Customs News Bulletin

	20 June 2017

Latest News

COUNTERVAILING DUTIES ON FLAT HOT-ROLLED PRODUCTS OF IRON OR STEEL

South Africa is a founding Member of the World Trade Organisation (WTO), 1994 and its successor, the General Agreement on Tariff and Trade (GATT), 1947.

South Africa is also a signatory to various WTO Agreements, for example the World Trade Organization (WTO) Anti-dumping Agreement, Agreement on Subsidies and Countervailing Measures and Safeguards Agreement.

The agreements above relate to measures of trade remedies, and in terms of our commitments under the agreements above, the WTO needs to be notified of any proposed remedial actions.

For background information, this article should be read with the article on anti-dumping duties, countervailing duties and safeguard duties in the  Jacobsens Customs News Bulletin of 9 June 2017.

Safeguard measures allow a WTO member to temporarily restrict imports of a product to protect a specific domestic industry, for example when unforeseen surges in imports cause or threaten to cause serious damage to that particular industry.

Measures can be applied under the Safeguards Agreement provided that all the following conditions prevail and apply during the term of the measures:

• they only apply for a temporary period;

• they are only imposed when the imports are found to cause or threaten serious injury to a competing domestic industry;

• they are applied to imports from all sources on a non-selective basis;

• the measures are progressively liberalized while in effect, the member imposing the safeguards may be required to compensate the members whose trade is affected.

There are currently no countervailing or safeguard duties in the Southern African Customs Union Tariff but safeguard measures on certain flat-rolled steel products could be introduced soon.

The general notification procedure for safeguards are explained below, with specific reference to these steel products as a case study.

Notifications are required in terms of the following international provisions:

• Article 12.1(b) of the Agreement on Safeguards on finding a serious injury or threat thereof caused by increased imports;

• Article 12.1(c) of the Agreement on Safeguards on taking a decision to apply a safeguard measure;

• Article 9, Footnote 2, of the Agreement on Safeguards.

South Africa notified the Committee on Safeguards of findings of serious injury or threat thereof caused by the increased imports and proposed safeguard measures in line with WTO document G/SG/W/1 dated 23 February 1995.

South Africa’s notification to be circulated was dated 24 April 2017, and the WTO‘s Committee on Safeguards notified members of the Proposed Safeguards under a circular dated 27 April 2017.

The International Trade Administration Commission of South Africa (ITAC) initiated an investigation for remedial action in the form of a safeguard against the increased imports of certain flat hot-rolled steel products on 26 March 2016.

ITAC communicated its proposed preliminary determination to the WTO on 18 July 2016.

The preliminary determination was published in the Government Gazette on 22 July 2016.

The initiation of the investigation and the preliminary determination must also be notified to the Committee on Safeguards. The Committee then notifies other Members. In this instance it was done in WTO documents (G/SG/N/6/ZAF/4 and G/SG/N/8/ZAF/3).

The product subject to investigation is described as certain flat-rolled products of iron, non-alloy steel or other alloy steel (not including stainless steel), whether or not in coils (including products cut-to-length and 'narrow strip'), not further worked than hot-rolled (hot-rolled flat), not clad, plated or coated, excluding grain-oriented silicon electrical steel, imported under Harmonized System tariff subheading 7208.10, 7208.25, 7208.26, 7208.27, 7208.36, 7208.37, 7208.38, 7208.39, 7208.40, 7208.51, 7208.52, 7208.53, 7208.54, 7208.90, 7211.14, 7211.19, 7225.30, 7225.40, 7225.99, 7226.91 and 7226.99.  (The original notification was given under HS 2012 and Customs administrations are now using a new version of the HS, HS 2017. None of the subheadings were affected by the transposition).

Pursuant to Article 12.1(b) of the Agreement on Safeguards, the notifying government (Government of South Africa in this case) must give notification upon making a finding of serious injury caused by increased imports of the products in question.

The notifying Government must further give notification upon taking a decision to apply a safeguard measure on imports of the products in question pursuant to Article 12.1(c) of the Agreement on Safeguards.

The Notifying Government, through its National Tariff body, must further provide the basis for:

• Making a finding of serious injury caused by increased imports, as provided for in Article 12.1(a) of the Agreement on Safeguards;

• Taking a decision to apply a safeguard measure, as provided for in Article 12.1(b) of the Agreement on Safeguards; and

• Specifying the developing countries to which the measure is not applied under Article 9.1 of the Agreement of Safeguards.

ITAC is the national tariff body of South Africa and, although the BLNS Countries (Botswana, Lesotho, Namibia and Swaziland) have their own national tariff bodies/boards in terms of the Southern African Customs Union (SACU) Agreement, ITAC also acts on behalf of the BLNS-Countries.

