JB Cronjé, tralac Researcher, discusses South Africa’s export control measures on metal waste and scrap

South Africa’s Department of Economic Development published draft Policy Directive and Export Control Guidelines on the Exportation of Ferrous and Non-Ferrous Metal Waste and Scrap at the end of last month for public comment. The purpose of the policy is to strengthen existing export control measures to prevent further job losses and deindustrialisation in the scrap processing industry and to ensure security of supply of inputs for the national infrastructure-build programme.

The proposal is to prohibit the exportation of ferrous and non-ferrous waste and scrap metal unless it has first been offered to domestic users of scrap, for a period of 30 working days, at a discount price or in terms of a price formula. The policy will be in place for a period of five years and could be extended subject to review. Interested parties are invited to submit proposals on what the price percentage lower than the Metal Bulletin price, fob Rotterdam should be. The price preference will be expressed as a fix percentage lower than the Metal Bulletin price, fob Rotterdam for all metal scrap, or a fixed percentage for the categories of metal scrap i.e. ferrous (steel and stainless steel) and non-ferrous (mainly aluminium and copper). The International Trade Administration Commission (ITAC) will twice weekly give first option to foundries, mills and smelters to purchase the metal scrap for which an export permit is applied for, at the predetermined price preference level. If the opportunity is not taken within 30 working days the application will be processed and an export permit will be issued. All variations and fluctuations in price and exchange rate from the date of the application and if an export permit is granted is the responsibility of the exporter.

The proposal forms part of a range of recommendations made by the Inter Departmental Task Team on Iron Ore and Steel and approved by Cabinet at the end of last year to secure developmental iron ore and steel prices in support of downstream, value-adding industries of the manufacturing sector. These instruments include:

• Amendments to the Competition Act to ensure that iron ore price concessions accruing to the primary steel industry are indeed passed on to downstream steel users.

• Establish new domestic steel production capacity; led by the Industrial Development Corporation

• Strategic utilisation of state infrastructure to achieve developmental outcomes with the support of Department of Public Enterprises.

• Amendments to the Mineral and Petroleum Resources Development Act to promote the beneficiation of minerals and petroleum resources in South Africa.

Beneficiation is defined in the draft Mineral and Petroleum Resources Development Bill as the “transformation, value addition or downstream beneficiation of a mineral or petroleum resource (or combination of minerals) to a higher value product” that can either be consumed locally or exported. According to the Bill, the Minister will be allowed to declare certain minerals “strategic” and determine the percentage per mineral commodity and the price in respect of such percentage required for local beneficiation. Producers will be required to offer a certain percentage of its raw mineral production to local beneficiators and all designated minerals will be subject to export controls. The resolutions adopted at the governing political party’s recent national conference provide the direction government policy will take on this matter. It listed the following minerals in its conference declaration which may be identified as “strategic” and subject to special public policy measures:

• Minerals for manufacturing: steel (iron ore), polymers (coal or oil/gas), base metals (copper, zinc, nickel), platinum group metals, chromium, vanadium, manganese, alumina-silicates;

• Minerals for energy: coal, uranium (also limestone for washing emissions), natural gas, including shale gas and coal-based methane gas;

• Minerals for agriculture: NPK-nitrogen (gas), phosphates, potassium, conditioners (sulphur, limestone);

• Minerals for infrastructure: steel (iron ore), cement (limestone, gypsum), copper.

Article XI of the General Agreement on Tariffs and Trade (GATT) provides for a general prohibition on quantitative export restrictions, except prohibitions and restrictions for

• Temporary relief of critical shortages of essential products;

• The application of standards or regulations for classification, grading or marketing commodities.

However, GATT Article XX provides a list of exceptions that could be recognised as exceptions to the substantive obligations (including Article XI) established under the Agreement. The article requires that subject to non-discrimination and least-trade restrictive standards, export restrictions are permitted, inter alia, for:

• Conservation of exhaustible natural resources in conjunction with matching restrictions on domestic production and consumption,

• Domestic materials necessary to ensure essential quantities for a domestic processing industry when the domestic price of such materials are held below the world price as part of a government stabilisation programme, provided the restrictions do not operate to increase exports of beneficiary final goods or protection to such domestic industry,

• Essential to the acquisition or distribution of products in general or local short supply, provided the measures are consistent with the principle that all countries are entitled to an equitable share of the international supply of such products.

The question remains whether the South African government’s draft export policy on scrap metals or other beneficiation programmes will meet the strict requirements of GATT. If not, the possibility arises that other WTO Member States may apply anti-dumping or countervailing duties to exported products that have benefitted from export restrictions on inputs used in domestic production.

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