Grain Imports; GrainSA and SA Poultry Association tariff application outcomes: ITAC briefing

Agriculture, Land Reform and Rural Development

16 September 2016
Chairperson: Ms M Semenya (ANC)
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Meeting Summary

The International Trade Administration Commission briefed the Portfolio Committee on import tariffs of wheat, maize, sugar and poultry. The tariff regime for grains was called the Variable Tariff Formulae. On 24 May 2016, wheat incurred an upward trigger and would now cost 159.14c/kg from 122.43c/kg. The tariff on sugar, however, experienced a downward trigger on 27 May 2016, which meant it now costs 144.33c/kg from 239.5c/kg for importation. Poultry tariff was co-ordinated with anti-dumping duties, and was maintained every five years by means of sunset reviews. In December 2015 a temporary rebate was created to allow for a free anti-dumping duty importation of 65 000 tons of US bone-in chicken portions annually. This was done in the context of South Africa’s continued participation under the African Growth and Opportunity Act (AGOA). Since the rebate was enforced the International Trade Administration Commission observed that the take-up had been relatively lower than what was expected by the quantity of the quota. South African importers continued to prefer importing poultry from the European Union.

The International Trade Administration Commission cited purpose of Variable Trade Formulae was to give price support to farmers who were now exposed to the volatility of the global markets as a result of trade reforms. This had followed the de-regulation of the agricultural sector by the state. In the global market, prices fluctuated from top to bottom. A floor price, known as the Domestic Reference Price (DRP), was determined to cushion domestic producers when the global prices were at the bottom. The Variable Trade Formulae policy would also serve to protect local producers against subsidised international producers and to sustain local production of these commodities by the inclusion of a distortion factor in the formulae. The distortion factor would take into account the amount that subsidies had depressed or lowered global prices that were import prices. If global prices were lower than the Domestic Referenced Price causing imports to cost relatively cheap prices, the import duty would then be levelled, resulting in imports to cost the same as the local floor price. A simple example, should the floor price (Domestic Reference Price) be US$300/ton. If the import price of wheat (global price) were low, say at US$200/ton, then the import duty would be the difference between the two amounts, which was US$100. If the import price increased above the Domestic Reference Price, say to US$350/ ton then there was no duty. The floor price (Domestic Reference Price) would have been determined by the International Trade Administration Commission through a rigorous investigation that entailed an examination of production, trade and financial data for a specified period of time. The International Trade Administration Commission would then recommend to the Minister of Trade and Industry appropriate floor prices that would contribute to food security, which took into account both the need for food availability and affordability. Once the Minister of Trade and Industry had accepted the recommendation made by the Commission, he would request of the Minister of Finance to have it implemented, because import tariffs were contingent to the Customs and Excise Act 1964. Ultimately, the implementation was action by the South African Revenue Service.

On the operation of the Variable Trade Formulae, three reviews since 1999 for maize, sugar and wheat had occurred. The Domestic Reference Price for maize had not been amended since 1999 when it cost US$110/ton. The Domestic Reference Price for sugar was amended twice, viz. US$330/ton in 2009 and US$566/ton in 2014. The Domestic Reference Price for wheat was amended twice: US$ 215/ton in 2010 andUS$294/ton in 2013.

According to the analogy of import trends for wheat, maize and sugar from 2013- 2016 (January to July), the importing of wheat was always high, but had escalated in 2015 due to the drought, and it was currently estimated that the shortage to meet the total domestic demand would further need 60% wheat imports. If wheat imporst for January to July 2016 were already above 1.2 million tons, it would be inevitable that at the end of the year the amount of wheat imports would be equivalent to its imports of 2015. Maize was completely different to wheat imports, with almost nothing imported in 2013, but some maize imports started in 2014, with a dramatic increase in 2015 and 2016 specifically due to the drought. In the past when maize was self-sufficient, its production a surplus and was a net exporter; the prices were set at export parity, but given the rise of imports the prices were now set at import parity instead. This meant that the price of maize had increased and maize was a staple food for low-income families. It had also posed implications for livestock feed, and so indirectly may have caused the cost of poultry to rise, because of the increased maize input costs for the farmers. South Africa had historically been a surplus producer of sugar, but since 2013 sugar was imported whilst it had continued to export it as well. Sugar had been imported in the past, but neither at the level nor consistency as wheat was imported.

