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Insight | Time: Nov 20 2020 4:28PM
Tariff changes of nylon related products under RCEP trade pact
 
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On November 15, 2020, the Regional Comprehensive Economic Partnership (RCEP) agreement has been signed among its 15 participating countries, the Association of Southeast Asian Nations, China, Japan, the Republic of Korea (ROK), launching the world's biggest free trade bloc, after 31 rounds of negotiations over eight years.

Below three tables shows the changes in the tariff of major nylon relevant products between China and highly relevant regions or countries in the trade pact.

Figure 1. Shift on import tariff of China from relevant regions or countries
- China’s import tariff on nylon products (excluding CPL) from ASEAN will reduce to different degrees gradually.
Product H.S. code South Korea Japan ASEAN
Caprolactam 29337100 unchanged at 9% unchanged at 9% unchanged at 9%
Nylon 6 chip 39081012 unchanged at 6.5% unchanged at 6.5% Reduce year by year to 0%
Nylon 66 chip 39081011 unchanged at 6.5% unchanged at 6.5% Reduce year by year to 0%
Single yarn of nylon-6, with≤50turns/m, not for retail sale 54024510 unchanged at 5% unchanged at 5% Reduce year by year to 0%
Elastic filament of nylon-6, psy,≤50tex, not for retail sale 54023111 unchanged at 5% unchanged at 5% Reduce year by year to 0%
Nylon 6 cord fabric 59021010 unchanged at 10% unchanged at 10% Reduce gradually to 5%


Figure 2. Shift on export tariff of China to Japan and South Korea
- China’s export tariff on nylon products, especially CPL and nylon 6, 66 chip, to South Korea and Japan will reduce evidently.
Product H.S. code South Korea Japan
Caprolactam 29337100 Directly reduce from 3% to 0% Directly reduce to 0%
Nylon 6 chip 39081012 unchanged at 6.5% Reduce year by year from 3.7% to 0%
Nylon 66 chip 39081011 unchanged at 6.5% Reduce year by year from 3.7% to 0%
Single yarn of nylon-6, with≤50turns/m, not for retail sale 54024510 unchanged at 8% Directly reduce to 0%
Elastic filament of nylon-6, psy,≤50tex, not for retail sale 54023111 unchanged at 8% Reduce year by year from 6.5% to 0%
Nylon 6 cord fabric 59021010 Reduce gradually to 0% Gradually reduce to 0%


Figure 3. Shift on export tariff of China to part of ASEAN members
- China’s export tariff shift on nylon products to ASEAN members with the relatively close trade relations.
Product H.S. code Thailand Vietnam Indonesia
Caprolactam 29337100 Directly reduce from 5% to 0% unchanged at 0% unchanged at 0%
Nylon 6 chip 39081012 Directly reduce from 5% to 0% unchanged at 0% unchanged at 0%
Nylon 66 chip 39081011 Directly reduce from 5% to 0% unchanged at 0% unchanged at 0%
Single yarn of nylon-6, with≤50turns/m, not for retail sale 54024510 Directly reduce from 5% to 0% unchanged at 0% Directly reduce from 5% to 0%
Elastic filament of nylon-6, psy,≤50tex, not for retail sale 54023111 Directly reduce from 5% to 0% unchanged at 0% Directly reduce from 5% to 0%
Nylon 6 cord fabric 59021010 Directly reduce from 5% to 0% unchanged at 3% Directly reduce from 5% to 0%


There are several obvious points we could tell from the above figures.
1. China's attitude towards importing products in the nylon industrial chain from South Korea, Japan, and ASEAN remains basically unchanged. In fact, the current ASEAN countries enjoy preferential tariff policies. For example, the actual import tariff for nylon 6 chips is 0, and the actual import tariff for caprolactam is 6% (lower than 9% MFN rate). Therefore, the RCEP trade pact will not exert great impact of this part of the commodity trade.

2. The import tariffs that have changed evidently into other countries or regions from China are: South Korea and Japan will directly reduce CPL import tariff from China to 0 after the RCEP trade pact. In addition, Japan, Thailand, Indonesia and other countries will reduce tariffs on other nylon products from China directly or gradually to zero. These changes will obviously benefit the exports of nylon product of China.

3. It is worth noting that the detailed rules of the tariff adjustment are default to tariffs without the Certificate of Origin. Actually, each country or region has a different implementation of tariffs without or with the Certificate of Origin on the same commodity. For example, South Korea’s tariff for nylon filaments from China is 4% if there is the Certificate of Origin, and 8% is levied if there is no Certificate of Origin.

Meanwhile, we noticed that the method for identifying the origin of import in the RCEP rules has changed:



In Chapter 3 of the RCEP Agreement text, “Rules of Origin”, the implementation of (b) and (b) undoubtedly makes more goods comply with the "source of origin" and have certificates of origin. Therefore, the actual tariff levied will be lower than those listed in the above three figures, which will definitely strengthen the export competitiveness of China-made products.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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