May 8, 2018 / 4:23 AM / a year ago

UPDATE 2-China April soybean imports unexpectedly drop below 7 mln T due to VAT change

* April soybean imports drop to 6.9 mln T vs 8.02 mln T a year ago

* Exports drop as border inspections delay clearances -analyst

* Buyers also delay imports because of lower VAT from May 1

* Drop in imports comes amid threat of high tariffs on U.S. beans (Recasts, updates throughout, adds comment)

By Dominique Patton

BEIJING, May 8 (Reuters) - China’s April soybean imports fell to 6.9 million tonnes, much lower than expected, as arrivals were delayed because of tougher port inspections and a tax change, said traders and analysts.

The 13.7 percent drop from a year ago to less than 7 million tonnes caught the market by surprise. China had been expected to take 8.5 million tonnes in April, higher than last year, amid good crushing margins in the world’s top buyer of beans.

The lower-than-expected number appears partly related to a 1 percentage point reduction from May 1 in the value-added tax on agricultural imports, said traders.

A similar move last summer prompted many buyers to delay clearing soybean shipments through customs to take advantage of a lower tariff, causing a backlog of vessels at ports.

China reduced the previous 11 percent VAT to 10 percent this month.

“From May 1, the VAT was due to decrease by 1 percent so most people would have tried to postpone going through customs [until then],” said a trader with an international trading firm.

The lower imports also came as China prepares for the possibility of an additional 25 percent tariff on soybeans from the United States that threatens to sharply curb trade and send prices soaring.

China imports 60 percent of the oilseeds traded worldwide to make meal for animal feed for its massive livestock herd, with about one-third typically coming from the United States.

Some cargoes may also have been held back by tougher inspections on U.S. soybeans, said the trader.

China tightened quality standards on U.S. soybean imports late last year, reducing the amount of foreign material allowed in shipments to 1 percent.

At least two vessels were held up because of phytosanitary checks in recent weeks, said another source at a major importer, but they have now been discharged.

Monica Tu, an analyst at Shanghai JC Intelligence Co Ltd, said talk in the market suggests increased inspections at ports are delaying the clearing of cargoes to more than one month, up from one to two weeks typically.

China’s General Administration of Customs did not immediately respond to a fax on the issue.

Beijing has recently stepped up checks on imports of other U.S. produce including fruit and logs, amid simmering trade tension between the two nations.

The threat of duties on U.S. soybeans has however effectively frozen future purchases from the United States, said trade sources recently.

April’s imports were up from 5.7 million tonnes in March. Arrivals for May are expected to be much larger, as delayed cargoes are cleared, and after buyers rushed to stock up on beans from a huge Brazilian harvest, benefiting from good domestic crushing margins.

If tariffs on U.S. soybeans are implemented, China’s crushers would see much tighter supply in the second half of the year, when China typically buys most of its beans from the United States.

Soy imports SB-CN-IMP in the first four months of 2018 were 26.49 million tonnes, down from 27.54 million in the same period in 2017, the customs data showed. (Reporting by Dominique Patton; Editing by Christian Schmollinger and Tom Hogue)

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