In May 2016, The Minister of Economic Development directed International Trade Administration Commission to evaluate and investigate reviews of the Dollar-based domestic reference price and variable tariff formulae for wheat, maize and sugar. The reasons for these current reviews were changed circumstances; such as grain shortage, due to drought that necessitated imports; the exchange rate fluctuations that had seen the Rand depreciate significantly in the past 3 years, and the food inflation. The Commission had published the initiation of the investigation in the Government Gazette for public comment by stakeholders on 22 July 2016. The Commission considered the first submission on Wheat on 13 September 2016, and in that meeting the Commission had also received oral presentations by GrainSA and the National Chamber of Milling (NCM). When the South African Sugar Association made an application concerning the latest Domestic Reference Price for sugar, they had requested over US$700/ton, but the proposal was previously rejected by the International Trade Administration Commission. Relative to sugar, maize and wheat were staple food and were more critical for food security. Hence when the Commission would recommend the appropriate level to the Minister of Trade and Industry, equilibrium between the different and conflicting interests were sought for. However, the first submissions on sugar and maize would serve before the Commission on 11 October 2016, as the aim was to complete the reviews before the end of 2016.

Import Tariffs on poultry meat were increased towards the end of 2013. The increases were based on an application brought by the South African Poultry Association (SAPA), on behalf of Rainbow Farms Limited; Astral Operations Limited; Sovereign Food Investments Limited; AFGRI Poultry Limited, and the Supreme Poultry Limited (Country Bird Holdings). The justification to increase tariffs included the rising levels of imports and loss of market share by domestic producers; decreasing profitability in the face of low priced imports; price disadvantages that domestic producers had experienced against low-priced imports, and the relevant input cost pressures. When SA Poultry Association made an application the respective tariff rates were requested; 991c/kg with a maximum of 82% for carcasses (excluding necks and offal) with all cuts (e.g. thighs, wings, legs and breasts) removed; 1111c/kg with a maximum of 82% for the whole bird; 12% or 220c/kg with a maximum of 82% for boneless cuts; 67% or 335c/kg with a maximum of 82% for offal, and a 56% or 653c/kg with a maximum of 82% for bone-in portions. Ultimately, what the Commission had recommended to the Minister of Trade and Industry was less than what SA Poultry Association had requested.

The bone-in portions had proven the biggest challenge for domestic producers in competing with low-priced imports. The approved tariff regime resulted in 82% bound rate for the whole bird; 12% for boneless cuts; 37% for bone-in portions; 30% for offal, and 31% for the carcases. South African importers continued to prefer importing poultry from the European Union, even with the bone-in portions that served the biggest challenge for domestic producers, despite the imposed USA quota and anti-dumping duties on bone-in chicken portions against imports from Germany, Netherlands and the UK, which was imposed in February 2015. Regardless, imports of bone-in portions had increased from the EU, because of the complete implementation of trade agreements between South Africa and the European Union. The trade agreement resulted in duties on poultry meat from EU currently to stand at zero. In other words, duty-free poultry meat from the EU meant that the cited increases for poultry tariffs were not applicable to imports from the EU, but to other global countries.

Members questioned why the Domestic Reference Price for maize had remained unchanged since 1999; who the tariff role-players were; who represented the agriculture sector and the consumers at the International Trade Administration Commission, and what the impact of the Variable Tariff Formulae policy was on local producers. Members also questioned whether the Commission had experienced contradictions between the local producers and the local importers, and whether anyone felt disadvantaged in those cases which favoured one over the other? It was queried that the Commission mentioned that a temporary rebate for a free anti-dumping duty importation was created in December 2015 for annual import of 65 000 tons of US bone-in chicken. This was in the context of the country’s participation in the African Growth and Opportunity Act (AGOA). For how much longer was the temporary rebate going to be in effect, as the dumping of agricultural products by subsidised foreign industries was the biggest concern to our local farmers? Also, since South Africa was currently not in a position to export sugar, the question posed was, would that perpetuate or could sugar exports occur after the drought?

