S. Korean move leaves Chinese garlic farmers fuming

File photo shows a garlic farmer works her land in Jinxiang county of East China's Shandong province on June 1, 2010. [Photo/Xinhua]

Commodity exporters from Lanling incur huge losses after consignments are rejected on quality issues

Garlic exporters in Lanling county of Shandong province have been urged to search for new buyers after South Korea's Agro-Fisheries Trade Corp rejected shipments from the region last month, even as the local government vowed to take legal action against the move.

About 2,200 metric tons of garlic shipped by exporters in Lanling to South Korea were returned in January because of quality issues, the Asian country claimed.

The local farmers had won a South Korean government procurement bid to export 2,200 tons of garlic in November. The farmers had to prepare the products within one month and transport them to Busan Port in two batches.

Song Jiacai, general manager of Lanling Jinyifa Food Co, which has been supplying garlic to South Korea for more than six years, vehemently denies that the garlic shipments had quality problems.

"The South Koran authorities deliberately created technical obstacles by using the wrong inspection procedures for Chinese garlic," he said.

Though the intermediary company and the exporters had purchased garlic from local farmers in accordance with the tender document floated by the South Korean authorities, some farmers said they had chosen the best quality products for shipment.

"To be honest, the garlic was carefully selected and the quality is even better than what we sell in the domestic market," said the 41-year-old manager, who, along with 23 local exporters and farmers, plan to appeal to the South Korean embassy, trade and investment representative office in Beijing. Song said the authorities have told him to wait for further information.

With a total loss of more than 10 million yuan ($1.59 million), what the exporters and farmers could not accept are the inconsistent excuses given by South Korea. The country's Agro-Fisheries Trade Corp had given a quality inspection certificate before the delivery of the product. However, after the first batch of products arrived in Busan in December, the country's agriculture department said the products were unqualified.

Due to lack of funds, the garlic was left at Busan port for several days before the Lanling county government helped Chinese exporters and farmers secure bank loans to ship the 110 containers of garlic back to China.

To prevent further losses, the local government has submitted rights protection materials to South Korea's consulate in Qingdao. The Chinese embassy in South Korea and the provincial commerce department of Shandong have also taken up the issue.

Chinese garlic farmers have complained to the Ministry of Commerce about the unfair treatment. The returned garlic has been transported to the province's Jining Port.

Song said he has sold a quarter of his 600 metric tons of garlic after the shipment returned to the province, and the local government will lodge a law suit against South Korea's Agro-Fisheries Trade Corp.

Li Houfu, another Lanling-based exporter, said South Korean government officials came to Shandong province in 2014 to invite bids to supply garlic. Li and other farmers from his county made the bids together.

"I supplied 1,000 tons of quality garlic, which cost 5,650 yuan per ton to purchase. On top of that, I forked out more than 900,000 yuan in site rental costs and 870,000 yuan of maritime transportation costs," said Li.

"We paid 8 yuan for a kilogram of garlic, but the garlic that's been shipped back only sells for 2.18 yuan. It is too heavy a loss to bear."

Zhao Zhongxiu, a trade professor at the University of International Business and Economics in Beijing, said the intermediary company is the cause of the trade dispute as it did not read the bid documents carefully. "Therefore they couldn't understand all the requirements necessary for this specific agricultural product," he said.

"International trade is a tough business, in particular under the current global economic setting," said Zhao. "Chinese intermediary companies and exporters shouldn't sign the contract without sufficient knowledge about what is written on the tender."

Zhao said the Chinese government should also be aware that many exporters are still using methods applied in the domestic market to carry out international trade. Best garlic in the province does not mean it can pass the quality checks in a foreign country.

A similar garlic trade dispute with South Korea occurred in 2000, when the country promised to buy 32,000 tons of Chinese garlic, but imported only 22,000 tons. Amid falling prices and lower demand at home, South Korean garlic importers refused to buy more garlic.

Li Guoxiang, deputy director of the rural development institute at the Chinese Academy of Social Sciences, a government think tank, said that in agricultural product trade, China and many of its trading partners differ a lot in product quality, regular practices, policies, laws and regulation.

"However, many Chinese exporters don't know the disparities well. They lack experience, and many intermediary companies also are not qualified in certain specialized fields. It takes time to know and get used to the environment of overseas market," said Li.

Li said the rejected shipment surely will have an impact on bilateral trade as the two nations just completed negotiations on a free trade agreement last year.