Discussions
Concerns over ITAC Trade Remedies Investigations
JB Cronjé, tralac Researcher, discusses concerns over ITAC Trade Remedies Investigations.
The International Trade Administration Commission (ITAC) announced the initiation of an investigation for remedial action in the form of a safeguard against the increased imports of frozen potato chips, classifiable under tariff sub-heading 2004.10.90, in November 2012. The application was submitted by McCain (SA) (Pty) Ltd, a major producer of frozen potato chips in the Southern African Customs Union (SACU) supported by Nature’s Choice Products (Pty) Ltd and Lamberts Bay Foods. The applicant alleges that it is experiencing serious injury in the form of “a decline in sales volume, output, market share, productivity and capacity utilisation”. The applicant further alleges that “there is an oversupply of frozen potato chips in the world market” and that they are “exported to the SACU at prices which will have a significant depressing and further suppressing effect on the applicant’s prices”. On this basis ITAC found prima facie information was submitted to indicate that “the SACU industry is suffering serious injury which could be causally linked to the recent, sudden, sharp and significant surge in imported frozen potato chips”. The applicant also indicated that “the expansion of capacity in the EU, the financial crisis which resulted in the oversupply of frozen potato chips in the world market and an aggressive export strategy by the EU producers of frozen chips augmented by the absence of sufficient duty protection as a result of the TDCA culminated in circumstances that occurred after the negotiation of the relevant tariff concessions “could not have been foreseen at the time the concessions were negotiated” in accordance with Article XIX of the GATT. (Government Gazette No. 35883, 23 November 2012).
Last week, ITAC decided to terminate the investigation “due to an error in the chain of notification to the WTO Safeguard Committee” (Government Gazette No. 36207, 8 March 2013). It is unclear what this means, but Article 12 (1) of the WTO’s Agreement on Safeguards determines that “A Member shall immediately notify the Committee on Safeguards” upon initiating an investigatory process. There exists a notion of urgency in the phrase “shall immediately notify” despite the fact that no specific number of days is mentioned in Article 12. The WTO’s Appellate Body upheld the finding of the Dispute Settlement Panel on US – Wheat Gluten that a delay of 16 days between the initiation of the investigation and the notification thereof doesn’t meet the requirement of immediate notification. On 24 January 2013, South Africa notified the Committee on Safeguards under Article 12(1)(a) on the initiation of the investigation (G/SG/N/6/ZAF/2). Two months after the notice of initiation by ITAC was published. However, the same day on which ITAC published the notice of termination in the Government Gazette it also published a notice, identical to the previous one, for the initiation of an investigation to impose safeguard measures on imported frozen potato chips (Government Gazette No. 36207, Notice 175 of 2013, 8 March 2013).
This case echoes the concerns raised by the Association of Meat Importers and Exporters (AMIE) regarding their experience with ITAC’s investigation on alleged dumping of Brazilian poultry in the SACU market before South Africa’s Parliamentary Portfolio Committee on Trade and Industry recently. Their main concerns relate to the manner in which investigations have been initiated and conducted by ITAC and how it engages with interested parties during an investigation. They also raised the inconsistency on the part of ITAC in following and implementing its internal procedures in line with domestic and international legal obligations. They felt that this has led to a decline in the quality of reports issued by ITAC. Two weeks later ITAC finally published a notice in the Government Gazette on 8 March 2013 on its decision not to impose definitive anti-dumping duties against the imported product despite its recommendation to the Minister of Trade and Industry that the duties should be imposed. The Minster rejected the recommendation considering the many centres of authority involved; increased imports of the products from other countries; the need for a comprehensive response to assist the domestic industry; and, that an investigation into an increase of the applied tariff rate would be more appropriate (Government Gazette No. 36207, Notice 173 of 2013, 8 March 2013).
This raises pertinent questions, as AMIE indicated, about ITAC’s capacity to exercise its legislative mandate. The quality of the Commission’s work will influence the country’s integrity as a trading partner and non-compliance to domestic and international legal obligations will lead to increased number of WTO disputes against South Africa. Moreover, there is a need for better coordination between the Department of Economic Development which oversees ITAC’s work including trade remedies investigations and tariff investigations and the Department of Trade and Industry which is responsible trade relations, negotiations and the implementation of trade agreements, trade remedies and tariffs.
Sources:
Government Gazette No. 35883, 23 November 2012
Government Gazette No. 36207, Notice 173 of 2013, 8 March 2013
Government Gazette No. 36207, Notice 174 of 2013, 8 March 2013
Government Gazette No. 36207, Notice 175 of 2013, 8 March 2013
WTO, Committee on Safeguards, Notification under Article 12.1(a) of the Agreement on Safeguards on the Initiation of an investigation and the reasons for it – South Africa – (Frozen Potato Chips), G/SG/N/6/ZAF/2.
WTO, 2007. WTO Analytical Index: Guide to WTO Law and Practice Vol II 2nd ed. Cambridge University Press.