Other concerns were what the impact was on domestic producers as a result of the free anti-dumping duty by the USA. Were its implications negative or positive? If it was negative, what was being done to ensure that the South African domestic producers were not adversely affected? Were the domestic stakeholders, specifically the domestic producers satisfied with the approved tariff regime (Variable Tariff Formulae)? If they were not happy with it, what were the fundamental issues they had raised pertaining to it? Furthermore, to which extent, if any, had safety measures affected the tariff determination? The safety of the food consumed in the country was essential. Even though the Commission has its own mandate, ultimately, it could not regulate the USA or any country that had not complied with the necessary safety measures of the anti-dumping duty. However, to which extent was influence imposed to ensure adherence to the safety measures, since it could not control the US, or were rebate and tariff negotiations solely focused on the quantity of imports?

 

Meeting report

Briefing by International Trade Administration Commission (ITAC)

Mr Siyabulela Tsengiwe, Chief Commissioner, ITAC, introduced the tariff regime known as the Variable Tariff Formulae (VTF) for wheat, maize and sugar as government policy and emphasised that it was completely different to other agricultural products. It was first introduced in 1999 by the then Board on Tariffs and Trade, which was ITAC predecessor. The purpose was to give price support to farmers who were exposed to the volatility of global markets as a result of trade reforms. This followed the de-regulation of the agricultural sector by the state. In the global market, prices fluctuated from top to bottom. A floor price, known as the Domestic Reference Price (DRP), was determined to cushion domestic producers when global prices were at the bottom. This was meant to bring stability in the domestic market, which also gave farmers certainty about the prices they would obtain in the market, such as prices that were profitable, which then had influence on production. Thus, in so doing it was supporting domestic production. The decisions by farmers to plant were hugely dependant on the prospective level of the DRP by harvest. The VTF policy would also serve to protect local producers against subsidised international producers and to sustain local production of these commodities by an inclusion of a distortion factor in the formulae. The distortion factor would take into account the amount that subsidies had depressed or lowered global prices that were import prices. If global prices were lower than the DRP causing imports to cost relatively cheap prices, the import duty would then be levelled, resulting in imports to cost the same as the local floor price. This meant that local producers could effectively compete, be economically viable and sustainable. A simple example: should the floor price (DRP) be US$300/ton. If the import price of wheat (global price) were low, say at US$200/ton, then the import duty would be the difference between the two amounts, which was US$100. If the import price increased above the DRP, say to US$350/ ton then there was no duty. The floor price (DRP) would have been determined by ITAC through a rigorous investigation that entailed an examination of production, trade and financial data for a specified period of time. ITAC would then recommend to the Minister of Trade and Industry appropriate floor prices that would contribute to food security, which took into account both the need for food availability and affordability. In other words, ITAC would consider food affordability against food availability. Once the Minister of Trade and Industry had accepted the recommendation made by ITAC, he would request of the Minister of Finance to have it implemented, because import tariffs were contingent to the Customs and Excise Act 1964. Ultimately, the implementation was action by the South African Revenue Service (SARS). The example given was a simplification of the complex calculation of the tariffs and was given so that the principle of the formulae was understood.

On the operation of the VTF, three reviews since 1999 for maize, sugar and wheat had occurred. The DRP for maize was not amended since 1999. When the policy was introduced in 1999, maize had cost US$110/ton. Regarding differences of market and production dynamics, maize had proven the largest of the three, as in 2013-2015 the average gross value contribution by maize to the agricultural production was approximately 15%, compared to the 3.6% contribution by sugar and 2.6% by wheat. Maize production in South Africa was always self-sufficient and it was a net exporter. Unlike wheat production, which South Africa had never been self-sufficient the past 25 years or so, and was a net importer of. Wheat was also much more sensitive to climatic conditions compared to maize. The DRP for sugar was amended twice, viz. US$330/ton in 2009 and US$566/ton in 2014. When the South African Sugar Association made an application concerning the latest DRP for sugar, they had requested over US$700/ton, but its proposal was rejected by ITAC. Relative to sugar, maize and wheat were staple food and were more critical for food security. Hence when ITAC would recommend the appropriate level to the Minister of Trade and Industry equilibrium between the different and conflicting interests were sought for.

