australia’s biggest trading partner.

Numerous sources told The Australian Financial Review that companies exporting agricultural products to China faced increasing difficulty in securing Chinese regulatory approval for new Australian processing facilities such as abattoirs.

While existing licences appeared to be safe, some exporters said they were concerned  about securing registration needed from China for new products coming on to the China market for the first time. The Australian government has raised concerns about this with the authorities in China.

After an 18-month wait, dairy giant Bellamy’s Australia, which is now a takeover target, failed to secure registration from China’s State Administration for Market Regulation (SAMR) agency to sell its organic baby formula in Chinese retail outlets.

Supermarket giant Coles, which wants to export high-quality beef cuts to China, is also waiting for licensing approval for its Retail Ready Operations (ROE) in Sydney.

The regulatory roadblocks come despite soaring demand for meat exports in China because of the damage done to local pork supplies by African swine flu.

Australian beef exports to China are at record highs, up 73 per cent year-on-year for the nine months to end-September. However, industry sources said regulators appeared to be dragging their feet when it came to approving licences for new facilities and products from Australia and New Zealand.

By contrast, China granted export licences to 25 Brazilian meatpacking plants in September.

“The problem is that the Australian government, the diplomats in China, don’t have access to the regulators at the moment. So there is no-one to go and talk to when there is a delay,” said one source with knowledge of the licencing and registration process.

Trade Minister Simon Birmingham acknowledged concern about regulatory hurdles facing exporters such as beef processors, and said the matter had been raised with the Chinese authorities.

“We’ve had some dialogue in relation to non-tariff barriers and some of the regulatory hurdles that are faced, for example by beef processors,that are of concern to us,” he said.

The slowdown comes despite booming demand for Australian products such as beef and infant formula. Australian coal exports to China have also been restricted this year, and  some traders attribute this political tension, although Beijing’s desire to drive up domestic coal prices is also a factor.

Coles head of exports Thinus Keeve said the supermarket group was waiting for China to approve a new licence for its Retail Ready processing facility in Sydney.

“We are going through the process of getting that licence, but licences are not an issue for us at the moment,” he said, saying Coles had approvals to export beef from other facilities which would meet its targets.

“The regulatory concerns are always there . . . . we continue to work with our own government agencies to support growth outside of Australia.”

An agricultural analyst in China said political tension was a challenge for exporters from Australia and other countries seeking to clear fresh goods through Customs in a hurry.

When asked how long it would take for licensing approvals, he said: “That depends on the attitude of the boss [local Communist Party official]. If they are not happy it could take a long time.”

While it is never acknowledged officially in China, traders and analysts said it was not unusual for local officials to drag out Customs clearance for goods coming from countries they believed were not in Beijing’s good books.

“If the relationship is good we [China] can give you an express channel [for clearing Customs],” the analyst, who did not want to be named because the regulatory process was politically sensitive, said..

“We can do it overnight or in a few hours. But if the relationship is not good we will strictly follow the procedures.”

He said it usually took products three to five days to clear Customs. There were cases, he said, where Customs officials deliberately waited the maximum five days to clear imports of products such as fruit to make life difficult for exporters from countries such as Vietnam which has poor relations with China.

Another industry source said the delays were not entirely politically motivated as Australia and New Zealand already had a large number of licences and Beijing was focusing on new markets.

The source, who has had regular dealings with Chinese regulators, also said the number of Communist Party officials handling the regulations was small and they usually had to travel to the country of origin to inspect those facilities seeking a licence. This meant they were thinly-stretched as they were as many as 30 new countries looking to get products such as meat into China.

Bellamy’s tried for 18 months to secure registration from SAMR to be able to sell its organic baby formula in Chinese retail outlets. SAMR approval is needed under a regulatory regime that Beijing brought in from January 1 to try to streamline the formula industry.

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