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Natural products industry eyes exclusions, new sources for China tariff relief

The Trump Administration has approved the latest round of superimposed tariffs on $200 billion worth of Chinese imports, including many dietary ingredients. The move places an immediate burden on the supply-side of the natural products industry, as companies scramble to figure out pricing and availability, while hoping for relief via an exclusion process. The effects, including any price increases, are not expected to impact retailers and consumers until a later date, possibly in mid- to late-2019.

President Trump announced the move Sept. 17 and set Sept. 24 as the effective date for this round of tariffs, known as “List 3.” Two previous rounds of tariffs were levied on a total of $50 billion worth of imports, primarily steel, aluminum and equipment.

After much speculation, Trump kept the List 3 tariffs at 10 percent, but this figure will rise to 25 percent on Jan. 1, 2019, if the trade war with China persists.

“We are taking this action today as a result of the Section 301 process that the USTR [U.S. Trade Representative] has been leading for more than 12 months,” Trump wrote in a statement published on the White House website. “After a thorough study, the USTR concluded that China is engaged in numerous unfair policies and practices relating to United States technology and intellectual property – such as forcing United States companies to transfer technology to Chinese counterparts.”

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Dietary ingredients ensnared in U.S.-China trade war

President Trump’s trade war with China is set to impact many dietary ingredients, with additional 10 to 25 percent import duties on a range of products from minerals to proteins and sweeteners sourced from China.

IngredientsOnline.com, which connects U.S. and other manufacturers and vendors to ingredient suppliers from around the world, including China, has compiled a list of more than 180 potentially affected ingredients in the company’s supply chain, including choline, creatine, xylitol, animal and plant proteins, ribose, phytosterols, hemp seeds and various forms of minerals and amino acids.

“With boots on the ground in China, our teams in Shanghai have identified this list of ingredients that are on the HTS [U.S. Harmonized Tariff Schedule] Code as ‘potentials’ for the additional duty fees that will start at 10 percent,” said Peggy Jackson, vice president of sales and marketing for ingredientsonline.com. “Keep in mind this is just the beginning; we’re hearing the tariffs can range from 10 percent to 25 percent. It’s obvious this will have a tremendous effect on not only the industry but on consumers as well.”

The Council for Responsible Nutrition (CRN) has been working on this issue since Trump released the first tariffs in May and has received lists from its members, sometimes including 30 to 40 or more ingredients potentially affected by the tariffs.

“The cost of sourcing raw material is going to go up in all these cases,” said Steve Mister, president and CEO of CRN. “Sometimes it’s the finished ingredient; in other cases, it’s the excipients or fillers and similar compounds. Each one incrementally increases the cost of goods, the cost to make the products.”

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