Introduction to Trade Remedies
Anti-Dumping | Countervailing | Safeguard Duties | General
Introduction
Today with the ever-increasing global trade and negotiations of Free Trade Agreements between countries and trading blocs the domestic industries are faced with fierce competition from outside their borders. Economies of scale, low labour costs, increased demand and new technology are all factors that play a role in products being exported at “dumped” price.
The World Trade Organisation (“WTO”) per se does not condemns dumping and subsidising – only if it causes material injury to the established domestic industry in the importing country or materially retards the establishment of a domestic industry. Therefore, products can normally be dumped or exported at subsidised prices to countries where no domestic industry of that product exist without being accused of dumping of the product.
Provision is made in Article VI of the General Agreement on Tariffs and Trade (“GATT”) that no product that is imported from a member country into the territory of a member country shall be subject to both countervailing and Anti-Dumping duties to compensate for the same situation of export subsidisation or dumping.
As a signatory and member to the WTO South Africa has committed itself to reducing its import tariffs over five to eight years. Three trade remedy measures remained to protect the domestic industry against ‘unfair’ and “fair” competition experienced from outside the Southern African Customs Union (“SACU”) borders. These measures are Anti-Dumping and countervailing actions for unfair trade and safeguard actions to address fair trade.
The Directorates Trade Remedies I and II conducts the Anti-Dumping, Countervailing and Safeguard investigations in SACU. These investigations are carried out and are implemented in accordance to the South Africa Customs and Excise Act, 1964, the International Trade Administration Act, No 71 of 2002 and the following Regulations.
- Anti-Dumping Regulations
- Countervailing Regulations
- Amended Safeguard Regulations
Anti-Dumping
Background
An Anti-Dumping action in South Africa is normally initiated when the SACU industry submits an application to the International Trade Administration Commission (“Commission or ITAC”), alleging that products are imported at dumped prices causing material injury to the SACU industry. The Commission must then determine if the exists prima facie information to investigate if a dumping investigation must be initiated. The Commission will investigate whether the imports from a company or companies in the country of export is dumping and whether material injury is suffered by the domestic industry in SACU as a result of the dumping.
Three Pillars of an Anti-Dumping Action
The Applicant must submit prima facie evidence that a like product is dumped into the country of import. That the domestic industry in the country of import is suffering material injury or that there exist a threat of material injury and that there is a causal link between the dumping of the product and the material injury suffered or threat of injury experience by the SACU industry.
Duration of an Anti-Dumping Investigation
These investigations, according to the Agreements must be concluded within 12 months after initiation and may only continue for a further 6 months if there exist special circumstances.
Duration of Final Anti-Dumping Duties
Anti-Dumping duties are imposed for a period of five (5) years and must be reviewed before the 5 year period lapse and can then can be extended for a further 5 years.
Countervailing
Background
The SACU industry can Apply to the Commission to initiate a countervailing investigation when products are imported at low prices causing material injury to the SACU industry as a result of receiving subsidies from the Government in the exporting country. The Commission will then investigate if prima facie information was submitted indicating that the SACU industry is suffering material injury and that there exist subsidies in the country of export and that the exporters are making use of these subsidies.
Therefore, in a countervailing investigation the Government of the export country is accused of granting countervailable subsidies to the exporters in that country and the exporters are making use of the subsidies available to them. By making use of these subsidies these exporters are thus accused of causing material injury to the SACU industry.
Prior to initiating a countervailing investigation, the Commission musG inform the exporting country of the complaint that was received and invite the government of the country of export to engage in consultation.
Three Pillars of a Countervailing Action
An Applicant must submit prima facie evidence that a like product that is imported is subsidised by the exporting country’s Government. That the domestic industry in the country of import is suffering material injury or that there exist a threat of material injury and that there is a causal link between the subsidising of the product and the material injury suffered or threat of injury.
Duration of a countervailing investigation
A countervailing investigation, according to the Agreement must be concluded within 12 months after initiation and may only continue for a further 6 months if there exist special circumstances.
Duration of Final Countervailing Duties
Countervailing duties are imposed for a period of five (5) years and must be reviewed before the 5 year period lapse and can then can be extended for a further 5 years.
Safeguard Duties
Background
A WTO Member country may only apply a safeguard measure (tariff or quantitive measure) to a product if that member has determined, pursuant to certain provisions, that such product is being imported into its territory in such increased quantities (a surge), absolute or relative to domestic production, which was unforeseen and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products.
Safeguard measures shall be applied to a product being imported irrespective of its source.
A safeguard measure can be seen as a temporally relief for an industry in the country of import from its WTO commitments, as the import tariffs are already at their bound rates, but imports continue to be imported in substantial volumes. Such safeguard duty then grants temporally relief allowing the industry to restructure and adjust to compete with the imports. Therefore, a safeguard measure if imposed must be liberalized over the period of its imposition.
It is also the only trade remedy instrument where it must be determined if the imposition of the measure will be in the public interest.
Duration and Review of Safeguard Measures
A safeguard measure shall apply only for such period of time as may be necessary to prevent or remedy serious injury and to facilitate adjustment. The period shall not exceed four (4) years, unless it is extended. The total period of application of a safeguard measure including the period of application of any provisional measure, the period of initial application and any extension thereof, shall not exceed eight (8) years.
If the duration of the measure exceeds three years, the member applying such a measure shall review the situation not later than the mid term of the measure and, if appropriate, withdraw it or increase the pace of liberalization.
General
These investigations shall include reasonable public notice to all interested parties and public hearings or other appropriate means in which importers, exporters and other interested parties could present evidence and their views, including the opportunity to respond to the presentations of other parties and to submit their views.
As a result of the impact of such measures on trade, any information which is by nature confidential or which is provided on a confidential basis shall, upon cause being shown, be treated as such by the Commission. However, parties providing confidential information must furnish non confidential summaries thereof to allow the other interested parties to see what was submitted in confidence.
The Commission shall then publish reports setting forth their findings and reasoned conclusions reached in the preliminary and final stages on all pertinent issues of fact and law.
It is thus extremely important that interested parties of these investigation monitor and liaise constantly with the Commission.
The above synopsis of the three trade measures are intent to serve as backgroud information to South African companies competing on the SACU market as well as globally, exploring the trade remedy mechanisms to level the playing fields especially within the SACU market and the risks involved in trading globally and to fall victim of the measure when trading globally. Therefore, this synopsis cannot be seen as being comprehensive and more information and guidance can be obtained here.