The number of permits issued for export licences into China, especially for dairy products, has “gone through the roof’’ as the Australian government has moved to rein in unscrupulous practices in the burgeoning grey market trade between the two countries.
Dairy Australia’s International Market Access manager, Stewart Davey, said the federal department of agribusiness and water resources was moving to successfully bring non-compliant exporters “into line’’.
It comes after Deputy Prime Minister Barnaby Joyce revealed in April that the Department of Agriculture had executed a search warrant in relation to an investigation into illegal infant formula exports as part of a crackdown on unlawful practices.
Demand on the grey market late last year saw Australian supermarket shelves cleared of infant formula products by Chinese tourists, students, migrants and middlemen who took them back to China for family members or made big profits by selling them on the internet.
The buying prompted a backlash from Australian parents, who feared they would not be able to source enough product for their children. Many sales and purchases are made through major business-to-consumer (B2C) platforms such as Alibaba’s Tmall platform and China’s largest direct-to-consumer e-retailer JD.com.
“The department have had this issue raised with them. They are looking at ways they can tighten that up. I know that towards the end of the last year and early this year the number of permits issued for export licences for dairy in particular went through the roof,’’ Mr Davey told an Australian China Business Council (ACBC) Forum at the offices of Dairy Australia in Melbourne.
“The number of licences issued in the first quarter of this year were more than issued during the whole of last year. So there has certainly been a focus on trying to bring those people into line.’’ Mr Davey said infant formula exports to China were now worth $500 million to Australian dairy farmers.
The government has stepped up its scrutiny of exporters of packages more than 10kg, demanding a health certificate and compliance with a series of import requirements imposed by the Chinese government.
Small exports of baby formula are legal but those over 10kg must be sourced from registered exporters.
The Chinese government has also introduced a new tax of 11.9 per cent on goods bought from foreign websites, designed to eliminate the competitive advantage of offshore retailers who avoid taxes imposed on local sellers.
The value of Australian agricultural and food exports to China is now $11 billion and the Department of Agribusiness and Water Resources told the ACBC forum that the first five months of 2016 following the signing of the China Australia free trade agreement last year had seen a big lift in sales of key products into China.
The Department’s Assistant Secretary Brett Hughes revealed fresh cherry exports had doubled, milk powder sales had tripled, infant formula exports had increased fivefold and lobster exports tenfold over the period.
Mr Hughes agreed there were “reputational risks’’ with grey market sales “particularly when we are talking about fresh products’’. “That certainly is an area that is being looked at,’’ he said, noting the Chinese authorities also had to be given time to adjust their regulatory regime to the new trading environment.
“It is a difficult area but we understand there are risks.’’
Earlier this year the Australasian boss of the booming a2 Milk business Peter Nathan described the booming trend of Chinese buying Australian brands as “the dawn of a new era”.
Stewart Davey said shipments that were less than 10kg were not “necessarily dangerous’’ but were a “risk to the industry in terms of potentially product being shipped up there that doesn’t comply with the Chinese regulations’’. “There are slight differences in regulations and composition requirements for various products, which means products sold here in Australia may not necessarily be compliant with what is being sold in China,’’ he said.
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