The US sent letters to Enterprise Products and Energy Transfer on Wednesday informing the companies they could load ethane on vessels destined for China but could not unload the ethane in China without authorization, according to a person familiar with the matter and copy of one letter.
The letters from the US Department of Commerce follow a licensing requirement imposed several weeks ago on the companies’ exports of ethane to China, which halted shipments and led to vessels anchoring in or hovering around the US Gulf Coast.
The letters may signal the US preparing to lift restrictions imposed on exports to China in late May and early June, as the US-China trade war shifted from retaliatory tariffs, to curbs on each others supply chains. With China granting rare earth export licenses to some firms and saying it would speed up the approval process, the US now appears close to permitting ethane exports to China.
Still, the companies are highly unlikely to risk loading the ethane on vessels and sending them on their way, the person familiar with the matter said. If the vessels make their way to China, it may be difficult to stop them from offloading the ethane and the companies could face penalties of up to twice the value of the shipment if they do.
A copy of the letter seen by Reuters and later released by Enterprise Products said, “This letter authorizes Enterprise Products to load vessels with ethane, transport and anchor in foreign ports, even if… to a party located in China,” the letter said. “However, Enterprise Products may not complete such export… to a party that is located in China,” without further authorization.
The securities filing with the letter did not include additional comment.
Enterprise Products and Energy Transfer, two of the top US ethane producers and exporters, did not respond to requests for comment. About half of all US ethane exports go to China, where it is used by the petrochemical industry.
The US Department of Commerce also did not immediately respond to requests for comment.
The ability to load and begin transporting ethane could relieve congestion at ports along the US Gulf coast, where vessels have been stalled.
Since May 23, the US imposed new restrictions on exports to China of everything from ethane and chip design software to jet engines and nuclear plant parts.
