The SA Revenue Service (Sars) has imposed anti-dumping duties on frozen potato chips as recommended by the International Trade Administration Commission (Itac), which investigates customs tariffs.
Itac found that the industry in the Southern African Customs Union (Sacu) was being seriously harmed by products being dumped on the local market by producers in Belgium, Netherlands and Germany.
French fries make up a large part of food sold by restaurants and takeaways.
The International Trade Administration Commission (Itac) — the organisation responsible for customs tariff investigations, trade remedies, and import and export controls — found that frozen potato chips from these countries were being imported at prices less than their normal value in the country of origin and above the minimum allowed margin of 2%. This resulted in declining sale volumes, market share, profits and employment in the local industry.
According to the Itac report on the dumping, 59 081 tonnes of frozen potato chips were imported from Belgium, Netherlands and Germany between July 2018 and end-June 2021 with 88% coming from Belgium.
The anti-dumping duties are targeted at both specific producers in the countries that participated in the Itac investigation and general imports of frozen chips from producers that did not participate. The ad valorem duties range between 8.8% and 19.6% for participating producers to 239% for non-participating producers from the Netherlands. Non-participating producers from Belgium and Germany will face duties of 67.3% and 181% respectively.
The duties, which will remain in place for five years unless there is another review application to Itac, were gazetted on Wednesday. Previously, there were no duties for German producers, while Dutch and Belgian producers faced duties of not more than 30% under the previous five-year anti-dumping regime that expired in 2021.
The provisional duties applied by Itac while it was conducting its investigation terminated after the stipulated six-month period in January, which meant that no duties were imposed between January and the gazetting of the new duties in May. There was also a long period of about a year after the expiry of the previous five-year anti-dumping duty period when no duties were applied. This harmed the local industry, particularly McCain Foods, which produces 60% of French fries in Sacu.
The SA potato industry welcomed Itac’s decision to reinstate import duties on frozen potato chips.
Willie Jacobs, CEO of industry association Potatoes SA, said in a statement “that cheap or low-quality frozen potato chips entering the market could be detrimental to SA producers and the sector as a whole, and could cause a surge in illicit trading activities. These regulations will go a long way in preventing this, allowing farmers to thrive.
“While trade and regional and global markets and economies are, of course, a priority, so is the protection of SA’s agricultural and manufacturing industries.”
According to Jacobs, the implementation of anti-dumping tariffs can help level the industry playing field, ensuring fair competition. “By supporting local producers, we can promote job creation, foster economic growth and maintain quality standards for the benefit of all stakeholders involved. This will also offer much-needed stability to consumers who are already facing significant pressures.”
However, the new anti-dumping duties will hit importers of frozen food such as Hume International, whose MD Fred Hume has warned of rising prices because of a shortage of local supply due to insufficient production capacity.
Donald MacKay, the founder and director XA International Trade Advisors, a trade advisory firm in SA, believes duties on French fries should be removed.
He said at a media briefing in late 2022 that potatoes and fries are exempt from VAT under current government legislation. A zero-VAT rating aims to provide basic foodstuffs at a reduced price to benefit the poor.
According to MacKay, there is a shortage of domestic potatoes used to make fries and there is not enough processing capacity in SA to meet local demand. Industry players have also noted the general shortage in SA of the potatoes used for French fries.
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