Australian seafood exporters are making good on lower Chinese import tariffs this year, although they still export more to the Asian giant through third countries, especially Vietnam.

From January to April, Australia exported rock lobster, abalone, mussels and other seafood products to the tune of $66.7 million to China, more than during the whole of last year, according International Trade Center (ITC). Rock lobster exports – Australia’s biggest seafood export by far — increased particularly strongly, up nine-fold during the period to $41.8m.

Behind the surge is a reduction in Chinese import tariffs which has made Australian seafood more competitive on Chinese markets. The reduction in tariffs is a benefit of the free trade agreement (FTA) between China and Australia, which came into effect in late 2015.

This year China reduced tariffs on Australian seafood by 2-5%, with import tariffs on all Australian seafood to China set to fall gradually to zero by 2019.

But, Australian seafood exports to China still fell behind Vietnam, the southeast Asian country with a population of 93 million compared with China’s population of 1.3 billion, according to official trade data.

Vietnam imports huge quantities of Australian seafood largely to ship in lorries from Haiphong port in north Vietnam to China across the border; by avoiding import duties, sales tax and Chinese customs inspection and quarantine, smugglers can charge lower prices on Chinese markets than importers using official channels. According to an industry source at a rock lobster company based in Australia, up to 95% of rock lobster shipped to Vietnam ends up in China through this route.

Earlier this year Undercurrent News estimated this ‘gray trade’ with Australia — including a similar illegal trade through Hong Kong — was worth approximately $500 million.

However, the China-Australia FTA deal should render smuggling commercially unviable in the long-term.

In the Jan-April period of this year, Australia exported $190.0m worth of seafood to Vietnam, almost three times as much as to China. However, this was 23.3% less than during the same period last year (see chart 1).

Australia’s seafood exports to Hong Kong, meanwhile, fell 20.8% year-on-year to $40.5m.