ITAC processes for investigations for trade remedies such as poultry dumping case

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Trade, Industry and Competition

21 February 2013
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The International Trade Administration Commission (ITAC), the Economic Development Department and the Department of Trade and Industry (dti) briefed the Committee on the processes ITAC followed regarding the trade investigations for trade remedies.

ITAC said the briefing would cover issues raised by the Association of Meat Importers and Exporters (AMIE) where AMIE differed with ITAC’s determinations. What concerned ITAC most was the allegation that ITAC did not follow proper processes in this case and in other previous cases? All cases complied with domestic law. The poultry case was tackled under anti-dumping which protected SACU against unfair competition which in this case was imports which cost less than the price it was sold for in the country of origin. The domestic market had to prove its case in respect of the calculation of the dumping margin, material injury, and show causality between the dumping margin and the material injury. The ITAC’s investigation process had 27 steps and the average time taken to complete the process was ten months based on figures since 2007.  AMIE had calculated that ITAC averaged 16 months based on figures since 2003. Other investigations done by ITAC and of concern to AMIE were investigations into tyres, bolts and nuts and hexagon screw imports from China and frit, a granular glass powder, imports from Brazil. The tyre case occurred four years ago and was referred to the Supreme Court of Appeal where the matter was found in favour of ITAC. The hexagonal screws case, which was completed in November 2012 and the frit case resulted in anti-dumping duties being imposed as did the nuts and bolts case in 2011. ITAC had followed an extensive engagement process. One issue which had been raised and considered by ITAC was that ITAC reports did not reflect fully on how it had engaged with interested parties’ comments. All ITAC reports in future would show fully how ITAC had engaged with interested parties’ comments on substantive matters. ITAC’s investigations were conducted in accordance with the law, WTO regulations and other relevant legislation.

The Economic Development Department (EDD) said ITAC reported to it. The EDD assisted ITAC on the processes but on the matter of the Brazilian poultry case the Department of Trade and Industry dealt with the technical aspects of the case and the Minister Trade and Industry was the appropriate Minister to rule on the matter.

The dti said ITAC did not operate in a policy vacuum; the economic development policy was that of job creation and adding to the value chain. So AMIE’s correspondence would be looked at from a broader policy environment perspective by dti. The dti did not believe that there was a clear causal link between increased poultry imports and an increased risk to SA’s food security. It also looked at whether the poultry imports undermined the value chain in the sector as this included grain farmers and spaza shop owners. There were therefore reasons to be concerned about the imports and the dti also looked at how it could assist local industry to become more competitive.

Members said that there had to be a system where the EDD and the dti worked together at senior level with ITAC. Members said farmers were subject to considerable pressure against subsidised imports and the minimum wage for farm workers had been raised by as much as 60% recently. Members said a calculation of the number of days the process took based on ITAC’s presentation showed it to be more than ten months, approximately a year. Members wanted to know whether ITAC’s figures were for calendar days, or working days and also for the EDD to endeavour to expedite the process time. Members asked whether the poultry investigation had been finalised and whether there was anything that the WTO could challenge regarding the process. What was the Cabinet’s position? Members agreed that ITAC did not operate in a vacuum. What steps had ITAC done to reduce the process time. Did ITAC have the capacity to survey industry trends, because unless these surveys were undertaken all policies would fail? Members asked if there were any cases of litigation against ITAC and what were the reasons for this. Was there a need for any legislative amendments? Members said ITAC had to inform the Committee if the reason for the lengthy process time was because of legislative reasons or did ITAC need extra capacity to reduce the process time. Members said that ITAC’s work had to align itself to three points from the SONA, poverty alleviation, job protection and job creation.


Meeting report

Briefing
The Chairperson said that the International Trade Administration Commission (ITAC) was an essential support process to IPAP.  

Ms Zoleka Xabendlini, Senior Manager of Trade Industries at ITAC said the briefing would cover issues raised by the
Association of Meat Importers and Exporters (AMIE) where AMIE differed with ITAC’s determinations. Differences were normal but what concerned ITAC most was the allegation that ITAC did not follow proper processes in this case and in other previous cases. She said all cases complied with domestic law.

There were three possible trade remedies which could be invoked; to prevent dumping because of unfair trade practices, countervailing trade which dealt with subsidised imports and safeguards to protect from import surges. The poultry case was tackled under anti-dumping which protected SACU against unfair competition which in this case was imports which cost less than the price it was sold for in the country of origin. The domestic market had to prove its case in respect of the calculation of the dumping margin, material injury, and show causality between the dumping margin and the material injury.

The ITAC’s investigation process had 27 steps (see p11 of ITAC document) and the average time taken to complete the process was ten months based on figures since 2007.  AMIE had calculated that ITAC averaged 16 months based on figures since 2003.  In comparison with other countries, the EU took 15 months, the USA took nine months  and Australia took five months to complete an investigation.

