The European Commission has announced it is investigating the potential laundering of Chinese shipments of citric acid through Cambodia, allowing Chinese manufacturers to flout export restrictions.
The European Commission (EC) imposed duties on Chinese citric acid in early 2015 after determining that the chemical was being sold in European Union (EU) markets far below the cost of local production.
Chinese exporters have since been using Cambodia as an intermediary port to sneak citric acid into Europe duty-free, the EC alleges in its announcement of a nine-month investigation.
Citric acid is one of the most common food additives and can be used as a flavouring, preservative or an ingredient in cosmetics and pharmaceuticals.
In the announcement, dated December 12, the EC says a significant change has been identified in the trade patterns of citric acid and related salts between China, Cambodia and the EU.
“The request [to investigate] contains sufficient evidence that the anti-dumping measures imposed on the product concerned are being circumvented by imports of the product under investigation consigned from Cambodia,” it said, adding that there was also evidence that the prices of citrus acid and salts in the EU were being disrupted by the illegal shipments.
The EU’s ambassador to Cambodia, George Edgar, said the investigation was being led by the Directorate General for Trade in the European Commission in Brussels, which has informed local authorities as well as Cambodia’s sole exporter of citric acid about the ongoing investigation.
He said in an email yesterday that such investigations were “quite common”, and explained that it “takes place each time there is a suspicion that goods are transhipped from a country under anti-dumping measures (in this case China) through a third country (in this case Cambodia) in order to avoid the payment of the relevant duties.”
“If the investigation finds that such transhipment is taking place, anti-dumping measures [in the form of] duties would be extended to cover these exports from Cambodia,” he added.
Philip Ye, general sales manager at Cambodia Wangkang Biochemical, a local citric acid manufacturer and exporter, said the factory had been asked by officials for information about its production and trade flows to the EU, including purchases and sales.
The Battambang factory, a branch of Chinese pharmaceutical company Hunan Er-Kang, was complying with the request, Ye said.
The United Nations Comtrade Database shows exports of citric acid and salts from Cambodia to the EU spiking in the past two years. The Netherlands reported importing only 3 kilograms, or $3 worth, of the products from Cambodia in 2015, but over 900 tonnes, or $750,000 worth, the following year.
Meanwhile, Chinese shipments of citric acid and salts into Cambodia have similarly surged since the imposition of the EU duties, according to the Comtrade data.
In 2014, before the duties were imposed on China, exports to Cambodia totalled about 400 tonnes. In 2015, however – the first year the sanctions were introduced – exports to Cambodia quintupled to about 2,000 tonnes, according to both Chinese and Cambodian reported figures.
Last year, Cambodia again reported nearly 2,000 tonnes of citric acid and salt imports from China, worth over $1 million, but China reported shipping only about 400 tonnes to the Kingdom.
Ngoun Meng Tech, director-general of the Cambodia Chamber of Commerce, said that the investigation was yet another attempt by the EU to pressure Cambodia into political submission since November’s Supreme Court decision to dissolve the opposition CNRP.
“The EU has had many issues related to Cambodia, ever since the Supreme Court decision,” he said. “But the EU should be fair and just to Cambodia, and should investigate this issue properly.”
He added that he doubted the EU would take action against Cambodia on this matter.“I don’t believe this issue has happened in Cambodia,” he said. “If it has, I believe our government will take action to investigate and punish the perpetrators.”
Commerce Ministry spokesman Long Kemvichet said Cambodia’s exports have complied with EU requirements.“Even if this investigation is found to be true, the exporters will be required to register, which is an already established initiative by the EU,” he said.
The Chinese Ministry of Commerce did not respond to questions.
According to the World Trade Organization, anti-dumping duties can be imposed when foreign products are sold far below market price, damaging local industries.
China and the EU have repeatedly imposed anti-dumping regulations against each other. Recently, China increased duties on imports of stainless steel tubes and X-ray security equipment, while the EU increased duties on Chinese steel and ceramics.