The International Trade Administration Commission of South Africa (Itac) has responded to trade consultant XA Global Trade Advisors’ call on government to conduct an urgent review of the impact of import duties on the increasing cost of food and to remove newly imposed duties on imported french fries, as reported earlier this month by Engineering News.

As noted in the November 2 article, XA said its call on government came on the back of the recent imposition of provisional duties on frozen fries imported or originating from Belgium, Germany and the Netherlands.

According to XA, this imposition was self-initiated by Itac, rather than being requested by industry.

Speaking to Engineering News, Itac highlighted that the commission is responsible for conducting anti-dumping investigations in accordance with policy and domestic law and regulations and consistent with the World Trade Organisation’s Anti-Dumping Agreement (ADA).

“Anti-dumping action is a critical instrument to protect jobs and industries against unfair competition from abroad. Dumping occurs in a situation where companies export their goods to foreign markets at prices (export price) lower than what they charge for the same product in their home market (normal value).

“Thus, if the export price is lower than the normal value, dumping has occurred. When dumping causes material injury, countries are entitled to act in terms of the WTO rules. The idea is to level the playing field between domestic producers and foreign competition,” Itac explains.

It adds that the South African Ant-Dumping Regulations (ADR) and the WTO’s ADA enable the commission to initiate an investigation on its own initiative, provided that it has prima facie evidence of dumping, material injury and causality.

“There were previously anti-dumping duties applicable to imports of frozen potato chips, and a review of those duties was under way when, due to legislated timeframes, the review could not be concluded timeously.

“This resulted in the duties that had been in place since 2014 lapsing, leaving the Southern African Customs Union (SACU) industry unprotected against injurious dumping. In consultation with the SACU industry, the commission decided to initiate a new investigation as it had prima facie information to indicate that dumping was taking place, causing material injury to the SACU industry,” Itac outlines.

In response to XA’s call for government to remove new duties on imported french fries, Itac clarified that the measures imposed are provisional in nature and only applicable for a period of six months, allowing the commission to finalise its investigation.

Itac indicates that the provisional payments, which it says are a form of security to secure a payment that is due or may be due, were imposed to protect the SACU industry while the investigation into the alleged injurious dumping of frozen potato chips originating in or imported from Belgium, Germany and Netherlands is ongoing.

It outlines that these provisional payments were imposed on July 15 and are in place for a period of six months, which at the end of the investigation may be confirmed, amended or revoked through final measures.

“It should also be noted that since these are a form of security, in the event the investigation is not completed with the six-months period, provisional [payments] will be refunded to importers, notwithstanding the final determination.

“Once the investigation is finalised, the commission will make a recommendation to the Trade, Industry and Competition Minister, who will make the final decision whether or not final anti-dumping duties will be imposed.

“In making his decision, the Minister will take all relevant information, including the effect on the prices of food, into consideration. The Minister may either accept, reject or refer Itac’s recommendation back for further consideration,” the commission explains.

Itac mentions that, for the purposes of the initiation of the investigation, detailed information was received from the domestic producers, which formed the basis for the commission’s determination that the industry was experiencing material injury.

“During the process of an anti-dumping investigation, all interested parties are engaged and at liberty to submit information relevant to the commission’s investigation. Importers are afforded the opportunity to submit information pertaining to the prices at which the product is imported into the SACU market, as well as any other comments relevant to the investigation.

“Exporters or producers in the countries concerned are also provided with an opportunity to provide information regarding the prices at which they sell in their respective domestic markets, as well as prices at which the products are exported to SACU. All information submitted is taken into consideration by the commission in making is determinations and recommendation to the Minister,” Itac points out. 

Response 

Meanwhile, Global Trade Advisors CEO Donald MacKay says that ITAC is correct when it says that if dumping is occurring, and the dumping is causing material injury to the domestic industry, then an anti-dumping duty can be imposed.

"Itac, however, does not address how the domestic industry can be suffering material injury from imports if the domestic manufacturers are unable to supply the market demand, and that is exactly the problem to be considered," he outlines.

"When ITAC says it consulted the domestic industry, it means it consulted McCain, the dominant domestic producer. They did not consult with Nature's Garden and Lambert's Bay Foods, who accounted for 20% of the imports into South Africa.  These companies had to import frozen fries because they couldn't find local potatoes of the varieties needed for chips production. According to these two companies, there was a potato shortage "due to adverse weather conditions".  The high price of chips demonstrates this problem, with prices moving up by 88% from R16 per kg in 2021 to R30 per kg in 2022. If the domestic industry could supply demand, then we should not have seen prices move up by more than the provisional duties imposed," McKay posits. 

He indicates that Itac is also correct in stating that the current duties are provisional and due to expire, but notes that the entity does not explain that it is proposing to extend and increase these duties for the next five years, "at time when the domestic industry cannot meet demand".

"They don't explain that these duties are currently paid by consumers and even if they do expire, consumers would still have paid the price.  These consumers can't get their money back if it's refunded, and as we all know, consumers are financially stretched.  Food inflation is an eye-watering 11.9%, unemployment is at record levels and yet these duties persist," McKay asserts. 

McKay also acknowledges that it is up to the Minister to decide on whether to implement final duties, however, he stresses that the Minister needs to be provided with a complete and accurate picture, and the essential facts letter.