Thursday 2 July, 2020

Blue Power hit by new duty on soap exports to Caricom

Dr Dhiru Tanna, chairman of Blue Power Limited has indicated that a new ruling from the World Customs Organization, will lead to a fresh 40 per cent charge for bath and laundry soaps produced by the company from palm-oil based noodles and exported to Caricom nations.

The products, Jamaica Customs advised do not meet Community Origin requirements.  

The soaps, Tanna said are, therefore, ineligible to receive preferential treatment under the Revised Treaty of Chaguaramas.

The company’s exports to CARICOM countries will now attract the duty rate, which is charged to soap imports from outside the region which is 40 per cent in most Caricom countries.

Tanna stated that the company intends to lobby for change to the ruling and that Jamaica Customs itself said it will enter into a negotiation with Caricom trading partners for an adjustment.

“For 19 years the tariff code we were using was accepted here and elsewhere in Caricom. Soaps made in Caricom did not pay any duty. Soaps from outside the region pay 40 per cent,” Tanna told Loop News

Tanna outlined that Caricom sales accounted for 20 per cent of Blue Powers’ sales. In 2018 exports to Caricom were over $102 million.

The chairman further said that there are no domestic alternatives to the raw materials used which are the basis of the new ruling.

“There are no domestic alternatives in the region.  Coconut oil goes mainly for cooking,” he said. 

In the notice published via the Jamaica Stock Exchange, the company chairman stated that the application of the duty “may make it uneconomical for the importing countries to buy from Blue Power.”

“Jamaica Customs is aware of the importance of the industry to Jamaica and has offered to negotiate with the other CARICOM countries which are affected to have the rules changed to restore the preferential treatment for regional manufacturers within CARICOM countries,” Tanna said.

This may however take time, Tanna noted.

The rule is expected to apply to all manufacturing countries using similar raw materials as Blue Power and means that imports of soap from regional countries (using the same manufacturing process) will also face the same tariff barrier.

In the meantime, Blue Power will take steps to increase its sales in the domestic and non-CARICOM markets while continuing to lobby for a change in the rules, Tanna shared.

Local supplies and exports to non-CARICOM countries like the US and the UK are not affected by this ruling.
With effect from August 1, the results of the soap maker exclude the former Lumber Depot division which has been sold via IPO.

For the quarter ended October 31, 2019, sales at Blue Power Group of $113 million produced an operating profit of $18 million and $28 million after tax.

For the previous year when after-tax profit for the quarter was $27 million with the operations of the Lumber Depot division included.

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