Chinese, S Korean firms in garlic spat

MOC calls for proper settlement of dispute after Shandong shipments rejected for 'not meeting standards'

China's Ministry of Commerce (MOC) on Wednesday called for an appropriate solution to a commercial dispute between garlic exporters in East China's Shandong Province and a South Korean State-run importer for the sake of healthy bilateral trade.

The Economic and Commercial Counselor's Office of the Chinese Embassy in South Korea and Shandong authorities including the Department of Commerce of Shandong Province have been requested to actively help with the negotiation and settlement, according to a statement posted on the MOC website.

The MOC statement came after three garlic exporters in Lanling county complained about the rejection of about 2,200 tons of garlic in December 2014 by Korea Agro-Fisheries & Food Trade Corp for alleged quality problems.

A manager of Lanling Jinyifa Food Co, surnamed Wang, was surprised by the rejection of the garlic, of which 600 tons had been supplied by his company.

"We were told that our garlic failed to meet some of the quality standards in South Korea. But we have encountered similar issues in South Korea before, and it is the first time that the shipment has actually been returned," Wang told the Global Times Wednesday.

In response to this, the South Korean importer said in a statement e-mailed to the Global Times on Wednesday that the contract clearly stated that "shipments will be returned if they are unable to meet the standards."

The dispute should strictly follow the contract terms, but the company will take it seriously to protect the healthy development of bilateral trade, said the South Korean company.

Four companies had won a South Korean government procurement bid for 3,000 tons of garlic in November 2014 but only one passed the inspection and had its 800-ton garlic shipment cleared, according to the statement.

The three suppliers of the remaining 2,200 tons failed to meet official South Korean standards even after two inspections, said the statement.

After being notified of the Chinese companies' complaints, the department has already been trying to facilitate the resolution of the dispute for the past two weeks, a staff member with the Department of Commerce of Shandong Province told the Global Times Wednesday on the condition of anonymity.

The companies expect that local authorities can help map out specific and practical solutions as soon as possible, said Wang, noting that an estimated 10 million yuan ($1.6 million) in losses may have been caused by the rejection for the three involved companies.

Amid falling prices and weak demand, South Korean importers of garlic may likely refuse to purchase more garlic, Cui Xiaona, an industry analyst with Shandong-based market consultancy SCi99.com Inc, told the Global Times Wednesday.

Given sufficient supply as a result of good weather at home, South Korea saw the prices of various vegetables drop in 2014, with garlic sliding 13.7 percent, Yonhap News Agency reported on January 7.

Cui noted that the incident will hardly influence China's overall garlic exports, as the South Korean market is not a major one.

Data from SCi99.com Inc showed that in 2014, 16,000 tons of garlic were exported to South Korea from China, out of the total Chinese export volume of 1.75 million tons.

It is hard to tell who is right or wrong, but the incident exposes the lack of communication between the entry-exit inspection and quarantine authorities of the two Asian countries, Bai Ming, a research fellow with the Chinese Academy of International Trade and Economic Cooperation, told the Global Times Wednesday.

If exports that have passed the inspection from Chinese authorities can be waived from undergoing another inspection from South Korea, the bilateral trade will be further boosted, as the two countries have closed negotiations on a free trade agreement in 2014, Bai noted.

So far, most of the rejected cargo has been transported back to Shandong after being held up for several days in Busan port, said Wang, noting that the company reluctantly decided to sell the garlic locally at a discount.

Cui, however, is concerned that the garlic market in China is lackluster at the moment, following strong supply in late January.