The DRP for wheat was amended two twice: US$ 215/ton in 2010 andUS$294/ton in 2013. The level of duty on wheat, since the implementation of the last increase in the Dollar-based reference price, remained zero for more than a year but subsequently triggered seven times since 25 April 2013. Whenever the global prices were reduced the duties would increase with an upward trigger, and vice versa. For instance, on 14 July 2015, the global price cost imports US$253.00, which required a downward trigger of 80.01c/kg – 51.06c/kg.  Yet on 25 April 2016, the global price cost imports US$193.33, which required a seventh trigger since 2013, an upward trigger that resulted in wheat imports costing 159.14c/kg instead of 122.43c/kg.

The level of duty on sugar, since the implementation of the last increase in the Dollar-based reference price, was 132c/kg when the recommendations were implemented. Subsequently, the duty triggered eight times since 4 April 2014. The most recent recommendation of tariff for sugar was 27 May 2016, with a downward trigger of 20%, which meant that global prices for sugar had increased for imports. Consequently, the tariff for sugar had been reduced from 239.5c/kg to 144.33c/kg.

According to the analogy of import trends for wheat, maize and sugar from 2013- 2016 (January to July), the importing of wheat was always high, but escalated in 2015 due to the drought, and it was currently estimated that the shortage to meet the total domestic demand would further need 60% wheat imports. If wheat imports for January to July 2016 were already above 1.2 million tons, it would be inevitable that at the end of the year the amount of wheat imports would be equivalent to its imports of 2015. As noted before, maize was completely different to wheat imports, with almost nothing imported in 2013, but some maize imports started in 2014, then a dramatic increase occurred in 2015 and 2016 specifically due to the drought. In the past when maize was self-sufficient, its production a surplus and was a net exporter; the prices were set at export parity, but given the rise of imports the prices were now set at import parity instead. This meant that the price of maize had increased and it should be reminded that maize was a staple food for low-income families. It also posed implications for livestock feed, and so indirectly may have caused the cost of poultry to rise, because of the increased maize input costs for the farmers. South Africa had historically been a surplus producer of sugar, but since 2013 sugar was imported whilst it had continued to export it as well. Sugar had been imported in the past, but neither at the level nor consistency as wheat was imported.

In May 2016, The Minister of Economic Development directed ITAC to evaluate and investigate reviews of the Dollar-based domestic reference price and variable tariff formulae for wheat, maize and sugar. The reasons for these current reviews were changed circumstances; such as grain shortage, due to drought that necessitated imports; the exchange rate fluctuations that have seen the Rand depreciate significantly in the past 3 years, and food inflation. ITAC published the initiation of the investigation in the Government Gazette for public comment by stakeholders on 22 July 2016. The Commission considered the first submission on Wheat on 13 September 2016, and in that meeting ITAC also received oral presentations by GrainSA and the National Chamber of Milling (NCM). However, the first submissions on sugar and maize would serve before the Commission on 11 October 2016, as the aim was to complete the reviews before the end of 2016.

