In the current economic climate we are frequently asked to advise businesses on the opportunities under South Africa’s trade agreements. In the vast majority of the instances the focus is always on goods, although South Africa’s trade agreements provide many opportunities in respect to services, investment and intellectual property.

 Often the focus is on utilising tariffs or customs duties (i.e. the tax charged on the importation of goods) to the advantage of the particular business, although there are many more aspects to consider in accessing the benefits provided in trade agreements.

Few businesses are aware that the tax charged on the importation of goods is not absolute. You can apply to have the current tariff amended. If you are an importer paying too much customs duty on a product or input, you may apply for a reduction in the tariff which could reduce the tariff to zero. In contrast, if you are a local manufacturer or producer and you need protection from imports, you may apply to have the customs duty increased. The maximum allowable tariff increase will vary from product to product depending on the rates South Africa bound at the World Trade Organisation (the “bound rates”). However for the majority of products, these increases in the customs duty may be substantial.

It may also be that businesses have a need for greater protection than what the maximum bound rate may provide. In such instances businesses have three further options depending on the circumstances. If imported goods are sold in South Africa for less than what they are sold for in their country of origin, then these goods are considered as being dumped. If the domestic industry can show that they are suffering injury (which could manifest itself in a variety of ways) due to the dumped goods, an anti-dumping duty may be applied for. These anti-dumping duties may result in substantial increases of the customs duty applicable to the dumped products often making it economically unfeasible to continue importing the products.

Often the goods are not being dumped but are still much cheaper than locally produced goods. In such instances it may be that the imported goods are subsidised by a foreign government. A subsidy may take a variety of forms, but usually takes the form of a financial contribution. South African businesses may take action against subsidies if the subsidised goods are causing them injury (which again may manifest itself in various ways), by applying for a countervailing duty. A countervailing duty has as its aim to counter the subsidy and level the playing field. As such the countervailing duty will increase the customs duty beyond the bound rate and often make it economically unfeasible to import the product.

Sometimes there is just a sudden surge of imports into South Africa that are neither dumped nor subsidised. If this causes serious injury or threatens to cause serious injury to businesses, the affected businesses may apply to have a safeguard imposed. The safeguard may take the form of a duty which has the effect of increasing the custom duty to counter the surge of imports. The level of such a safeguard duty will thus be very high so as to prevent imports from entering South Africa. Typically, however, the most appropriate relief will be to impose a quota, which will prevent goods from entering South Africa in order that local businesses may have time to adjust to the increased imports.

The use of tariffs highlighted above may be accessed not by lobbying the government so that they may negotiate with South Africa’s trading partners for assistance, but by applying to the International Trade Administration Commission of South Africa (“ITAC”). If you ensure that your application form complies with the relevant legal requirements the application will be approved and you will be entitled to the relief for which you applied. It is thus a cost effective and efficient mechanism to take advantage of tariffs. This however does not imply that businesses should not actively engage with government when it is negotiating free trade deals with our trading partners. It further also does not imply that these are the only benefits under the current trade regime. The trade agreements in force provide many opportunities for gaining access to markets outside of South Africa.

For more information on how your business can benefit from these trade agreements, kindly contact Rian Geldenhuys.

© Trade Law Chambers 2011