GLNCY Glencore Plc (PK)

By Paul Vieira 

OTTAWA -- China has revoked the permit for a second Canadian grain handler to ship canola seed into the world's second-largest economy, reinforcing fears among grain growers that they have become collateral damage in the diplomatic dispute between Ottawa and Beijing over a detained Huawei executive.

Chinese customs authorities posted a notice online Tuesday indicating that they had revoked the export license held by Viterra Inc., a unit of Glencore PLC, citing the discovery of pests in canola-seed shipments that arrived in the Chinese cities of Dalian and Nanning. The suspension is required "to prevent the introduction of harmful organisms" into the country, the notice added.

The formal move by China comes days after the Canola Council of Canada warned that Chinese importers have ceased buying Canadian canola seed altogether, regardless of the processor. A spokesman for the council said the Viterra ban should prompt Canadian officials to redouble efforts to find a solution.

A spokesman for Viterra, of Regina, Saskatchewan, said the company is gathering more information about the reasons underlying China's decision. "Market access issues such as this one hurt our industry and Canadian farmers," the spokesman said. Canadian food-inspection officials have said their review of foreign-bound canola seed meets foreign-import requirements from China.

Canola industry officials and China experts say Beijing's canola moves are part of China's efforts to persuade Canadian authorities to release Meng Wanzhou, Huawei Technologies Co.'s chief financial officer. Ms. Meng was arrested by Canadian officers in December, at the behest of U.S. authorities, under terms of an extradition treaty, on allegations that she and Huawei violated U.S. sanctions on Iran. She is on bail in Vancouver, British Columbia, and is scheduled to return to court in early May.

"We think this is part of a larger Canada-China issue, and we hope it gets resolved expeditiously," said Jean-Marc Ruest, vice president and general counsel at Richardson International Ltd., Canada's largest grain processor, which had its China canola permit revoked earlier this month.

A former senior Canadian foreign-policy official concurred. "I would be very surprised if China's canola clampdown were not connected to the Meng case," said Roland Paris, a politics professor at the University of Ottawa and former foreign-affairs adviser to Prime Minister Justin Trudeau.

Roughly 90% of canola seed production in Canada is export bound in one form or another, in either seed, canola oil or canola meal. China is by far the biggest market. Canadian canola-seed exports to China totaled 2.7 billion Canadian dollars (US$2.02 billion) in 2018. On a volume basis in the most recent crop year, ended July 31 last year, Canada shipped 4.32 million metric tonnes (4.76 million tons) of canola seed to China, or more than the No. 2 and No. 3 markets combined.

"Obviously we have seen a certain amount of challenges in our relationship with China over diplomatic issues and the rule of law," Mr. Trudeau said in Winnipeg, Manitoba, Tuesday hours before a scheduled meeting with senior executives from Richardson International.

China also detained two Canadians immediately after Ms. Meng's arrest, and has alleged the two worked together to steal Chinese state secrets.

Mr. Trudeau said his government was treating China's ban on canola seed on an urgent basis, reminding reporters that Canada's foreign minister, Chrystia Freeland, is the daughter of a canola farmer.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

March 26, 2019 16:28 ET (20:28 GMT)

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