Mr Tsengiwe presented the poultry tariff regime too. Import Tariffs on poultry meat were increased towards the end of 2013. The increases were based on an application brought by the South African Poultry Association (SAPA), on behalf of Rainbow Farms Limited; Astral Operations Limited; Sovereign Food Investments Limited; AFGRI Poultry Limited, and the Supreme Poultry Limited (Country Bird Holdings). The justification to increase tariffs included the rising levels of imports and loss of market share by domestic producers; decreasing profitability in the face of low priced imports; price disadvantages that domestic producers had experienced against low-priced imports, and the relevant input cost pressures. When SAPA made an application the respective tariff rates were requested; 991c/kg with a maximum of 82% for carcasses (excluding necks and offal) with all cuts (e.g. thighs, wings, legs and breasts) removed; 1111c/kg with a maximum of 82% for the whole bird; 12% or 220c/kg with a maximum of 82% for boneless cuts; 67% or 335c/kg with a maximum of 82% for offal, and a 56% or 653c/kg with a maximum of 82% for bone-in portions. Ultimately, what ITAC had recommended to the Minister of Trade and Industry was less than what SAPA had requested. The approved tariff regime resulted in 82% bound rate for the whole bird; 12% for boneless cuts; 37% for bone-in portions; 30% for offal, and 31% for the carcases. The bone-in portions had proven the biggest challenge for domestic producers in competing with low-priced imports. Since industrialised nations, i.e. the EU and USA, had shown preference for the white meat of poultry, which were the legs, thighs and wings, but the brown meat of the poultry, which were the internal bone-in, was not preferred and resulted with industrialised nations having an over-supply and would resort to exporting of it. The whole bird tariff was also a huge increase and it was in the high-end of the market. The offal tariff was increased by 3% from 27% and the carcases were increased by 4% from 27% too.

The trade remedy by ITAC for the poultry tariff regime was the anti-dumping duties on bone-in chicken meat portions originating from the USA that were imposed in 2000. These anti-dumping duties have been maintained through sunset reviews in 2006 and 2012, since anti-dumping duties lasts for five years after which a new sunset review would assess the likelihood of continued any injury. Hence, through the sunset reviews ITAC had recommended that the anti-dumping duties should be maintained. In December 2015 a temporary rebate was created to allow for a free anti-dumping duty importation of 65 000 tons of US bone-in chicken portions annually. This was done in the context of South Africa’s continued participation under the African Growth and Opportunity Act (AGOA). Since the rebate was enforced ITAC had observed that the take-up had been relatively lower than what was expected by the quantity of the quota. South African importers continued to prefer importing poultry from the European Union, even of the bone-in portions that served the biggest challenge for domestic producers, despite the imposed quota and anti-dumping duties on bone-in chicken portions against imports from Germany, Netherlands and the UK, which was imposed in February 2015. Regardless, imports of bone-in portions had increased from the EU, because of the complete implementation of trade agreements between South Africa and the EU. The trade agreement resulted in the duties on poultry meat from EU currently to stand at zero. In other words, duty-free poultry meat from the EU had meant that the cited increases for poultry tariffs were not applicable to imports from the EU, but to other global countries. In conclusion, ITAC was currently in the final stages of an investigation for a safeguard measure in terms of Article 16 of the TDCA on frozen bone-in portions of chicken originating from the EU.

Discussion:

Ms Z Jongbloed (DA) asked why the DRP for maize had remained unchanged since 1999. Since it was noted that the first submissions on sugar and maize would serve before the Commission on 11 October 2016; what was the basis of the application done for the review of the maize price to increase made by GrainSA? Who were the tariff role-players; would the buyers, producers or other stakeholders be considered as such? How were local farmers protected against overseas subsidies?

Mr P Maloyi (ANC) questioned who represented the agriculture sector and the consumers at ITAC, and queried if they had made meaningful inputs.

Mr N Capa (ANC) questioned the impact of the said policy on local producers, and queried the feedback of the beneficiaries.

Mr Tsengiwe answered that the DRP for maize had not changed since 1999, because the change was subject to an application made by domestic producers, of which no application for an increased DRP was made. The production and market conditions differed for maize, in comparison to wheat, and domestically it was in a much more favourable position that was largely self-sufficient, with slight impact from the drought, than wheat was. South Africa had also been a net exporter of maize, and consequently was void of the challenges of low-priced imports that the other grain produce was put at risk by. However, recently GrainSA had approached ITAC to review the DRP for maize prices. ITAC was in the process of reviewing the application made by GrainSA when the Minister of Economic Development gave a policy directive to initiate a policy review of the tariff instead; this was motivated by the reasons of drought, currency fluctuations and the concern of food inflation. The processes that follow any investigation were transparent and open to all interested parties involved. At the beginning, ITAC would invite all interested parties, such as the various organisations and companies, but members of the public were welcome to comment and provide submissions as well. For instance, when revising the DRP review for wheat, both GrainSA and Grain Millers provided return submissions to the Commission at ITAC, resulting in a participatory process of investigation. Subsidies provided by industrialised nations to their local farmers that would result in over-supply and the lowering of global prices, and so implicate South African local farmers, were considered by a distortion factor calculated into the DRP pricing. Whichever the lowering of the global prices was estimated at, the distortion factor would make up for in the DRP, causing the playing field between foreign and domestic import and export to be levelled.

