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China, Australia ink FTA removing import tariffs on met coal; date to be fixed

China and Australia Wednesday inked a bilateral free trade agreement that will remove the existing 3-6% import tariffs on metallurgical coal, Australia’s Department of Foreign Affairs and Trade said.

This follows the signing of a memorandum of understanding between the two countries last year.

The implementation of the FTA will not be immediate as it now needs to pass through domestic legal and parliamentary processes in both China and Australia, including a review by Australia’s Joint Standing Committee on Treaties and the Senate Foreign Affairs, Defence and Trade References Committee, DFAT said in an email response to queries.

Such domestic processes typically take “a few months,” an industry source said.

A DFAT official said: “Both countries will work towards effecting entry into force as soon as possible.”

The implementation of the FTA will immediately cut the import tariffs on coking coal from the current 3% to zero and phase out those on PCI from the current 6% to zero over three years; to 4% in the first year, 2% in the second and zero in the third, based on the indicative schedule provided by DFAT.

DFAT said Australia’s bilateral trade for metallurgical coal with China was estimated to be worth A$5.9 billion ($4.5 billion) in fiscal 2013-14.

Australia is the biggest exporter of metallurgical coal to China, with volumes totaling 31 million mt, accounting for 66% of China’s seaborne imports in 2014.

China imposed a 3-6% tariff on imported metallurgical coal in October 2014, a move which many Chinese participants felt to be a protective measure by the state to prevent the collapse of the sluggish domestic industry.

Most market participants surveyed were generally upbeat on the news.

One said that this would help make Australian metcoal around $3/mt cheaper when compared to Chinese coals which could help boost exports to the country.

“It is good for sentiments,” the source added.
Source: Platts