Quick Look at Agrochemical Trade in the United States
What the last five years have taught the agrochemical industry.
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By Jim DeLisi
Contributor
Note: This article is based on statistics compiled by Fanwood Chemical, using data sourced from Datamyne and U.S. Census as presented by the USITC Dataweb. You can see DeLisi in person for a question-and-answer session at the AgriBusiness Global℠ Trade Summit on 9-10 August 2023.
The last five years, the agrochemical industry witnessed unforeseen challenges affecting agrochemical trade. Here is an overview of agrochemical imports to and exports from the U.S. illustrated in the following charts over a five-year period of 2018 through 2022. The year 2018 is an important starting year since it pre-dates the imposition of the 301 surtaxes on imports from China. We also need to acknowledge that 2020 and 2021 were pandemic years with the supply and logistical nightmares.
CHART 1
Chart 1 is our best attempt to trace quantities in kilos of all agrochemical imports into the U.S. It was produced by totaling up the weight of everything reported in Fanwood Chemical’s Monthly Import Survey in kilos. As you will see, by 2022, well over 580 million kilos (639,340.56 tons) of biologically active agrochemicals were imported annually into the U.S. While not unexpectedly, the volumes dropped in 2019 and 2020. Those volumes are now on an upward trajectory at a very steep rate. We also have broken out imports from China (red line) and India (blue line). It is somewhat surprising that the India line is not stronger.
This above chart would suggest that the 301 China surtaxes have not had a significant impact on the importation of pesticides from China.
CHART 2
Chart 2 is a spreadsheet with details concerning formulated pesticide imports into the U.S. for 2018 through 2022. In addition, we broke out the imports from China, Colombia, India, Mexico, and Canada.
CHART 3
Chart 3 is a bar graph for the totals from these six countries. As you will see Colombia, India, Mexico, and Canada are all on an upward trajectory, while China is relatively flat.
Both charts 2 and 3 appear to show that the China 301 surtaxes have accomplished their objective as it is clear that imports from China have been reduced while they increased from other suppliers to the U.S. The implication is that the active ingredients (AIs) are being imported and formulated in the U.S.
Points to Consider
- While China is not a significant factor in formulated fungicides, even at reduced rates it remains a significant factor for imported formulated herbicides and insecticides.
- Most of the imports from Colombia are from ADAMA’s facilities. ADAMA has done a remarkable job expanding this facility in a very short period of time, especially for herbicides.
It is important to note that according to the U.S./Colombia free trade agreement, for a product to be considered “territorial” and eligible for the designation “Colombia-U.S.”, and therefore gain duty-free access into the U.S., a formulated pesticide must contain a minimum of 50% by weight of the active ingredient or ingredients that is the product of a chemical reaction in either Colombia or the U.S.
- It is likely that most of the imports from Mexico and Canada are from formulation facilities owned by the major companies in these countries. The North American Free Trade Agreement (NAFTA) had a much more difficult rule of origin than the United States-Mexico-Canada Agreement (USMCA), which has the same rule as Colombia, 50% by weight minimum of the active ingredient or ingredients must be territorial. The USMCA, unlike NAFTA, allows for the Chemical Reaction rule to determine origin. This is very important, especially in instances where there is no change in tariff classification for the underlying intermediates, or there is no substantial change in value.
- If India was able to get back into the Generalized System of Preferences (GSP) program, this would give them a significant advantage since 3808.91.10, 3808.91.25, 3808.91.30, 3808.92.15, 3808.92.28, 3808.92.30, 3808.93.15, and 3808.93.20 are all GSP duty free. These are some of the largest categories for imported formulated pesticides.
CHART 4
Chart 4 highlights a selected group of herbicides, fungicides, and insecticides selected by the author to try to determine if the 301 surtaxes on China had a significant impact on the flow of active ingredients into the U.S.
As you will see, it has details on the volumes in kilos each year, as well as a column showing the amount of any surtax to be collected. There are also columns that show if we are aware of any U.S. production and the estimated percentages from countries that supply these active ingredients in 2018 as well as 2022. Before we begin a discussion on any single item, it is important to note:
- Pendimethalin: It would appear that BASF has begun importing large quantities from China. It is not known whether they have actually shutdown U.S. production.
- For Syngenta, most imports come from Colombia, with the exception of mancozeb, are from ADAMA’s production site in this country.
- Most imports from the European Union member states for the listed AIs are from Syngenta-owned facilities.
- Paraquat: Technical (2933.39.23) paraquat is not on the 25% surtax list. Formulated paraquat, meaning that at a minimum the imported product contains the emetic, (3808.93.15) is currently exempt from the China surtax.
- China surtax: all formulated pesticides, except paraquat are subject to this tax at this time.
This chart, with a few exceptions including bifenthrin, dicamba, and sulfentrazone, some of which do not have 301 surtaxes, would support the notion that pressure to move sourcing outside of China has had a limited impact on import patterns for active agricultural chemicals. It is important to note, that in several of these instances, especially bifenthrin, it is highly likely that the rise of production in both India and Mexico is based on imported intermediates from China.
In other instances, especially in cases where there are no China surtaxes, China’s penetration of the U.S. market, despite government pressure to reduce reliance on China, significantly increased. This is especially true for glufosinate, where a producer in the U.S. shutdown two plants and for unknown reason imports from Germany have ceased.
In several other instances, China has an almost total lock on the supply chain, especially abamectin (no surtax), atrazine (7.5% surtax), chlorothalonil (no surtax), clomazone (no surtax), ethephon (no surtax), glyphosate (no surtax), and mesotrione (25% surtax).
CHART 5
Chart 5 shows U.S. exports for the same period of time as the U.S. imports chart. Interestingly, the U.S. has a significant positive trade balance in all three categories.
The figures in this chart are based on “U.S. Domestic Exports.” They would not include formulated pesticides that were imported then subsequently exported. We also included a list of the top 20 destinations in USD as well as kgs.
The U.S. has a very robust business in the formulation of agrochemicals for consumption both here and abroad. Exports continued to thrive, despite the fact that many of these materials are produced with Chinese AIs. It needs to be noted that except for Mexico and Canada, all tariffs paid on imported AIs, including any necessary China surtaxes are subject to duty drawback, putting the U.S. on a level playing field with the rest of the world. This is not the case for either Mexico or Canada. The USMCA does not allow for manufacturing drawbacks. Therefore, any import tariffs, including surtaxes, are included in the cost of goods sold for export to our USMCA partners.
Four Takeaways
While it would appear that in the case of AIs that the 301 tariffs have had limited impact, this is likely caused by a couple of key factors:
- The production of active agricultural chemical products is highly regulated making it difficult to establish new sources.
- Many of the basic chemical facilities necessary to produce agrochemicals in the Western World were dismantled many years ago. It is very difficult to financially justify a commitment to build a new chemical plant, even within an existing facility, without a firm understanding of the duration of the surtax.
- It is likely that in the limited number of cases were production of AIs was moved out of China, in actual fact what was transferred was the final step or two of the process. Key intermediates are likely still sourced from China. It is also the case that many pesticides that are properly labeled “Made in USA,” “Made in the EU,” “Made in Japan,” and even “Made in India” source their intermediates from China.
- Lastly, any new production facility in the West would need to be competitive worldwide to survive for the long term.