Therefore, in the case of the investigation to the safeguards on the steel products in question, ITAC initiated an investigation pursuant to an application by South African Iron and Steel Institute (the Applicant), on behalf of the SACU industry in order to determine whether increased imports have caused serious injury to the domestic industry, within the meaning of the Agreement on Safeguards, in connection with certain flat-rolled products of iron, non-alloy steel or other alloy steel (not including stainless steel), whether or not in coils (including products cut-to-length and 'narrow strip'), not further worked than hot-rolled (hot-rolled flat), not clad, plated or coated, excluding grain-oriented silicon electrical steel.

ITAC made a final determination on the following:

• Unforeseen Developments;

• Increased Imports;

• Serious Injury;

• Causal Link between Increased Import and Serious Injury;

• Adjustment Plan; and

• Offer of consultations under Article 12.3.

In the light of the above, if adopted, ITAC made a final determination that a definitive measure of 12% on the imports of certain flat-rolled products of iron, non-alloy steel or other alloy steel (not including stainless steel), whether or not in coils (including products cut-to-length and 'narrow strip'), not further worked than hot-rolled (hot-rolled flat), not clad, plated or coated, excluding grain-oriented silicon electrical steel, imported under tariff subheading 7208.10, 7208.25, 7208.26, 7208.27, 7208.36, 7208.37, 7208.38, 7208.39, 7208.40, 7208.51, 7208.52, 7208.53, 7208.54, 7208.90, 7211.14, 7211.19, 7225.30, 7225.40, 7225.99, 7226.91 and 7226.99 be imposed.

It is expected that the definitive measure, if adopted, will come into effect on the 7th of July 2017. The Safeguard duty will be inserted in Part 3 of Schedule No. 2 to the Customs and Excise Act, 1964.

Tariff amendments in the Southern African Customs Union are published by the South African Revenue Services following a process in terms of which ITAC investigates matters and makes recommendations in relation to the investigation. If a tariff amendment is justified, the Minister of Trade and Industry requests the Minister of Finance to implement the recommendations. SARS is responsible for drafting the notices and arrange for publication in a South African Government Gazette. The Notices are normally signed by the Deputy Minister of Finance in terms of a deletion by the Minister of Finance.   

If adopted, the safeguard measure will remain in force for three years. It will be reduced annually from 12% to 8% and is expected to expire on 6 July 2020.

There are special procedures that need to be followed for safeguard measures with a duration of more than three years. For example a proposed date for the review must be provided under Article 7.4 of the Safeguards Agreement.

A list of developing countries which are exempted from the safeguard measure is listed in Article 4.3 of WTO document G/SG/N/8/ZAF/3/Suppl.1,  G/SG/N/10/ZAF/3, G/SG/N/11/ZAF/3 dated 27 April 2017.

DRAFT DOCUMENTS PUBLISHED BY SARS FOR PUBLIC COMMENT  

Two draft documents have been published on the SARS website for public comment.

Under the first document the Commissioner intends to publish Rules to establish Saldanha and Richards Bay as places where container depots may be established. Comments are due by 20 June 2016.

Part 2 of Chapter 3 of the Customs Duty Rules, dealing with Deferment has also been published for public comment. The due date for comments is 31 July 2017.

View the documents at http://www.sars.gov.za/Legal/Preparation-of-Legislation/Pages/Draft-Documents-for-Public-Comment.aspx. The path on the SARS website is “Legal Council” / “Preparation of Legislation” / “Draft Documents” and then look for the dates.

Customs Tariff Applications and Outstanding Tariff Amendments

The International Trade Administration Commission (ITAC) is responsible for tariff investigations, amendments, and trade remedies in South Africa and on behalf of SACU. Tariff investigations include: Increases in the customs duty rates in Schedule No. 1 Part 1 of Jacobsens. These applications apply to all the SACU Countries, and, if amended, thus have the potential to affect the import duty rates in Botswana, Lesotho, Namibia, Swaziland and South Africa. Reductions in the customs duty rates in Schedule No. 1 Part 1. These applications apply to all the SACU Countries, and, if amended, thus have the potential to affect the import duty rates in Botswana, Lesotho, Namibia, Swaziland and South Africa. Rebates of duty on products, available in the Southern African Customs Union (SACU), for use in the manufacture of goods, as published in Schedule No. 3 Part 1, and in Schedule No. 4 of Jacobsens. Schedule No. 3 Part 1 and Schedule No. 4, are identical in all the SACU Countries. Rebates of duty on inputs used in the manufacture of goods for export, as published in Schedule No. 3 Part 2 and in item 470.00. These provisions apply to all the SACU Countries. Refunds of duties and drawbacks of duties as provided for in Schedule No. 5. These provisions are identical in all the SACU Countries. Trade remedies include: Anti-dumping duties (in Schedule No. 2 Part 1 of Jacobsens), countervailing duties to counteract subsidisation in foreign countries (in Schedule No. 2 Part 2), and safeguard duties (Schedule No. 2 Part 3), which are imposed as measures when a surge of imports is threatening to overwhelm a domestic producer, in accordance with domestic law and regulations and consistent with WTO rules. To remedy such unfair pricing, ITAC may, at times, recommend the imposition of substantial duties on imports or duties that are equivalent to the dumping margin (or to the margin of injury, if this margin is lower). Countervailing investigations are conducted to determine whether to impose countervailing duties to protect a domestic industry against the unfair trade practice of proven subsidised imports from foreign competitors that cause material injury to a domestic producer.

