Oscar House
Growing up on his parents’ tobacco farm in North Carolina, Oscar House was exposed to the tobacco business from an early age. In January of 2018, he joined the US Tobacco Cooperative (USTC) as senior vice president of manufacturing. A mere year later, in January 2019, he was promoted president and c.e.o. For the North Carolina native, this is the latest stage in a tobacco industry career that has spanned several decades. Having earned a degree in business from the University of North Carolina as well as an MBA from Duke University, House initially assumed a succession of management roles at Liggett Group (formerly Liggett & Myers Tobacco Company).
But Asia eventually beckoned, seeing House move to Indonesia, where he joined the country’s largest tobacco company, PT HM Sampoerna, which experienced strong growth at the time. He served as director of operations, remaining in that role even after Sampoerna was eventually purchased by Phillip Morris International. Four years later, PMI dispatched House to Bogota, Colombia, where he resumed his role as director of operations, being responsible for overseeing PMI’s manufacturing business.
After many years abroad, House, who is married and has two children, finally returned home and joined USTC. Alas, that was exactly at a time when USTC began to reel under China’s suspension of all US tobacco imports as part of the ongoing China-US trade war, seriously denting the cooperative’s export business.
In this exclusive Q&A, Tobacco Asia picked Oscar House’s brains about the current situation.
Tobacco Asia: The trade war between China and the US has been going on for almost two years now. When did the first effects materialize for US tobacco suppliers exporting to China?
Oscar House: That was in March of 2018 after the US imposed tariffs on imported goods from China. USTC was notified by CTINA that CTI had suspended all US tobacco purchases.
Tobacco Asia: What type of US tobacco is primarily affected?
Oscar House: China’s purchase suspension primarily affected US flue-cured tobacco.
Tobacco Asia: And what processed tobacco types are foremost affected?
Oscar House: The US has been a principal supplier of flue-cured lamina to China
Tobacco Asia: What repercussions does China’s import suspension have for US suppliers?
Oscar House: The tobacco purchase suspension completely severed the US tobacco supply line to China. China has been a reliable and consistent market for US suppliers for over a decade.
Tobacco Asia: How has the United States responded with regards to tobacco imports from China? Is it a tit-for-tat?
Oscar House: The US tobacco tariff rate Quota (TRQ) was established in September 1995 based on calculations of historical origin of imports. China did not have a history of tobacco exports to the US and therefore did not receive a quota. China exports a small amount of tobacco to the US under a residual quota that was set aside for countries that did not receive a TRQ allocation. The residual quota is filled on a first-come basis. China exports to the US depend on the amount of residual quota available.
Tobacco Asia: Who is more severely affected by this trade war, Chinese exporters or US exporters?
Oscar House: US exporters, such as USTC, that depend heavily on the China market and who are now experiencing dramatic financial consequences as a result of China’s purchase suspension.
Tobacco Asia: How is the trade war affecting USTC in particular in terms of annual export volume to China? Was China an important market for USTC?
Oscar House: China has been USTC’s largest customer for many years. Therefore, USTC is experiencing dramatic consequences from the loss of access to China’s market.
Tobacco Asia: Have you been able to compensate for the lost exports to China? Have you perhaps sourced new markets to mitigate the situation?
Oscar House: USTC is trying to access other markets in order to allow its members the opportunity to continue growing tobacco. Currently USTC still has the 2018 crop that was purchased from its members for China in storage. Grower contracts were reduced by 80% for the 2019 crop because of the 2018 unsold inventory.
Tobacco Asia: What were the main Chinese tobacco end product categories that used USTC-supplied tobaccos?
Oscar House: USTC tobacco sales to China have been primarily high-quality, high-flavored flue-cured tobacco. This style is used in top quality premium cigarettes.
Tobacco Asia: Once the trade war has abated, do you fear that USTC might have difficulties re-entering the Chinese market to the same tune as in the past because Chinese tobacco companies have in the meantime started to source their raw materials elsewhere? In other words: Do you expect there is going to be an after-effect?
Oscar House: With the exception of the trade war interruption, USTC has successfully supplied China with the highest quality and the highest flavored tobacco available. We have enjoyed a mutually beneficial trade relationship.
When the US and China trade negotiations reach a resolution of the issues, USTC will be ready to resume doing what we do best; that is supplying the highest quality tobacco available to China for use in their premium products. The terms of the agreement may impact the rate of trade resumption. Flue-cured tobacco is available by many world suppliers.
However, US flue-cured is noted for its dependable and consistently high-quality year after year. USTC will be focused on providing China with the best product and service available when the trade war is over.
Tobacco Asia: Is there anything else that you would like to mention with regard to the ongoing trade war?
Oscar House: If the trade war with China lingers on, it will result in unprecedented strain on US tobacco growers’ sustainability.