UPDATE 3-China to levy anti-dumping duties on US chicken

Fri Feb 5, 2010 9:20am GMT

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For more stories on China-U.S. relations, click [ID:nCHINA].

* China to assess duties of 43.1-105.4 pct on chicken parts

* Rising trade and currency tensions

* US chicken industry's profitable China business threatened

(Adds AmCham statement, final duties date in paras 5, 11)

By Lucy Hornby and Niu Shuping

BEIJING, Feb 5 (Reuters) - China will levy heavy anti-dumping duties on U.S. chicken products, its Commerce Ministry said on Friday, a move likely to aggravate trade relations and antagonise one of the few U.S. industries that profitably exports to China.

The ministry's initial investigation showed that U.S. companies had dumped chicken products into the Chinese market, according to the ministry's website (www.mofcom.gov.cn).

The preliminary tariffs were announced a day after China requested a World Trade Organisation ruling on European Union duties on shoes made in China. That was the most recent of many cases demonstrating China's embrace of the WTO to keep markets open to the exports on which it depends.

The United States and China are engaged in a series of trade disputes, particularly over the value of the Chinese currency, with President Barack Obama this week vowing to get tough in dealing with complaints that U.S. exports are at a disadvantage.

"The world needs strong U.S.-China economic engagement now, not a ratcheting up of trade tensions," said Michael Barbalas, president of the American Chamber of Commerce in China.

Chicken wings and feet, virtually worthless in the U.S. market, are a delicacy in southern China. Many U.S. poultry producers count on the Chinese market to round out their profits.

"Chicken feet and wings are not wanted in the U.S. so they sell them to China, they dump them below cost," said Wang Xiulin, president of the Chinese Poultry Association.

"For over a decade, the U.S. has sent big volumes of chicken to the Chinese market, hurting producers here. Last year, the Chinese poultry industry was really hurting so we asked for this investigation."

Tyson Foods (TSN.N), an active investor and lobbyist in China, got the lowest duty of 43.1 percent. Pilgrim's Pride Corp. PPC.N was hit with an 80.5 percent duty. Most other firms, including Sanderson Farms (SAFM.O), face a 64.5 percent duty.

Those that did not appeal the finding would pay duties of 105.4 percent, the ministry said.

Duties go into force on Feb 13, or Chinese New Year's Eve, ensuring the price of the popular delicacies remain steady for holiday shoppers already fretting about vegetable inflation. The rates could be adjusted in the final ruling, in several months.

GAME OF CHICKEN

The U.S. poultry industry had been lobbying for Congress to revoke a prohibition on U.S. inspectors certifying Chinese cooked poultry plants, a prohibition that China is fighting at the WTO.

That prohibition is lifted in the latest Congressional budget, although U.S. inspectors have yet to tour Chinese plants. The author of the prohibition had cited food safety concerns if cooked chicken were imported from China, which has undergone a series of food safety scandals, including the delibrate lacing of milk with melamine, a chemical product that causes kidney stones.

China began its investigation in U.S. chicken parts after the U.S. imposed safeguard duties on Chinese-made tyres, which China is fighting at the WTO [ID:nLDE60I1H8].

The new tariffs could close a lucrative market for the U.S. poultry industry, which supplie more than ¾ of China's imports.

Chicken feet and wings fetch about 2 U.S. cents per pound in the U.S., but land in China at about 42 U.S. cents - a figure that Chinese rivals say represents the cost of the freight only.

A flat import tax of 500 yuan ($73) a tonne and a 13 percent value-added tax mean U.S. wings and feet can enter the Chinese market at about 54 cents a pound - compared to the Chinese wholesale price of about 76 cents.

Additional duties mean that U.S. imported chicken parts will cost about 5 cents per pound more than their Chinese competitors. (Writing by Lucy Hornby; Editing by Ron Popeski)

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