Will the China Tariffs Affect My Spice Order? What You Need to Know About How Your Onion & Garlic Sourcing Will Change
Are you worried about how your ingredient sourcing will be affected by the China tariffs? You aren’t alone.
As part of a group of products that form a $250 billion component to the U.S. administration's recent duty legislations, sourcing Chinese garlic and onion has been a hot topic since Fall 2018 when the first tariff increase of 10% was imposed. In February 2019, a further 15% duty increase was applied, and in September 2019, another 5% was raised on dried garlic and onion products, and the latest duty increase will take effect from October 15, 2019.
When taking into consideration the incremental duties, the tariff rates for dehydrated onion and garlic have moved from 29.8% to the current rate of 54.8%. An additional increase is scheduled to take effect in October, effectively doubling the duty rate to 59.8% over the past year. Moreover, this sharp increase is being felt across the globe.
Whether you are buying bulk or purchasing a single box or bag, the change in garlic and onion pricing is going to affect you. These changes will be especially worrisome if you’re currently buying offshore, or specifically Chinese products. Furthermore, there’s no indication from the U.S. government that these tariff increases will stop.
So how is the market responding to the China tariffs?
Since the China tariffs were imposed, the market has responded over the last nine months as follows:
- End users have asked their importer and/or suppliers to move material into the USA ahead of the duty changes and warehouse product in the U.S. to minimize the impact of duties. The downside of this is that a significant portion of the Chinese garlic in the U.S. being sold at lower prices is most likely over 12-18 months old — with associated quality and flavor issues.
- Some importers have resorted to “tariff engineering” to minimize import duty incidence. This involves bringing in the dehydrated garlic under different HTS codes with lower duties. This is potentially dangerous as importers may be infringing on labeling laws. Moving forward, importers and end users must develop alternate strategies to reduce dependence on Chinese garlic imports to minimize supply chain risks and stabilize supply. Shifting to U.S. garlic from Chinese garlic is a viability alternative that works well across numerous applications and markets.
Considering these market changes, here are the three things your business should be on the lookout for as you source garlic and onion:
1. Ensure You’re Buying the Right Product.
To mitigate the price changes, tariff engineering practices are happening more frequently, which means products are being falsely declared. For example, dehydrated garlic is being declared as roasted garlic because the duties on this product are much lower. Instances like these — where products are being sold with incorrect HTS codes — can reduce the 60% duty to 35%. In addition to misdeclaration, importers have been labeling products as a blend, for example, containing 99% garlic and 1% onion, because there is no specific duty on such a combination. While this may seem like a small problem, these importers are essentially selling stolen goods.
Validating the source of the Chinese garlic supply is becoming imperative. End users should confirm the processing company in China has GFSI accreditation for food safety and quality, and should also ensure the garlic has been imported under the correct HTS codes and labeled appropriately. Securing certification documentation from the processing entity in China and a declaration from the U.S. importer of the HTS codes under which product has been imported and labeled is useful evidence in this area. In addition, conducting peanut allergen tests of material through accredited U.S. labs would also help ensure the quality of the product.
2. Understand the Costly High-Risk Alternatives.
Due to the loss in transparency because of mislabelling, companies are taking a significant risk in buying low-priced items. While these lower-priced options may be more attractive in the short-term, they are high-risk. By opting to purchase products that are created using these dishonest tactics, buyers are liable for the Customs Border Protection (or CBP) to confiscate their goods or pay a fine.
On the surface, a customer might not even know that an item is undeclared or misdeclared. However, a blend or roasted garlic product that is significantly below the market price might be fraudulent, and you could be at risk for violating customs law by purchasing. The CBP is becoming more vigilant, and are aware that there are sellers in the market trying to circumvent the new duties.
3. Get Quality Assurance.
Here’s the truth: Chinese product is grown and processed in different circumstances than in the United States. Where there are many regulations in place in the U.S. to ensure that there is full traceability for products, there are fewer restrictions in place in China. Products like garlic are often grown in the same fields in conjunction with peanuts or are rotated alternatively with the peanut crop. These practices can cause unintended co-mingling of peanuts and garlic, leading to the presence of undeclared peanut allergens in the end product. Based on tests of over 100 samples of dehydrated garlic sold in the retail space across the U.S., Olam has determined that one out of every five bottles of dehydrated garlic contains undeclared peanut allergens. This peanut allergen presence may or may not constitute a health risk and will depend on the extent of allergen present and the allergen sensitivity of the consumer. If found, the presence of undeclared peanut allergen in a retail product is potential ground for a Class 1 product recall. Are a few cents of savings worth putting your consumers — and reputation — at risk?
While the first step is to bring these risks to light, the second is to prepare for the instance that all suppliers and buyers of Chinese spices need to look at domestic alternatives. California garlic, while more expensive on the surface, does provide shelter from all of these risks mentioned above.
As the leading supplier of California garlic worldwide, Olam can help protect your business from inferior quality products and possible retribution for purchasing mislabelled goods. Here’s how:
1. Our California garlic is fully traceable.
Grown in the San Joaquin Valley, we work with local farmers to grow the best tasting garlic available on the market with proprietary seed varieties that are exclusive to Olam. We offer a full range of products that meet USDA standards, including but not limited to, kosher, halal, and gluten-free options, and we are also USDA organic certified, CCOF certified, and non-GMO project verified. When you buy our California garlic, you get full traceability from the field to the factory and no risk of allergens or mislabelled goods.
2. We offer a superior product that will save you money long-term.
You can offset some of the high-costs of buying Chinese garlic by purchasing California garlic which is intrinsically higher in both quality and flavor. We have tested it, and you can use essentially half the amount of California garlic as Chinese garlic for the same (or better) flavor profile. Even with inflated pricing due to duties, or the cheaper options offered by the unconventional routes, purchasing California garlic is a better buy. To learn more, or order a free sample, create an account today.
3. We provide alternative options at varying price levels.
For price-sensitive customers, we can offer California economy garlic powder, which comes with all the benefits of U.S. garlic at a price which rivals China. The economy garlic option is only available in the powder form and may only work in some applications. However, it is fully traceable, non-GMO, gluten-free, peanut allergen-free, and economically priced. So whether you want to buy economy or premium garlic, you know that your spice choice is viable and profitable.
So, How Can You Have Certainty in the Market? By sourcing intentionally.
As the trade war continues, the price and quality of Chinese garlic and onion will continue to fluctuate. If you are averse to risk and want to safeguard the quality of your product from these changes, it’s time to buy U.S. grown.
At Olam, we can help protect your customers, your revenue, and your reputation with options that fit any budget and any flavor profile. To get started, explore our California garlic and onion options here, or you can sign up for an account and request a free sample today.