Other investigations done by ITAC and of concern to AMIE were investigations into tyres, bolts and nuts and hexagon screw imports from China and frit, a granular glass powder, imports from Brazil. She said the tyre case occurred four years ago and was referred to the Supreme Court of Appeal where the matter was found in favour of ITAC. The hexagonal screws case, which was completed in November 2012 and the frit case resulted in anti-dumping duties being imposed as did the nuts and bolts case in 2011.

ITAC had followed an extensive engagement process. One issue which had been raised and considered by ITAC was the issue of ITAC reports not reflecting fully on how it had engaged with interested parties’ comments. All ITAC reports in future would show fully how ITAC had engaged with interested parties’ comments on substantive matters.. ITAC’s investigations were conducted in accordance with the law, WTO regulations and other relevant legislation.

Mr Nkosi, Chief Director at the EDD, said ITAC reported to EDD, which assisted ITAC on the processes but on the matter of the Brazilian poultry case for example, the Department of Trade and Industry dealt with the technical aspects of the case and the Minister Trade and Industry was the appropriate Minister to rule on the matter.

Mr Steven Hannibal, of the dti, said ITAC did not operate in a policy vacuum; the economic development policy was that of job creation and adding value which would contribute to rural development. So AMIE’s correspondence would be looked at from a broader policy environment perspective by dti. The dti did not believe that there was a clear link between increased poultry imports and an increased risk to SA’s food security. It also looked at whether the poultry imports undermined the value chain in the sector as this included grain farmers and spaza shop owners. There were therefore reasons to be concerned about the imports and the dti also looked at how it could assist local industry to become more competitive.

Discussion
Ms S van der Merwe (ANC) said that there had to be a system where the EDD and the dti worked together at senior level with ITAC.

Mr Mackintosh (COPE) said farmers were subject to considerable pressure against subsidised imports and the minimum wage for farm workers had been raised by 60% recently. He said his calculation of the number of days the process took based on ITAC’s presentation showed it to be more than ten months, approximately a year. He wanted to know whether ITAC’s figures were for calendar days, or working days and also for the EDD to endeavour to expedite the process time. 

Mr X Mabasa (ANC) asked whether the poultry investigation had been finalised and whether there was anything that the WTO could challenge regarding the process. What was the Cabinet’s position?

Mr B Radebe (ANC) concurred that ITAC did not operate in a vacuum. What steps had ITAC done to reduce the process time? Did ITAC have the capacity to survey industry trends, because unless these surveys were undertaken all policies would fail?

Ms Xabendlini said that according to the process sheet in her presentation, ITAC only got involved at the initiation stage from which point it totalled 282 days. Legislated days to allow for responses totalled two months. There were also opportunities to request an extension, which lengthened the process. The days given on the process page were for a best-case scenario.

The investigation had been finalised and a decision had been made on 21st December 2012 not to impose duties on chickens from Brazil. The dti had asked SARS to investigate poultry imports.  

Mr Hannibal said the dti believed the agricultural value chain was important. Sector desks did monitor imports on a monthly basis. Last year there had been a surge in pasta imports and the dti asked the sector if they needed protection. ITAC was then approached and duties were increased. They also assessed unfair competition and worked closely with ITAC.

Mr Nkosi said that it was important that capacity and skills be built to strengthen the regulatory bodies.

Mr N Gcwabaza (ANC) asked if there were any cases of litigation against ITAC and what were the reasons for this. Was there a need for any legislative amendments?

Mr B Radebe said ITAC had to inform the Committee if the reason for the lengthy process time was because of legislative reasons or did ITAC need extra capacity to reduce the process time.

Ms Xabendlini said there were five litigation cases since 2007. ITAC tried to minimise the risk where there was an obvious litigation risk in interpretation, ITAC looked at how other authorities operated to try and reduce the process time. She said that extensions which arose from the public administration and justice acts, impacted on the process time. 

Mr Nkosi said there was a need for funding for investment into training and development to build capacity and also for policy and legislative changes as some people were requesting extensions just to increase the pressure on ITAC. EDD would look at the alignment and cooperation of the work between the EDD and the dti to improve the response time.

Mr Hannibal said the Department was working with EDD to improve cooperation and training had had three half-day workshops recently. They could not initiate requests for increases in general tariffs at government level although they could request ITAC to initiate a tariff investigation. ITAC then had to approach industry. The dti had said to the poultry industry that they should apply for a general increase in the tariff, which could be readily looked at. As an option provisional duties could be imposed pending the completion of an investigation. It could also be imposed if a Minister designated a sector to be in distress and this would reduce the process time to four months but this was for general tariff increases not tariff increases based dumping.

Mr N Gcwabaza said that ITAC’s work had to align itself to three points from the SONA, poverty alleviation, job protection and job creation.

The meeting was adjourned.

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