IN WHAT may emerge as South Africa’s next major trade row, concerns have been raised about a large increase in tariffs on imported pasta — to 40% — with lawyers warning that the correct procedure was not followed when a local producer approached the International Trade Administration Commission (Itac) in a bid to protect manufacturers.
Last year, investigations undertaken by Itac showed that Brazil was dumping chickens in South Africa, yet Brazilian producers threatened to take the issue to the World Trade Organisation (WTO).
Sasko Pasta, which brought the application, said the current duty structure did not provide effective protection against subsidised imports for the domestic pasta manufacturing industry.
Tiger Brands’ Fatti’s & Moni’s brand is the leader in South Africa, with a value share of approximately 35%, according to Euromonitor International, an independent strategy research company.
Sasko’s Mr Pasta brand has a value share of more than 10% and the company’s Pasta Grande and Puccini brands both have a 4% value share.
The duty on uncooked imported pasta, including macaroni, spaghetti and noodles, was effective from January 1 after a notice was published in the Government Gazette on December 21.
The market for noodles and pasta in South Africa increased at a compound annual growth rate of 2.4% between 2004 and 2009, according to Datamonitor Research.
Trade consultant Donald MacKay expressed concern about the multitude of tariff increases seen last year, saying there had been "a well documented drive" by the government to protect local companies, which led the way for "opportunistic applications" for protection against imports.
Rian Geldenhuys, an international trade and commercial lawyer with Trade Law Chambers, said last week that the main reason for the pasta application was to protect the local industry.
According to Mr Geldenhuys, the correct application would have been for the imposition of a countervailing duty. The application that was brought was for an increase in the rate of a general customs duty. The original application, brought in in July, requested an increase in the ad valorem duty to 54% from 30%. Mr Geldenhuys said countervailing measures required a far more detailed probe than a tariff hike.
The WTO says a countervailing duty can be charged only after the importing country has conducted a detailed investigation similar to that required for anti-dumping action. "There are detailed rules for deciding whether a product is being subsidised, criteria for determining whether imports of subsidised products are hurting domestic industry, procedures for initiating and conducting investigations, and rules on the implementation and duration of countervailing measures," the WTO explains.
Mr Geldenhuys said importers must be given the opportunity to confirm or deny whether their products were being subsidised and the applicant must be able to show to what extent the subsidy was hurting the local industry.
Sasko said in its application that the protection under the current duty structure did not allow the expansion of production to levels necessary to achieve enhanced economies of scale.
"This is impacting on the local industry's ability to embark on fixed capital investments and (its) ability to create sustainable employment opportunities."