Discussions
Frozen potato chip imports – the case of consecutive trade remedies
Willemien Viljoen, tralac Researcher, discusses the use of trade remedies on frozen potato chip imports to South Africa
The safeguard and anti-dumping investigations launched by South Africa on frozen potato chip imports (classified under HS 2004.10.20) have had an interesting history which came to an intriguing end on 8 August 2014 with the decision to suspend the imposition of anti-dumping duties until the current safeguard applicable to the same product is terminated. The safeguard investigation was launched on 8 March 2013 by the South African International Trade Administration Commission (ITAC). This was followed by an anti-dumping investigation on the same import product originating in or imported from Belgium and the Netherlands on 21 June 2013. On 25 July the South African Revenue Service (SARS) imposed a final safeguard duty on frozen chips. Imports attract a duty of 40.92 percent from 25 July 2014 to 4 July 2015 and a duty of 20.45 percent from 5 July 2015 to 4 July 2016. On 8 August, Notice 634 of 2014, published in the Government Gazette stated that ITAC made a recommendation to the Minister of Trade and Industry to impose definitive anti-dumping duties on frozen chips imported from or originating from Belgium and the Netherlands. The Minister, however, decided to suspend the implementation of these anti-dumping duties until the safeguard measure comes to an end.
The reason for the suspension of the anti-dumping duty is currently unclear. There has been speculation by trade experts that it is to avoid the ‘overprotection’ of a specific product; and the possibility that the simultaneous implementation of safeguards and anti-dumping measures could see South Africa being taken to the WTO Dispute Settlement Body (DSB). This raises some interesting questions in terms of the World Trade Organization (WTO) law applicable to trade remedies and safeguards.
1. Simultaneous implementation and ‘overprotection’
Is South Africa trying to avoid a dispute at the WTO under the Dispute Settlement Understanding (DSU), by adopting consecutive rather than simultaneous measures? There is nothing in terms of WTO law that prohibits the simultaneous implementation of a safeguard and anti-dumping measure. The only prohibition that is found in the GATT 1994 Article VI: 5, pertains to the simultaneous implementation of anti-dumping and countervailing duties. According to the article ‘No product of the territory of any contracting party imported into the territory of any other contracting party shall be subject to both anti-dumping and countervailing duties…’ No prohibition exists on the simultaneous implementation of anti-dumping or countervailing duties and safeguards and no dispute regarding this matter has been brought to the WTO DSB. Given the different and unique design of these remedies, simultaneous implementation does make sense.
A second argument in favour of consecutive remedies is that simultaneous implementation might result in ‘overprotection’. In terms of anti-dumping and safeguard measures this matter once again is yet to be tested by the WTO DSB. This matter goes to the distinct nature of the remedies. An anti-dumping duty is a trade remedy implemented by a country to rectify harm caused by the unfair trade practice of dumping, while safeguards are not trade remedies in the strict sense of the word. A safeguard aims to provide temporary relief when harm is caused by a surge in imports under fair trade conditions. Anti-dumping measures are country and product specific; safeguards are only product specific and must be implemented irrespective of the source of the imports. Since safeguards are used to address a surge in imports, and anti-dumping measures are used to address dumping and each is implemented according to its own unique set of rules, simultaneous implementation should be justifiable. However, a counterargument, anchored in the prohibition in the GATT Article VI: 5, can also be offered. Can the prohibition of the simultaneous implementation of anti-dumping and countervailing duties be extended to the current situation? Why would simultaneous implementation in the one instance be prohibited, but not in the other? Does this pertain to the nature of the remedies in that anti-dumping and countervailing duties are levied against specific countries, while safeguards are levied irrespective of the source? These are all interesting and complex questions that could be raised if a similar case is brought in front of the WTO DSB in future.
2. Consecutive implementation of remedies
In terms of frozen potato chip imports into South Africa (and the SACU market) the safeguard measure is currently in place and only much later will the anti-dumping measure come into effect. There is no direct provision within the WTO law that prohibits the implementation of trade remedies consecutively. The only provision that prohibits consecutive application is in the case of consecutive safeguards in accordance with Article 7 (5) of the WTO Agreement on Safeguards Article. This article states that ‘No safeguard measure shall be applied again to the import of a product which has been subject to such a measure, …., provided that the period of non-application is at least two years.’ No such prohibition exists in the case of anti-dumping measures and no such provision exists in the case of applying different remedies consecutively.
Questions also concern the proposed time lapse between the decision to implement an anti-dumping duty and the actual imposition of the said duty. Currently the implementation of the anti-dumping duty is suspended until the safeguard is terminated which is set for July 2016. However, according to WTO law a safeguard measure should be implemented only to the extent necessary to remedy the injury and for no longer than a period of eight years (an initial 4 years which can be extended for a further 4 years). This means that although the current safeguard is set to expire in 2016, a review can take place after the initial two years with a decision to extend the safeguard measure for a further period. This can result in a significant time lapse between the decision to implement and the actual implementation of the definitive anti-dumping duty. This lapse in time seems to fall in a grey area of the WTO law pertaining to trade remedies and safeguards. In terms of the WTO Agreement on Anti-dumping Measures (ADA), the only time periods the WTO law prescribes are the timeframe within which the anti-dumping investigation needs to be completed and the duration of imposed provisional and definitive measures. However, in the current situation these time frames have been and will be abided by with the time lapse between the final decision and implementation falling outside the ambit of these provisions. The only provision made within the ADA for a similar type of lapse in time is in the case of a price undertaking. According to Article 8 of the ADA if a price undertaking is accepted in lieu of the imposition of anti-dumping duties the proceedings can be suspended or terminated. However, if the undertaking is violated countries can take ‘expeditious’ action in terms of provisional measures and further definitive duties. Although this article does allow for the suspension of the implementation of definitive anti-dumping duties, this is in very specific circumstances and it is unclear whether this can be extended to the suspension of one remedy until another has ended. In terms of Article 6.14 (pertaining to the evidence in a dumping case) of the ADA the article states that the procedures provided for the collection of evidence are not ‘intended to prevent the authorities… from proceeding expeditiously with regard to initiating an investigation, reaching preliminary or final determinations,….., or from applying provisional or final measures….’ Although this provision pertains to a specific area in the anti-dumping investigation process, the question can be asked if the requirement for expeditious proceedings should not pertain to the ADA as a whole. This will have a significant implication for the current set time lapse of two years between the final decision and the actual imposition of the anti-dumping duty on frozen potato chips.
The use of consecutive trade remedies is unfamiliar territory and seems to be a grey area in terms of WTO law. This might have left South Africa vulnerable to a challenge at the WTO DSU by the European Union; something that South Africa might have tried to avoid in the first place by choosing the current course of action. If this case is brought to the DSB it will be interesting to see how the interaction between the WTO trade remedy and safeguard rules will be interpreted.
Sources:
ITAC (www.itac.org.za);
Government Gazette (Notice 634 of 2014, Report No. 436 and Report No. 458);
WTO Agreement on Anti-dumping Measures (http://www.wto.org/english/res_e/booksp_e/analytic_index_e/anti_dumping_e.htm);
WTO Agreement on Safeguards (http://www.wto.org/english/res_e/booksp_e/analytic_index_e/safeguards_e.htm)