Industry News

China to Cancel Tariff Concessions on Over 100 Products Under ECFA


Source: PCB Shop
Last updated: 2024/07/10



At the end of May, the Tariff Commission of China's State Council announced the second batch of suspended tariff concessions under the Cross-Strait Economic Cooperation Framework Agreement (ECFA). According to the announcement, starting June 15, tariff concessions on 134 imported products originating from Taiwan will be suspended.

The items canceled this time are mostly common raw materials or mechanical components. Due to the complexity of the PCB manufacturing process, the upstream supply chain will inevitably be affected. After an initial inventory, the potentially impacted items are primarily raw materials, as listed in the table, including copper foil, fiberglass, films, and adhesives. The differences in the export value proportions of these products to China, corresponding to different tariff codes, suggest that copper foil, film, and adhesive products are likely to be more significantly affected in terms of production value, even though these products are not exclusively used in the PCB industry.

The long-term impact of canceling tariff concessions on businesses lies in the change in competitiveness. Even if the products ultimately fall under the most-favored-nation (MFN) tariff rates, in the worst-case scenario, companies may still have to absorb the tariff rate difference themselves, affecting their profits. Since Taiwan is not a member of the RCEP, companies that produce products in Taiwan and export them to the Chinese market have not been significantly affected under the ECFA framework in the past. However, the cancellation of these tariff concessions will now highlight this difference. The actual degree of impact, however, will depend on the proportion of cross-strait production capacity and the sales strategies of the companies, making it difficult to equate the extent of revenue impact uniformly.

In this scenario, affected companies will need to take measures to avoid losing long-term orders. Besides increasing production capacity in China or even third-party locations, another viable direction is to intensify efforts in developing high-end products to enhance customer retention. However, the latter will require government support in terms of policies, such as R&D and investment tax credits. Although the 134 items represent only a part of the early harvest list, and some items may not be impacted this time, companies should use this opportunity to develop a risk awareness and prepare in advance.




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