In recent weeks, Beijing and Ottawa have been locked in a contentious trade dispute over Canadian canola seed exports to China.
On March 1, China’s General Administration of Customs (GAC) issued a notice revoking the license of Richardson International, Canada’s largest canola distributor, to export canola to China after it allegedly found ‘dangerous pests’ in its products. Subsequently, Canadian reports on March 22 indicated that Chinese importers were allegedly unwilling to purchase Canadian canola seed exports – with industry experts suggesting that the restrictions are thought to be targeted at new canola sales rather than contracts already in place. A second Canadian canola producer, Viterra, a unit of Glencore Plc, also had its license revoked on March 26 for an alleged similar pest infestation issue.
Chinese customs authorities announced on March 7 that leptosphaeria maculans and other pest infections were detected in Richardson International’s canola seed imports on multiple occasions at ports in Dalian, Nanning, Shenzhen, and Guangzhou. On March 26, Chinese media reports announced that further pest infestations, including of the leptosphaeria maculans bacteria, had allegedly been found in Viterra’s canola shipments at the ports of Dalian and Nanning.
The unexpected ban on Canadian canola products comes on the back of a diplomatic dispute that has been linked to the detention of a senior Chinese corporate executive in Vancouver last year. Although Chinese officials and media sources cite agricultural safety concerns as the main reason behind the Richardson and Viterra decisions, other reports suggest that diplomatic tensions between Beijing and Ottawa are the more likely root cause behind the seemingly retaliatory measures.
Canadian officials have strongly refuted Chinese allegations. Richardson has likewise rejected these claims, while Viterra has yet to comment. In addition, the Canadian Food Inspection Agency (CFIA) officials on March 25 denied Canadian media reports that strict customs inspections were also being applied to other Canadian agricultural exports such as wheat, peas, and flax seed. Some observers – including former Canadian ambassadors to China – are urging the government to file an official complaint at the World Trade Organization, but the Canadian trade minister is calling on China to provide sufficient scientific evidence before taking any further measures.
It remains unclear as to whether there will be an outright ban of Canadian canola imports or if another producer will follow Richardson and Glencore in having their import licenses revoked. On April 3, Canada’s agriculture ministry denied media reports that a third canola exporter was being targeted by China, clarifying that there has not been another company to have their registration suspended.
Regulatory ambiguity produces uncertainty
Canola – a variant of rapeseed – is used for cooking oil and animal feed for livestock, but also as a source of renewable energy through biodiesel in some markets such as Europe. As the world’s largest canola exporter, Canada supplies about 40 percent of China’s canola exports with 4.32 million metric tons of canola seeds last year – a volume that surpasses both the second and third largest exporters combined.
With the planting season looming in mid-to-late April, the dispute comes at a crucial moment when canola farmers worldwide will need to decide on which crops to grow including wheat, barley, and canola. Given that many farmers have already finalized their investment and planting decisions, the continued disruption is leaving canola producers, and suppliers seeking canola exports, with further uncertainty in the face of declining crop prices and regulatory ambiguity in China.
As of this writing, Beijing has not issued any official statements on whether all imports of Canadian canola seeds are banned.
Customers focusing on Chinese industries will need to remain alert on any further potential regulatory disruptions on Canadian agricultural products by customs authorities. The ongoing canola dispute comes on the heels of another similar delay in customs clearance of Australian coal imports last month, understood to be as a result of diplomatic tensions between Canberra and Beijing.