Imported potato chips from Belgium and the Netherlands are now at least 30% cheaper than locally produced chips, mainly because of the termination of long standing anti-dumping duties.
The removal of the duties – ranging between 6% and 30% – means the local industry will be battered. Employment levels are under threat and job losses seem unavoidable. The industry will also lose at least 10% of its market share to international producers.
The International Trade Administration Commission (Itac) admits that the duties expired because it failed to complete its investigation into a sunset review application by local producers in the prescribed time.
The duties were set to expire on August 7, 2019. McCain Foods submitted a sunset review application to prevent the termination of the duties on February 7, 2019. The application was supported by Lamberts Bay Foods and Nature’s Garden.
In terms of the Anti-Dumping Regulations anti-dumping duties must be terminated five years after implementation, unless a sunset review is initiated prior to the expiry date.
The Itac investigation started on July 26, 2019, and the commission failed to complete the sunset review investigation within 18 months.
The exporters have blamed the Itac investigators, saying they were responsible for delays during the verification process because of the “approach the team chose”. This approach made the completion of the verification process impossible, they said.
Itac, however, says this is incorrect.
The commission blames the exporters for providing incorrect or incomplete information, and of having “side meetings” with their consultant which left the investigators waiting for “unreasonabl[y] long” periods during the process.
Francois Dubbelman, founder of FC Dubbelman & Associates, says this is the first time in the history of the commission that it failed to finalise a sunset review application on time.
He has expressed concerns about the potential impact on investigations into other critical sectors of the economy such as poultry and structural steel, where anti-dumping duties are in place or trade-remedy investigations are underway.
In the McCain application, which was submitted well in advance of the expiry date, the company stated that without the duties the South African Customs Union (SACU) industry is likely to see “the continuation of dumping and the recurrence of material injury”.
Itac found there was sufficient and prima facie evidence that the expiry of the anti-dumping duties would “likely lead” to dumping and material injury to local producers.
‘Somebody must take control’
Dubbelman says in this instance no one can blame the Covid-19 pandemic, since the investigation was initiated long before the onset of the pandemic in South Africa.
In principle, it is on Itac to push an investigation.
It knows it has 18 months to complete the task. Generally, a sunset review is completed within a year. In terms of the General Agreement on Tariffs and Trade the deadline for investigations is 18 months, mainly because it is so disruptive to the trading environment.
“Somewhere in the dusty Covid-corridors of Itac, the Department of Trade, Industry and Competition [dtic], and the minister’s offices, somebody must take control and ensure that the industries that apply for relief are assisted quicker and more efficiently [than] is currently the case,” says Dubbelman.
“This neglect in support of South African industries who have invested millions and employ millions when they need it the most is not sending the right message to foreign investors that the president is trying to lure to South Africa.”
Dubbelman cites several instances where industries have approached the dtic.
“Investigations are not finalised as they remain on the minister’s table waiting [for] approval to ensure that applicants can receive the required protection or assistance from government to remain a viable and competitive industry while retaining jobs.”
Dubbelman says the Itac undertaking to finalise its investigation in six months is nothing but a pipe dream.
An investigation into tariff protection for the coated steel industry is currently gathering dust on the minister’s table, he adds.
Dubbelman also refers to a company that applied for protection against cheap imports of phosphoric and polyphosphoric acids in February 2018. It was stated in the application that without protection “local production will be lost to imports costing the SACU economy jobs and investments”. More than three years later there was still no outcome.
In the white goods industry, particularly in refrigeration production, where protection was requested, an East London plant was closed at the end of March this year. More than 150 jobs were impacted.