Controlling Food Prices... Zero Tariffs on Sugar, Pork, and More

Temporary Tariff Reduction on 8 Concentrated Agricultural and Marine Products
International Sugar Prices Rise 70% Above Average

The government has decided to exempt tariffs on sugar and raw sugar until the end of the year. This measure aims to prevent ‘sugarflation’ (sugar + inflation), where soaring international sugar prices lead to price increases in bread, snacks, ice cream, beverages, and more. Additionally, to ease the inflationary burden caused by price hikes in popular foods such as pork and mackerel, tariffs will also be set to 0% starting next month.

On the 30th, the government resolved at the Cabinet meeting to temporarily reduce the sugar quota tariff and the basic tariff rate on raw sugar to 0% until the end of the year. The tariff reduction measures are expected to be implemented early next month.

The basic tariff rate on sugar is 30%. However, a 5% quota tariff was applied to 105,000 tons. With this quota tariff reduction, the revised tariff rate (0%) will apply to about 80,000 tons, excluding 25,000 tons already imported.

According to the International Sugar Organization, the average annual global raw sugar production over five years (2017?2021) was 171 million tons. Brazil accounts for 20.2%, India 17.3%, the European Union (EU) 9.4%, and Thailand 6.4% of production. Regarding raw sugar export volumes, Brazil holds 57.9% of the total 37.4 million tons, with Thailand and Australia accounting for 10.7% and 8.5%, respectively.

However, South Korea relies on Australia and Thailand, where tariffs are waived under Free Trade Agreements (FTA), for 58.1% and 24.8% of raw sugar imports, respectively. The government expects that this tariff reduction will enable diversification of import sources.

An official from the Ministry of Agriculture, Food and Rural Affairs said, "With this measure, the sugar refining industry can enhance competitiveness by diversifying raw sugar import sources to countries like Brazil, where a good harvest is expected in the second half of the year. Also, the sugar quota volumes, which had been slow to enter due to high international prices, can now be smoothly imported."

Alongside this, the government will also reduce tariffs on eight agricultural, livestock, and fishery products, including pork and mackerel, to 0%. Pork demand has increased recently due to more outdoor activities and dining out, while supply has decreased due to rising import prices from Europe. As a result, the price of pork belly in May is expected to be about 17% higher than the average. To alleviate short-term supply instability and stabilize consumer prices, the government will apply a 0% quota tariff on up to 45,000 tons.

Additionally, for mackerel, the quota tariff will be reapplied at 0% instead of the basic 10% tariff. The 0% quota tariff period for ethanol (used as a raw material for soju and other liquors) will be extended from the end of June to the second half of this year. Palm kernel and distillers dried grains will also have a 0% quota tariff instead of the basic 2% tariff. For ginger, the market access volume subject to a lower tariff rate (20%) will be increased by 1,500 tons until the end of September.

Meanwhile, international sugar prices began rising at the end of 2022 due to poor harvests in major producing countries such as India and Thailand in the first half of the year. As of the 25th, the international sugar price was $699 per ton, up 28.4% from May last year ($543) and 69.4% above the five-year average ($412). It surged to 87.4% of the record high price of $799 in 2011. International raw sugar prices have also risen similarly, currently at $549 per ton, up 29.3% from a year ago and 68.0% compared to the five-year average.

In response to the steep rise in sugar prices, the Ministry of Agriculture, Food and Rural Affairs has been holding emergency inspection meetings sequentially since March with the sugar refining, sugar import, and food industries to monitor sugar supply and price conditions and explore stabilization measures with related ministries.

At these meetings, the related industries requested tariff reductions, which the government accepted, deciding to lower the applied tariff rate on the remaining sugar quota volume from the current 5% to 0%, and the basic tariff rate on raw sugar (currently 3%) to 0% as well.