Proposed amendments to the countervailing regulations: moving forward or a missed opportunity?Posted on Thursday, April 23rd, 2009 by Brink, Gustav in Trade Briefs
The International Trade Administration Commission (ITAC) recently published draft amendments to the Countervailing (Anti-Subsidy) Regulations for comment. It indicated that the amendments are proposed to align the Regulations with ITAC’s current practice, the requirements of the World Trade Organisation (WTO) Subsidies Agreement and decisions of WTO panels and Appellate Body, as well as with the Amended Anti-Dumping Regulations which are yet to be published.
While some of the proposed amendments will increase transparency, scrutiny of the proposals indicates that ITAC will no longer accept applications for countervailing measures unless at least 50% of the domestic industry submits injury information. In addition, all producers that represent more than 35% of the production capacity must submit information. On top of this, parties will be only be regarded as producers if they add 25% value in South Africa, as calculated by ITAC, i.e. the value included in the final product, excluding packaging, general and administrative expenses and profit, must exceed 25% of the total cost of raw materials regardless of where such raw materials were sourced. This effectively means that South Africa has virtually no textiles, clothing or pharmaceutical industry that would qualify for lodging applications.
On top of this ITAC not only proposes including a national interest requirement before countervailing duties can be imposed, but reserves the right to apply the national interest to preliminary determinations without giving any interested party the opportunity to comment.
Further scrutiny shows that several provisions of the Proposed Regulations are not in line with the WTO Subsidies Agreement and WTO jurisprudence, no time constraints are placed on ITAC, ITAC will not investigate new subsidies during reviews despite having to investigate the effects of subsidised exports rather than specific subsidy programmes and in many instances no protection will be granted against subsidies paid direct to exporters as only foreign producers are targeted.
All of this follows pressure brought by the Chinese government against a South African producer that recently lodged a countervailing application, which led to the withdrawal of the application and subsequent termination of the investigation.
In view of the above it appears that the domestic industry can no longer rely on ITAC to protect it against unfair international trade in the form of subsidised exports.
Read more by downloading Working Paper 02-2009: WP022009BrinkCVRamendments20090311.pdf (2022KB)