Itac opens door for new anti-dumping duties to protect local frozen chip producers

The International Trade Administration Commission (Itac) has initiated its own investigation into the alleged dumping of frozen potato chips from Belgium, the Netherlands and now also Germany onto the South African market.

This follows the commission’s failure to complete a sunset review application to retain anti-dumping duties for another five years in the prescribed time. That led to far cheaper imported frozen chips being dumped on the local market.

The debacle was first report on by Moneyweb on July 20.

Read: Imported ‘frites’ are now cheaper than South African potato chips

The commission said in a notice announcing its investigation on Friday (November 19) that it has gathered sufficient evidence to establish a prima facie dumping case.

The alleged dumping by the three European countries is causing “material injury” to the Southern African Customs Union industry.

Itac says the dumping margins range from 11.75% (Belgium) to 83.22% (Netherlands) and 190.23% (Germany).

According to Francois Dubbelman, founder of FC Dubbelman & Associates, this is the first time ever that the commission is self-investigating a dumping case.

This was most probably because of its failure to complete the sunset review application by McCain Foods timeously.

Timeline

In terms of World Trade Organisation rules and South African anti-dumping regulations, a sunset review must be completed within 18 months after a review application was brought.

The initial anti-dumping duties were set to expire in August 2019. The commission took more than the prescribed 18 months to complete its investigation despite the fact that McCain’s application was submitted well in advance of the expiry date.

Dubbelman says this self-initiated investigation could take 18 months to complete – meaning local producers will continue to be battered by the dumping.

“I do believe Itac will try to complete the investigation faster this time. The fact that they have self-initiated the case shows that they know they have botched the sunset review investigation.”

A sunset review application is brought shortly before the expiry of the five-year existing dumping duties to determine how the local market will be effected when the duties expire.

Read: Crippling effect of lapsed anti-dumping duties on local industry and farmers

The local industry must prove that there will a continuation or recurrence of material harm or injury when the duties expire. If that is the case, Itac may recommend the extension of the duties for another five years.

Since the Itac investigation is seen as a new case and not a review application, Itac is allowed to add Germany if it believes the country is also involved in dumping products in SA.

Delays continue to affect other products

Dubbelman says his firm is currently involved in four dumping investigations. Itac has recommended the introduction of duties in two of the dumping cases and the extension of existing duties in two sunset review cases.

These cases involve the dumping of pasta from Lithuania, Latvia, Egypt and Turkey, the dumping of float glass from Malaysia, a sunset review for extended duties on imports of wheelbarrows from China, and the extension of duties against imported garlic from China.

The recommendations are waiting for the approval of Trade, Industry and Competition Minister Ebrahim Patel. These are all nearing the 18-month cut-off period.

“The provisional duties that were introduced to protect local producers until the implementation of a final duty have already expired,” says Dubbelman.

“This means local producers are suffering material harm because of the delays. There is also a risk that the two dumping cases may be terminated if the 18-month investigation period is exceeded.”

Dubbelman says investigations have never before taken so long to complete. Itac has always prided itself on finalising cases within a year.

Dubbelman’s firm is also involved in six cases relating to import duty increases that are older than two years. In these cases, the 18-month deadline is not applicable. Itac used to be able to complete these cases within six months, he notes.

This does not bode well for foreign direct investment.

A key investment consideration is whether the government will act and address unfair trade and whether it will offer relief to protect the investment and jobs when a company is not able to compete against imports while setting up or restructuring its business.

It sends a message to international investors if there are huge delays and bureaucratic burdens when producers rightfully require protection to survive.