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Aug 12, 2002

New dumping regulations by 2003

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Engineering|Africa|Deloitte & Touche Investment Solutions|Africa|Europe|China|India|Japan|South Africa|South Korea|United States|Product|Products|Board On Tariffs And Trade|BTT's InternationalnTrade Administration|World Trade Organisation|Francois Dubbelman|Gustav Brink|Nomonde Maimela
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© Reuse this In a move which is set to alter South Africa's trading environment drastically, the Board on Tariffs and Trade (BTT) is drafting the country's long awaited antidumping regulations, expected to come into effect during the first half of next year.

The board's trade remedies policy director, Gustav Brink, is spearheading the drafting of the regulations.

The BTT, a statutory body whose staff is seconded by the Department of Trade and Industry (DTI), is itself being reconstituted into a commission for international trade administration (Cita), in line with the DTI's drive to become more accessible, customer-focused and competitive.

The commission will be responsible for managing South Africa's international trading environment, including trade remedies, tariff investigations and import and export control.

A Bill paving the way for the Cita is due to be presented to Parliament soon. "The Bill will go through the normal Parliamentary process before it is promulgated, and is scheduled to take effect in 2003," BTT CEO Nomonde Maimela tells Engineering News.

She says the envisaged Cita Act will be "more encompassing" than the existing BTT Act and will state the trade remedies the board can apply as well as how it can apply them.

Where a foreign supplier has been proved to be engaging in unfair trade practices, the BTT may apply antidumping or countervailing duties, in addition to customs duties, to protect not only South African industries, but also those in other Southern African Customs Union (SACU) member countries.

Dumping occurs when the export price of a product is lower than the comparable price payable in the ordinary course of trade in the exporting country or if the product is sold for less than its production cost. While the World Trade Organisation (WTO) does not prohibit dumping, it allows member countries to take measures which prevent injury to local manufacturers.

When a local manufacturer or industry feels that its profitability or viability is threatened because of dumping or subsidised exports, it can apply to the BTT for protection against unfair trade.

The board's trade-remedies directorate will then invite all interested parties, including foreign government representatives, importers and exporters, to supply information in rebuttal of the allegations by the domestic industry.

The directorate will then verify the information submitted by all parties before making submissions to the BTT.

"The process consists of a merit assessment and preliminary and final determinations, and provisional payments in respect of antidumping or countervailing (antisubsidy) allegations are regularly imposed to offset further material injury during the investigations," explains Maimela.

Usually, investigations have to be finalised within 12 months, but they can continue for up to 18 months in complex cases.

Francois Dubbelman, a manager and antidumping expert at Deloitte & Touche Investment Solutions, points out that, currently, investigations average 15 months.

However, the timeframes are expected to improve further following the appointment of additional staff at the BTT's International Trade Administration earlier this year.

South Africa is one of many countries which has actively applied antidumping and countervailing duties, and the 109 products imported into South Africa which were subjected to antidumping duties in June 2001 represent only 9,8% of the total number of affected imports worldwide.

Most of the products imported into this country which are subjected to antidumping or countervailing duties emanate from China, India and Europe, but antidumping duties have also been imposed against countries such as South Korea, Japan and the US.

Strictly speaking, South Africa does not have antidumping regulations but follows the WTO's antidumping agreements. Maimela says that the antidumping regulations were long overdue and that they will "bring about more clarity and certainty in the market.

"They will, for example, spell out exactly how the BTT is to deal with the information made available to it and the process to follow, thus ensuring consistency.

"By removing the existing grey areas, the new regulations will provide guidance to the board and ensure that there is clarity among South African companies which may be affected by dumping".

Currently, the conclusion of antidumping investigations may be delayed when an affected party suddenly makes information available to the trade remedies directorate at a late stage, but the regulations being drafted will put a stop to this.

"We hope that the regulations will reduce the time it takes to conclude investigations considerably," comments Maimela.

She tells Engineering News that the new antidumping regulations will, to some extent, deal with countervailing investigations as well, although another set of regulations dealing specifically with this issue will be developed at a later stage. After that, safeguard regulations, aimed at protecting local industries from sudden surges in imports that cause serious injury to the domestic industry, will also be drafted.

New antidumping and countervailing regulations have been on the drawing board since 1992 and, at the height of antidumping investigations in 1996, a person was specifically appointed to spearhead the restructuring of the mechanism of dealing with unfair trade by foreign companies in accordance with WTO requirements. The then South African representative at the WTO was also brought in to head the BTT's antidumping unit, and more staff were appointed and training programmes initiated.

Observers have expressed concern at the possibility of the new antidumping regulations running counter to rulings made by the BTT in the past, which might open a floodgate of appeals by affected companies.

But Dubbelman says under South Africa's administrative law no authority can review its own decisions unless there are changed circumstances. The impending regulations, coupled with improved capacity at the BTT, mean that the days of protracted investigations may be numbered.

This time last year, the trade remedies staff complement was 12 people, rising to 17 in November and 22 currently. Brink is one of the newcomers, along with two other directors.

It is expected that more people will be employed when the BTT is transformed into the Cita.

Since investigating unfair trade practices is highly complex and requires long periods of training, Maimela says the benefits of employing more people will not become evident overnight.

Although she says 90% of the world's trade may involve dumping and that the BTT is not against dumping as such, Maimela says the WTO only condemns dumping that causes material injury to the domestic industry. In fact, where dumping takes place and there is no domestic industry, the dumping may result in lower prices, which benefits consumers.

She notes that firms in the US and the European Union (EU) are so big that only a small proportion of their production would cause serious problems if it were sold in South Africa at cheaper prices than those charged by local manufacturers.

Given their long exposure to competition, EU and US manufacturers are sometimes more efficient than their South African counterparts, many of which were set up to supply products that could not be sourced internationally before 1994 as a result of sanctions.

The relatively small size of South African industries is also a big hindrance when it comes to investigating whether or not foreign suppliers are dumping their products in South Africa.

A domestic company may regard $1 million, which represents a significant part of its turnover and which might be needed to send people to investigate whether overseas com-panies are dumping their products in South Africa, as being too big.

"Determining whether or not a foreign company is dumping its products here is complicated and costly," explains Maimela.

She says that, since September last year, very few new antidumping complaints have been lodged with the BTT, probably as a result of the dramatic weakening of the rand.

Just before the local currency went into free-fall, a US dollar was valued at about R8, meaning that an imported product worth $100 would sell for about R800 in South Africa.

But when the rand depreciated to the extent that a greenback would buy R13, the local price of the imported product shot to R1 300. The upshot was that imported goods became more expensive than their locally-manufactured equivalents, thus eliminating the need by South African manufacturers to seek protection against dumped imports.

Dubbelman predicts that the next few months will see an increase in new applications for antidumping and countervailing investigations, as the protection accorded by the weak rand has been falling away since January, when the local currency started to recover.

"People who may have started preparing applications for antidumping and countervailing investigations obviously shelved them but, with the rand strengthening, the applications may be revived," he says.

The lull in antidumping investigations provided the BTT with an opportunity to train staff and to reformulate policy, says Dubbelman. With higher staffing levels, better-trained personnel and clearer regulations, there is little doubt that South Africa's trading environment will never be the same.
Edited by: Martin Zhuwakinyu
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