[Regulations Raising Prices]② "Peanut Snacks, It's Better to Make Them in China"

Dependence on Imported Processed Peanuts... High Tariffs on Quota Volumes
Setting Up Factories in China More Advantageous Than Domestic Production
Domestic Peanuts Market Segmented for Gourmet Use

"We are contemplating whether to give up producing peanut snacks in domestic factories. It might be better to relocate the factory to China, where securing raw materials is easier and price competitiveness is higher, or to import finished products instead." This is the lament of the head of a domestic peanut processing company. This company imports processed peanuts from China to make snacks. However, recently, the price of Chinese peanuts has soared, and with a 40% tariff imposed, it has become difficult to sustain operations. Moreover, the tariff on importing finished peanut snacks is only 8%. The industry argues that the import tariff on processed peanuts should be lowered so that the benefits can reach small and medium-sized enterprises and consumers.

On the 4th, the Korea Peanut Production, Distribution, and Processing Association announced that the market access volume (TRQ) for imported peanuts this year is 10,907.3 tons, a slight increase from about 10,500 tons last year. TRQ refers to a system where the government imposes low tariffs only on a certain allowed volume and applies high tariffs on quantities exceeding that. Peanuts are designated as an import-managed item to minimize damage to farmers and improve food self-sufficiency. The tariff rates for the peanut market access volume are 24% for raw peanuts and 40% for processed peanuts. Processed peanuts are peanuts processed for confectionery and bakery use. For quantities exceeding the quota, tariffs rise sharply to 230.5% for raw peanuts and 57.5% for processed peanuts.

The problem is that the tariff rates for peanut market access volumes are higher compared to other import-managed items. While peanuts have a low tariff rate set at 40%, beer malt is 30%, wheat starch is 8%, and soybeans are 5%. Additionally, the price of imported peanuts has recently surged. The Korea Agro-Fisheries & Food Trade Corporation explained that the price increase is due to reduced production and inventory shortages among local trading companies. As of February, Chinese peanuts account for over 90% of total imports. This explains the continuous pressure for price increases in the peanut processing industry.

The industry agrees with the policy's intent to protect domestic peanut farmers. However, since the markets for domestic peanuts and imported volumes are separate, they argue that tariff reductions on the market access volume should be considered. Byung-tae Yoo, Executive Director of the Korea Peanut Production, Distribution, and Processing Association, explained, "Domestic peanuts are consumed 100% as preferred food products, but the processed peanuts entering as concession volumes are used entirely for manufacturing and processing."

The talk of giving up domestic production arises because most peanuts used to make peanut snacks must be imported from China, where a 40% tariff is imposed. In contrast, the tariff on importing finished peanut snack products is only 8%. An industry insider said, "There are about 250 domestic peanut manufacturing and processing companies, but except for a few large corporations, most are small-scale businesses that find it difficult to cope with currency fluctuations and overall increases in food raw material costs."

The industry insists that tariff adjustments on market access volumes should reflect market conditions and lead to price reductions. Executive Director Yoo emphasized, "We need to create data showing that tariff adjustments actually result in price reductions. It is also important to establish a structure where these benefits go not to large corporations but to small and medium-sized partner companies and consumers."