Drink producers shun China corn syrup imports to avoid new levy

PHILIPPINE beverage producers are swapping their imports of highfructose corn syrup (HFCS) for domestic sugar to avoid higher taxes on the alternative sweetener, industry and government officials said, limiting exports from top supplier China.

Losing the Philippine market, or bulk of it, could lead to an oversupply of HFCS in China at a time when Chinese producers are expanding output of the sweetener from huge domestic corn stocks.

The Philippines was the biggest market last year for China’s corn syrup, buying 290,080 tons, or half of China’s exports.

The government on Jan. 1 imposed a tax of P6 a liter on drinks using sugar and other sweeteners versus a tax of P12 on HFCS.

The levies, part of a broader tax reform package, will be used to fund a countrywide infrastructure development program.

“Starting Jan. 1, 2018, we have shifted away from the use of HFCS,” Juan Lorenzo Tañada, director for legal and corporate affairs at CocaCola Philippines, the country’s top HFCS importer, told Reuters in a text message.

Mr. Tañada said the move would reduce the impact of the higher tax on its customers, adding the company will “re-export the HFCS that we are no longer going to use due to our shift to sugar.”

Sweetened beverage producers are the biggest HFCS buyers in the Philippines.

Pepsi Cola Philippines, another major HFCS importer, is disposing its HFCS supplies “by selling them abroad little by little, whatever we can sell,” according to a company official who declined to be named because he was not authorized to speak to the media.

China’s HFCS producers may end up flooding their domestic market if they lose their market in the Philippines, said Meng Jinhui, an analyst with Shengda Futures in Beijing.

“If the Philippines does not import any from China, it will add huge

pressure on the domestic industry,” Mr. Meng said.

“That part of output would have to be diverted back to the domestic market, further causing oversupply,” he added. —