Plea for the suspension of anti-dumping duties on frozen potato chips

Frozen meat and vegetable distributor Merlog Foods has requested the suspension of anti-dumping duties on frozen potato chips from Belgium, the Netherlands and Germany.

The International Trade Administration Commission (Itac) introduced preliminary anti-dumping duties on producers from these European countries until January next year. The duties range between 9% and 181%.

Merlog general manager Georg Southey says the price of frozen potato chips has increased substantially in recent times, making it unaffordable for most consumers. The import duties adds fuel to rising food inflation.

“In the interest of reducing food prices and inflation we request Minister [of Trade, Industry and Competition] Ebrahim Patel to remove the duties on French fries similar to what was done with (the duties on) chicken imports.”

Rising food prices

Itac recommended the implementation of anti-dumping duties on chicken imports from Brazil, but Patel considered the “current rapid rise” in food prices locally and globally and the impact the duties might have on the price of chicken. He postponed the imposition of the tariffs on chicken by a year due to public interest considerations.

The preliminary duties on chips follows a self-initiated investigation by Itac into the impact of dumping in the Southern African Customs Union. McCain, the dominant producer of frozen potato chips in the country, requested continued protection against dumping from Belgium and the Netherlands back in 2019.

However, the commission failed to complete its investigations within the 18 months prescribed by the World Trade Organisation and the duties against the two countries lapsed, leaving the local industry (McCain, Nature’s Garden and Lamberts Bay Foods) exposed to cheaper imports.

In a first-ever for Itac it decided to self-initiate an anti-dumping investigation and included Germany in the investigation.

In July this year it imposed the preliminary duties on imported frozen potato chips from the three countries. The investigation has to be completed by January for Itac to make final recommendations to Patel for the imposition of anti-dumping duties for five years.

Soaring prices

Southey says soaring prices for French fries are driven by a severe shortage of the right cultivar of potatoes used for producing chips, as well as a shortage in processing capacity to meet the “exploding” demand for chips. Rolling power outages because of load shedding have added to the woes of producers.

He adds that countries like Mexico and the Philippines have temporarily suspended duties on certain food items to ensure that there is affordable food in their countries.

“What Patel did on chicken has assisted, but many other countries with populations and demographics similar to SA have taken further steps to ease the burden to get affordable food on the table.”

Donal MacKay, founder of XA Global Trade Advisors, says the price per kilogram of chips has gone up from R16 in 2021 to R30 in 2022. He says this price increase comes at a time when inflation is rising sharply and consumers are battling to put food on the table.

Local producers have previously argued that an increase in tariffs does not lead to an increase in consumer prices. The main reason is that consumers never benefit from the lower landed prices. They argue that imports are priced at market or slightly lower prices than the price of local products.

Government policy

MacKay questions government policy. On the one hand government decides not to impose anti-dumping duties on chicken from Brazil because of public interest considerations, but it imposes anti-dumping duties on imported French fries.

“It becomes a curious thing when we are happy to apply a duty on one food item but not happy to apply it to a different food item. If we can argue that there is a public interest around food inflation it is unclear us how the decision was arrived at for one product and not for the other,” says MacKay.

He is not suggesting that South Africa not have any duty protection whatsoever on food items, but says the country finds itself in an unusual situation at the moment. In this case the public interest seems to be equated to the protection of one large producer of potato chips.

Inconsistency, ‘no predictability’

XA Global Trade Advisor manager Tonderai Chibasa says the challenge importers are facing is the manner in which Itac conducts its investigations. There is no predictability in the process.

He says Itac applies different calculation methodologies in order to get the outcomes it wants.

“You cannot cherry-pick how to calculate the duty in one investigation so as to impose the highest duty. The outcome can be different for each company [importer], but the process has to remain the same.”