Cape Town-based fastener supplier Fastenright is appealing to the International Trade Administration Commission of South Africa (Itac) to remove the customs duty that was implemented on stainless steel fasteners on April 1.
Following a review of the customs duty imposed on many downstream steel industry products last year, Itac heeded the call from a number of domestic fastener manufacturers to increase the customs duty applicable to stainless steel fasteners to their respective World Trade Organisation-bound rates of 15% and 30%. The implementation of the duty comes amid Itac’s bid to provide protection measures for the larger steel manufacturing industry through the institution of a hot-rolled coil safeguard duty, which was approved by Trade and Industry Minister Dr Rob Davies last month.
However, Fastenright MD Rainer Lutz explains that there are no local manufacturers that can produce stainless steel fasteners in the range of sizes, standard of quality or volumes required by customers. Like many fastener suppliers, Fastenright, thus, imports its stainless steel fasteners from approved suppliers – predominantly in Asia and Europe – and can supply material certificates on request as evidence of their quality. The company’s products support a range of industries, including manufacturing, boat building, construction and security.
“We, and all other stainless steel fastener importers in South Africa, are falling victim to what seems to be oversight in applying this customs duty to stainless steel fasteners. These products always used to be, and should continue to be, duty-free.”
Lutz stresses that local stainless steel fastener manufacturers, of which there are only a few, cannot compete on availability, quality or price with well-established and -respected international manufacturers that have the expertise and the capacity to supply the South African market. The customs duty, thus, offers local manufacturers little of the intended protection or incentive.
In addition, he points out that, while import duties should be applied to all importers of the relevant products, it is possible that more unscrupulous suppliers may attempt to import goods under the wrong tariff heading – giving them an unfair advantage. “Removing the duty will level the playing field and cost savings will inevitably and ultimately be passed on to end-users and exporters.”
To support its application to Itac to remove the duty on stainless steel fasteners, Fastenright has submitted proof of its research confirming that there are no viable stainless steel bolt and nut manufacturers in South Africa. The company submitted typical enquiries for stainless steel fasteners to several local manufacturers, which were all unable to supply the products, maintaining that they are not part of their product range.
In addition, the South African Fasteners Manufacturers Association has also confirmed to Fastenright that all the stainless steel fasteners that the company is importing are not made by any South African manufacturers, except for screw studs and screw studding of stainless steel, more commonly known as threaded rods, which Fastenright acknowledges would justifiably be subjected to the customs duty to protect the local manufacturer.
Lutz highlights that, if the company’s application to Itac is unsuccessful, it will be forced to significantly increase its selling prices, as it will not be able to absorb the newly imposed import duties. “With all suppliers facing the same predicament, this would have an unnecessary inflationary effect on the entire South African stainless steel industry, with many other products that depend on stainless steel fasteners for assembly and production affected as well.”
He adds that a significant number of Fastenright’s customers who are exporting their products will also not be able to increase their selling prices to recover these higher duties, as this would put them in a situation where they are no longer competitive.
Curbing Industry Growth
Implementing the hefty customs duty comes at a particularly inopportune time, as Lutz notes that local demand for stainless steel fasteners is growing, as customers increasingly acknowledge the advantages of the product in their operations.
Stainless steel fasteners are far more resistant to staining, corrosion and rust than ordinary steel. Lutz believes that their robustness, together with Fastenright’s impeccable customer service and stockholding capacity, is the reason for the company’s steady market growth over the past seven years, despite the challenging economic conditions in South Africa.
To increase customer demand, Fastenright added a third warehouse to its operation in October to ensure that it always has enough stock on hand. Lutz highlights that the company can source any fastener in any material, owing to positive relationships with its suppliers.
He adds that the company’s security fasteners are also showing noticeable sales growth. These fasteners are a useful preventive measure that can be applied wherever installations are exposed and problems such as theft and vandalism need to be considered. Lutz stresses that the higher initial cost is far outweighed by not having to repair or replace equipment, offering customers further peace of mind. Fastenright has steadily increased its range of security fasteners over the past few years and can source almost any kind of tamperproof fixings.
“We are constantly extending our product range beyond the normal bolts and nuts – special products for the solar and maritime industry are also in stock and can be ordered in-house. The implementation of the customs duty on stainless steel fasteners is an unnecessary obstacle, stifling the positive trajectory of a growing industry.”