Ms Rika Theart, Senior Manager, ITAC, answered that ITAC had consulted with The Bureau for Food and Agricultural Policy (BFAB) during investigations and was further assisted by BFAB with making impact analogy of specific scenarios, in terms of the level of the duty on consumers. For instance, when wheat was under review, BFAB was consulted for an impact analysis on bread prices once a particular level of duty or reference price was determined. The policy and its recommendations endeavour to have balanced the profitability of the farmers with the affordability of food by consumers.

Mr Tsengiwe elaborated that the structure of ITAC was as follows, the Commission would report to two Departments, viz. the Department of Trade and Industry (DIT) and the Economic Development Department (EDD). The EDD was responsible for the monitoring of the implementation, such as the policy strategy and funding, of the Infrastructure Development Act that ITAC operated by, and then EDD was reported too. However, once the investigations were completed, its recommendations were sent to the Minister of Trade and Industry. Once the Minister of Trade and Industry had made a decision, he would then request its implementation by the Minister of Finance, because import tariffs were subject to the Customs and Excise Act 1964. It should be noted that ITAC has various units; such as tariff investigation, trade remedies, import and export control to name a few. Once a month, the investigation staff would present the findings to the seating of the Commission, who would evaluate the findings provided and make recommendations to the Minister of Trade and Industry. The Commissioners comprised of a broad range of sectors, which were agriculture, business, organised labour, finance and economics. There was a full-time Commissioner, who was the Chief Commissioner and nine part-time Commissioners. One Commissioner derived from the Department of Agriculture, Forestry and Fisheries (DAFF) and another derived from Treasury to represent government.

Mr L Ntshayisa (AIC) queried that in the presentation, ITAC mentioned that a temporary rebate for a free anti-dumping duty importation was created in December 2015 for annual import of 65 000 tons of US bone-in chicken. This was in the context of the country’s participation in the African Growth and Opportunity Act (AGOA). For how much longer was the temporary rebate going to be in effect, as the dumping of agricultural products by subsidised foreign industries was the biggest concern to our local farmers? Also, since South Africa was currently not in a position to export sugar, the question posed would be, would that perpetuate or could sugar exports occur after the drought? 

Mr Maloyi queried what the impact was on domestic producers as a result of the free anti-dumping duty by the USA. Were its implications negative or positive? If it was negative, what was being done to ensure that the South African domestic producers were not adversely affected? Were the domestic stakeholders, specifically the domestic producers satisfied with the approved tariff regime (VTF)? If they were not happy with it, what were the fundamental issues that they had raised pertaining to it? Additionally, should it be assumed that the only person representing the agriculture sector would be the said Commissioner from DAFF, and so the consumers were also taken into consideration, as the Commissioner was adequately skilled to competently represent the entire sector?

The Chairperson noted that ITAC had indicated that the application request made by GrainSA was overtaken by a decision made by the Minister of Economic Development to the Commissioners to review a tariff policy. Given the current situation of drought, what could be further expected? Also, to which extent, if any, had safety measures affected the tariff determination? The safety of food consumed in the country was essential. Even though ITAC had its own mandate, ultimately, it could not regulate the USA or any country that had not complied with the necessary safety measures of the anti-dumping duty. However, to which extent was influence imposed to ensure adherence to the safety measures, since it could not control the US, or were rebate and tariff negotiations solely focused on the quantity of imports?