Safeguard measures, can be introduced to protect a domestic industry against unforeseen and overwhelming foreign competition and not necessarily against unfair trade, like the previous two instruments. Dumping is defined as a situation where imported goods are being sold at prices lower than in the country of origin, and also causing financial injury to domestic producers of such goods. In other words, there should be a demonstrated causal link between the dumping and the injury experienced. The International Trade Commission of South Africa (ITAC) also publishes Sunset Review Applications in relation to anti-dumping duty in terms of which any definitive anti-dumping duty will be terminated on a date not later than five years from the date of imposition, unless the International Trade Administration Commission determines, in a review initiated before that date on its own initiative or upon a duly substantiated request made by or on behalf of the domestic industry, that the expiry of the duty would likely lead to continuation or recurrence of dumping and material injury. The International Trade Administration Commission of South Africa (ITAC) published an application to increase the rate of duty on the importation of biaxially oriented polymers of propylene, of a width not exceeding 200 mm, classifiable in tariff subheading 3919.10.43 from 10% to 20%. The ITAC reference number is 29/2016. For comments or enquiries contact: Mrs Ayanda Gandi at endou@itac.org.za or fax (012) 394 4724 or Mr Nkulana Phenya at nphenya@itac.org.za or fax (012) 394 4677. The application was published in Government Gazette No. 40847 of 19 May 2017 under Notice No. 400 of 2017. Comments are due by 15 June 2017. Customs Tariff Application List 03/2017 was published in Government Gazette 40793 of 21 April 2017 under Notice No. 308 of 2017.

Customs Tariff Amendments

With the exception of certain parts of Schedule No. 1, such as Schedule No. 1 Part 2 (excise duties), Schedule No. 1 Part 3 (environmental levies), Schedule No. 1 Part 5 (fuel and road accident fund levies), the other parts of the tariff is amended by SARS based on recommendations made by ITAC resulting from the investigations relating to Customs Tariff Applications received by them. The ITAC then investigates and makes recommendations to the Minister of Trade and Industry, who requests the Minister of Finance to amend the Tariff in line with the ITAC's recommendations. SARS is responsible for drafting the notices to amend the tariff, as well as for arranging for the publication of the notices in Government Gazettes. During the annual budget speech by the Minister of Finance in February, it was determined that parts of the tariff that are not amended resulting from ITAC recommendations, must be amended through proposals that are tabled by the Minister of Finance.

Once a year, big tariff amendments are published by SARS, which is in line with the commitments of South Africa and SACU under international trade agreements. Under these amendments, which are either published in November or early in December, the import duties on goods are reduced under South Africa's international trade commitments under existing trade agreements. There were no amendments to the Common External Tariff (CET) of the Southern African Customs Union (SACU) at time of publication. The latest tariff amendments were published on 31 March 2017. These amendments were forwarded to Jacobsens Subscribers under cover of Supplement 1088. The amendments have been published in the Customs Watch which is also available on the Jacobsens website at www.jacobsens.co.za.

Customs Rule Amendments

The Customs and Excise Act is amended by the Minister of Finance. Certain provisions of the Act are supported by Customs and Excise Rules, which are prescribed by the Commission of SARS. These provisions are numbered in accordance with the sections of the Act. The rules are more user-friendly than the Act, and help to define provisions which would otherwise be unclear and difficult to interpret.

Forms are also prescribed by rule, and are published in the Schedule to the Rules. There has been no amendments to the Rules to the Customs and Excise Act, 1964 at time of publication. The last Rule amendment (DAR/168) was published in Government Gazette 40486 of 19 May 2017.

Contact Information:	Contact the Author:
Havandren Nadasan Jacobsens Editor Tel: 031-268 3510 e-mail to: jacobsens@lexisnexis.co.za	Leon Marais Independent Customs Consultant Tel: 053-203 0727 e-mail to: leon@itacs.co.za

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