China Imposing 25% Tariff to Medical Devices Imported from the US according to the List

  • 2019-05-15
Medical device products, including large instruments and equipment, consumables and reagents, are involved in the China-US Trade War escalated again.

The date of imposing tariff determined
The trade friction between China and the US has been deepening since 2018, experiencing an unpredictable course of intensification, truce, restart and escalation.

On May 9, American government announced that the tariff imposed to USD 200 billion of listed goods imported from China would be increased from 10% to 25% from May 10.

On May 13, the Office of the Customs Tariff Commission of the State Council said that the measures mentioned above led to the escalation of trade friction between China and the US, went against the consensus of the two parties on settling trade disputes through negotiation, destroyed the common interests of the two parties and did not meet the general expectation of the international community.

In order to safeguard multi-bilateral trading system and its own legitimate rights and interests, China had to adjust the tariff imposed to some products imported from the US.

According to such laws and regulations as Foreign Trade Law of PRC and Regulations of the People's Republic of China on Import and Export Duties and the basic principles of the international laws, subject to the approval of the Party Central Committee of CPC and the State Council, the Customs Tariff Commission of the State Council decides as follows:

Tariff imposed to USD 60 billion of some listed American goods would be increased to 25%, 20% or 10% respectively from June 1, 2019. The 5% tariff previously imposed to listed goods would be continued.

On May 13, an international comment "China is ready for a comprehensive response" on this matter was released on the CCTV News.

List of tariff imposed to equipment, consumables and reagents
The list of USD 60 billion American goods announced not only includes large medical equipment and instruments, but also includes consumables and reagents.

Specifically, 25% tariff is imposed to 2,493 categories of goods, including the medical products of X-ray contrast agents, diagnostic reagents, X-ray photographic films, surgical gloves and other consumables.

20% tariff is imposed to 1,078 categories of goods, including disinfectors for medical use and laboratories, X-ray non-destructive detectors, audiometers, thermometers and other conventional medical device products.

10% tariff is imposed to 974 categories of goods, including articles of rubber clothing and α, β, γ ray equipment for medical use and other medical, surgical or veterinary equipment and parts.

5% tariff is imposed to 662 categories of goods that are mainly equipment and instruments with high technical requirements and some consumables, including absorbent cotton, gauze, bandages (impregnated or prepared with drugs and retail package for medical, surgical, dental or veterinary use), sterile surgical catgut, sterile kelp, sterile adhesive plaster, sterile absorptive hemostatic materials, sterile anti-adhesion barrier materials for surgery and dentistry and blood grouping reagents of similar sterile materials. B ultrasound, color Doppler ultrasound and ECG recorders are also included.

Besides, tariff is also imposed to some spare parts of equipment and semi-finished goods for consumable production.

Leaders of the Tariff Department said that China would adopt above tariff measures to safeguard its own legitimate rights and interests and curb the escalation of trade friction by  taking countermeasures, and China hoped that the US should return to the right direction and carry out bilateral economic and trade consultation. The effect of relevant measures on production and people's living needs should be minimized.

The escalation of the trade war has made positive and negative effects on the medical device industry in China.

Little effect on export
According to public data shows, in recent years, China's export of medical device products to the US has been steadily growing and, from the perspective of product segments, China mainly exports low- and medium-end products and low-cost consumables. At present, top ten exported products are mainly massage health instruments and medical consumables and dressings, accounting for about 50% of total export of medical devices.

As analyzed by insiders, the sale price of China's corresponding products in the US would rise, and the amount of export would likely reduce after the US imposes the tariff. However, China still has cost advantages. The imposing of the tariff would be conducive to turning to European market and expanding to emerging markets in terms of channels.

In addition, some medium- and high-end products would be affected greatly. Due to the relevant core technologies not fully mastered and the lack in industrial production experience, some products now need to be fully imported.

Likely conducive to domestic medical devices
In terms of the imported medical device market in China, with the improvement in the technological level in research and development and the improvement in product quality, the export of some products is reducing and the market share of domestic enterprises has exceeded that of imported products.

For example, about 80% market share of heart stents in 2018 in China has been occupied by domestic brands, and the import of heart stents has been basically substituted.

The policy environment is favorable and good in China, and NMPA has issued several specific measures to support the development of domestic medical devices. It is specified that domestic products should be firstly procured on the premise of quality assurance and they shall not be restricted or excluded from the bidding with unreasonable conditions.

According to the several reports on the industry, the market share of domestic medical devices is increasing ceaselessly in the segments of medical imaging, IVD, high-value consumables, low-cost consumables, patient care and medical information application etc.

Therefore, it is undoubted that the escalation of the trade war and the imposing of the tariff are unfavorable for agents of products and reagents produced by US-funded companies or from the US due to the increase in the maximum tax of 25%. The procurement prices of enterprises in China will be higher than before. According to the principles of economics, it is possible for these factors to lower the share of imported equipment in the domestic market and the purchase will be reduced accordingly, which can provide more space for the development of domestic equipment.

Source: Medchina