The Commission considered an application submitted by the Printing Industries Federation of South Africa (PIFSA NPC) (“Printing SA”) on behalf of Rotunda (Pty) Ltd (“Rotunda” or the “Applicant”), for an increase in the rate of customs duty on thermal paper rolls of a width not exceeding 150 mm, from free of duty to the WTO bound rate of 5% ad valorem, classifiable under various tariff subheadings in Chapter 48 of the Customs and Excise Act, No. 91 of 1964, by way of creating additional 8-digit tariff subheadings.
During its deliberations and in arriving at its recommendation, the Commission considered the information at its disposal, including comments received during the investigation period.
The Commission found that:
• In the Southern African Customs Union (“SACU”) market, jumbo printing rolls are currently not manufactured domestically, however, domestic convertors add value to the imported jumbo rolls by cutting them to 80mmx80mm diameter, which is the most popular paper roll size.
• Input material costs constitute approximately 73% of the total production cost of the subject product, making it the highest cost driver in the conversion of jumbo rolls.
• Although the Applicant experienced positive profit margins of 0.7% in 2019, 5.8% in 2020, and 8.1% in 2021, the Applicant experienced significant price disadvantages of 73.5%, 61%, and 77%, respectively against similar imported finished products over the same period.
• Although import volumes and domestic production volumes increased in 2022, domestic production could have increased at higher levels if not for the negative impact of low priced imports, which resulted in the Applicant experiencing significant price disadvantages.
• Although the domestic industry’s supply increased in 2022, its supply still remained at lower levels of approximately 20% when compared to the 2019 base year.
• The domestic industry’s market share declined to 7.8% in 2019, 6.9% in 2020, and 6.3% in 2022. The domestic industry’s market share recovered slightly to 6.6% in 2022 but still remained low when compared to the base year of 2019.
• Although total import volumes have decreased during 2020, imports have subsequently increased by 11% in 2021 and further increased by 7% in 2022.
• The domestic industry has to compete with imports, which do not comply with local standards, being the SANS 1811:2019 standard, which were developed by domestic converters together with the South African Bureau of Standards (“SABS”) to regulate the quality of products for the domestic thermal converting industry.
• Thermal rolls containing a chemical called Bis-Phenol A (“BPA”) are banned in the Western World because of health concerns. However, it was submitted that the majority of imported thermal rolls, imported from the East, still contains BPA.
• The application was supported by all known domestic thermal paper convertors. Only Formax, an importer of the final converted products, submitted its objection to the application.
• SAPPI and Mondi, domestic manufacturers of various paper products, submitted that they currently do not manufacture thermal paper domestically.
• In line with the National Development Plan, the New Growth Path (“NGP”), the Industrial Policy Action Plan (“IPAP”), South Africa’s Trade Policy and Strategy Framework (“TPSF”), the Medium Term Strategic Framework 2019-2024, the Economic Reconstruction and Recovery Plan (“ERRP”), Masterplans and more recently, the Trade Policy for Industrial Development and Employment Growth, appropriate customs tariff policy under the new landscape must reflect a strategic approach, which advances an industrialisation agenda based on, inter alia, creating and retaining employment, increasing production and investment, building dynamic firms and economic inclusion, building local capacity (“localisation”) for both local and global markets, greening the economy and enhancing international competitiveness.
On balance and in light of the above considerations, the Commission recommended an increase in the rate of customs duty on thermal paper rolls of a width not exceeding 150 mm, from free of duty to the WTO bound rate of 5% ad valorem classifiable under various tariff subheadings in Chapter 48 of the Customs and Excise Act, 1964, by way of creating new 8-digit tariff subheadings.
The Commission further recommended that the duty be reviewed after a period of three years or such other period as decided by the Commission to determine the performance of the domestic industry.
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ISSUED BY THE INTERNATIONAL TRADE ADMINISTRATION COMMISSION OF SOUTH AFRICA