Mr Tsengiwe answered that the ITAC had historically acted against dumped imports, particularly from the USA, which had resulted in the standing anti-dumping duties of the bone-in chicken imports from the USA, and it was maintained by the sunset reviews. Negotiations between South Africa and the USA concerning the continued SA participation in AGOA was tough. It resulted in SA having to balance the given concession on US demands in terms of the quarter on chicken, with its export interest in other sectors that SA had benefited from. Hence there were association-with-association negotiations about the quota, and ultimately the quota was settled at annual import of 65 000 tons of US bone-in chickens. The utilisation of the quota had proven to be quite lower than expected. Instead, South African importers had continued to prefer importation from the European Union. Thus, the quota had not replaced imports from the EU in the manner that was anticipated. Therefore, it shall be investigated why the South African importers had continued to source from the EU. Once the cycle of drought was over, the production of sugar would revert to its surplus supply, and so SA could continue to export sugar. Regarding domestic producers’ satisfaction, it should be noted that when domestic producers had approached ITAC their focus was solely in their interest, but ITAC response was based on objective assessment of industry data, because ITAC responsibility was to balance the interest in the value chain. Thus, there would be the farmers, processors and retailers versus the consumers at the end of the value chain. Since the endeavour was food security, ITAC considered its affordability, especially by the poor, more than food availability by domestic producers. Consequently, in most cases, the recommendation of the appropriate tariffs, were less that the requests made by the relevant domestic producers, as they would argue for what was in the sector’s interest, but ITAC had to balance the entire value chain.

Ms Theart answered that when the temporary AGOA rebate was implemented on 18 December 2015, the annual 65 000 metric tons’ allocation of in-bone chicken imports from the US were divided by four, thus 16 250 tons were made available until the official AGOA rebate kick-in on 1sApril 2016. During the initial phase merely 55% of the quota was utilised, despite being governed on a first-come-first-serve basis. Subsequently, conditions were attached to determine who would qualify under the rebate provision. Yet only 23% of the quota was utilised for Importer one. Therefore, overall utilisation of the quota had proven low.

Mr Tsengiwe elaborated that since the application by GrainSA for maize was overtaken, the future of the maize tariff was yet being investigated by ITAC, of which the findings would be presented to the Commission in October. The Commission would then consider the relevant facts and make a decision. It cannot be pre-empted at this stage what the tariff protection would be once the Commission had made its determination. It should be assured, however, that the decision would be based on rigorous and prudent investigations. The process was based on industry data, was open and transparent and included full participation by all interests of the value chain. Food safety had fallen outside of the scope of ITAC and was primarily the responsibility of DAFF. During the administration of the AGOA quota, the importers would first need to apply to DAFF, of which it would have ensured that the importers had met the requirements and guidelines, inclusive of safety requirements and hazard inspections, and then ITAC would be involved closer to the end of the application, by means of approving a rebate permit that would be communicated to SARS.

Mr Capa questioned whether the Commission had experienced contradictions between the local producers and the local importers, and whether anyone felt disadvantaged in those cases which favoured one over the other?

Mr Tsengiwe replied that in almost all of the investigations contradictions were evident, because of conflicting interest in the value chain. For example, the wheat farmers who were represented by GrainSA would request the maximum profit return possible. Yet on the other hand, Grain Millers and the Big Five were also interested in competitive pricing, because the wheat was an input cost of the flour that they were producing, but their interest was capping the input cost. There were, also, the bakers, some of which was vertically integrated with the Grain Millers, retailers and consumers. Hence, there was none unison regarding the outcome for the wheat tariffs represented to the Commission by the relevant parties concerned. Tariffs would always highlight the concern of price rising effects for consumers, especially since the objective was for consumers to access food at affordable prices. The Commission was, therefore, presented with quite a delicate balance of interest and challenging processes, but could assure that it could be achieved.

Mr Ntshayisa wanted clarity for the current import tariff status for maize. 

Mr Tsengiwe replied that there was no tariff on maize and that the DRP for maize remained unchanged for years. Since the global price for maize was either at the level or higher than the DRP and so no trigger for tariff change was necessary. However, as cited, GrainSA had approached ITAC to review the DRP for maize, and the outcome of the new level of pricing would constitute of a trigger in relation to the global prices. However, currently no tariff for maize in South Africa existed.  

The meeting was adjourned. 

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