On 5 August 2013, the International Trade Administration Commission (ITAC) submitted its recommendation for an increase of import duties on five poultry products to the Minister of Trade and Industry, Dr Rob Davies, for decision. On 29 August 2013, the Minister forwarded his decision to the Minister of Finance for implementation by the South African Revenue Services (SARS). On 30 September 2013, SARS implemented the decision by way of Notice 715 in Government Gazette No 36876.
The Minister noted that the application for the increase on tariffs for five poultry products was submitted to ITAC by the South African Poultry Association (SAPA) on 27 March 2013. He noted the industry claims that it was in a distressed financial situation due largely to the rapid increases in imports of low priced poultry. He further noted that in terms of the ITAC processes, a notice was published in the Government Gazette inviting all interested parties to comment on the application by SAPA. Written and oral submissions had been received from a wide variety of interested stakeholders in SACU, including from the primary and secondary industries, companies, importers, retailers, as well as interested government departments. The concerns of stakeholders opposed to the tariff increases were given direct attention, and additional time was provided for comment.
The Minister observed that in the course of its investigation, ITAC had considered conditions in the world and SACU markets and the tariff position of those products in SACU. ITAC also considered questions of employment, investment, the financial performance of producers, production costs and trade data, and the concerns of importers, amongst other things.
The Minister of Trade and Industry made the following considerations and decisions for tariff increases on five poultry products:
Taking into account that imports of “whole bird” (tariff heading 0207.12.90) constitute a small percentage of the total SACU market for poultry, that this product is more expensive and mostly consumed by higher income households, and that the domestic industry is at a significant price disadvantage with relation to the imported product, the import tariff will be increased from 27% to 82%. The imports of whole birds represent less than 1% of poultry imports over the last 12 months.
Taking into account that for “carcasses” (tariff heading 0207.12.20), the domestic industry is at a significant price disadvantage in relation to the imported product but that this remains an important source of protein for poor households, the import tariff will be increased slightly from 27% to 31%. The imports of carcasses represent around 2% of poultry imports over the last 12 months.
Taking into account that “boneless cuts” (tariff heading 0207.14.10) is relatively expensive and is mostly consumed by high income households, and that the domestic industry is at a price disadvantage with relation to the imported product, the import tariff will be increased from 5% to 12%. The imports of boneless cuts represent around 11% of poultry imports over the last 12 months. Taking into account that for “offal” (tariff heading 0207.14.20), the domestic industry is at a significant price disadvantage in relation to the imported product but that this is remains an important source of protein for poor households, the import tariff will be increased slightly from 27% to 30%. The imports of offal represent around 5% of poultry imports over the last 12 months.
Taking into account that “bone-in” portions (tariff heading 0207.14.90) constitutes about 70% of domestic production, and that the domestic industry is at a significant price disadvantage in relation to the imported product, the import tariff will be changed from a specific duty of 220c/kg to an ad valorem duty of 37%. The imports of bone-in portions represent around 54% of total poultry imports over the last 12 months.
It is the view of the Minister that the level of the tariff increases strikes an appropriate balance in limiting the price raising effects on poor households while ensuring that domestic producers are placed on an improved competitive footing as compared to their foreign counterparts. This should allow for a fair and reasonable profit to producers and, in turn, encourage further investment, production and employment in the industry. Aside from whole chicken that constitutes less than 1 % of total poultry imports over the last 12 months and is a more expensive poultry product, the overall average percentage point tariff increase is 8,75.
In making these decisions, the Minister attaches the following conditions. First, there will be an early review of the new tariff positions to assess its impact. Second, the Minister expects that the question of brining will be satisfactorily addressed through new regulations to be established by the Department of Agriculture Forestry and Fisheries and that the domestic industry will reduce brining in anticipation of these new regulations. Third, the Minister expects that the established poultry industry would make meaningful undertakings to support the development of small-scale poultry farmers. Fourth, the Minister expects that providing this support, the poultry industry will work to encourage fair competition in the domestic market. Finally, these measures are designed to support and promote the poultry producers across the entire SACU market to ensure a sustainable and competitive industry that is able to provide greater food security to the region’s people.