ITAC response to media questions pertaining to the XA Import Duty Investigation Report No.3.

17 Aug 2023

The International Trade Administration Commission (ITAC) notes the recent release of the XA Import Duty Investigation Report No.3 over the last day or so. While the Commission is still studying the contents of the Report, there are a few areas covered in it that require immediate clarification to avoid deepening the misunderstanding that some of the wild claims in the report have spawned.

It should firstly, be noted that the Commission receives applications from industry. In other instances, the Commission may self-initiate tariff amendment and safeguard investigations as per section 16(d)(ii) of the International Trade Administration Act (‘the Act’).

There are also instances, where the Minister of Trade, Industry and Competition may issue a trade policy directive for ITAC to investigate possible tariff amendments as he is empowered to do by section 5 of the Act. This context may be helpful in considering some of the queries made to the Commission by the media in relation to the contents of the XA report.

We consider some of the claims made in the report in turn,

1. Claim 1: Applicants face the reality of tariff investigations taking 52 months, as opposed to the six months indicated in guidance to industry:

It is important to note that the Commission undertakes tariff investigations speedily and with rigour. It usually takes the Commission four months for sectors in distress and six months for normal investigations to arrive at a final determination and recommendation to the Minister of Trade, Industry and Competition and the Minister of Finance.

There may be instances where an investigation envisaged to unfold over a six-month period, may take longer. This is in no way irregular and maybe attributable to a wide array of reasons, including but not limited to, the submission of deficient applications, several requests for extensions on the part of applicants and investigations being referred back to obtain additional information inter alia.

It should be further noted that the timeframes mentioned above are computed from the date of receipt of a duly completed application, through to when a final recommendation is made by the Commission. It is unclear on what basis the 52 months is arrived at, and as such we are not in a position to comment on this.

2. Claim 2: The quantifiable cost of these delays is R2.6 billion in duties paid where there is no local producer and R4 billion not collected in duties where protection has been requested:

The XA Report’s computation of the alleged costs of ‘indecision’, assumes that, were all relief and duty increases granted in line with the wishes of the applicants, and rebate applications granted as well; this would result in R2.6 billion in duties paid and R4 billion in foregone duties, which would have been paid, were the trade protection granted. While seemingly compelling, these numbers further fudge rather than illuminate the issues.

Firstly, the assertion that an investigation would be considered overdue if it is more than six months old, is utterly misleading. The six months the XA report draws on, refers to the timeline for the Commission to arrive at a recommendation for the two members of the Executive. Rather than a ‘timeline’ for the entire process.

This intentional misreading of the Commission’s ‘timeline to recommendation’, extends the same timeline to policymakers, implicitly assuming that the policymakers would ‘rubber stamp’ and auto-concur with the decision of the regulator. This is not the practice, and to do so, would go against standing jurisprudence and the obligation on those policymakers to apply their minds to the recommendations made by the Commission.

Secondly, and related to the point above, the computation assumes that all requests for protection would be responded to by the policymakers in the ‘affirmative’, if this was the case, the lawmakers who wrote the Act, would have made the ITAC decision final, for both members of the Executive to just note and ‘sign off’ on. That they did not do this, was intentionally aimed at ensuring that trade policymaking is a process, as with many others, that makes provision for a meaningful interface between regulator and policymaker, all balancing an array of considerations.

Policymakers in this framework, as the Customs and Excise Act suggests, have a right to reject or refer back any recommendation made by the Commission. So to peddle the ‘billions’ the XA Report sells, is to gloss over this right that policymakers have and should exercise in the ordinary course of their work.

To use ‘opportunistic calculus’ to eschew this separation of powers, while serving XA and its clients, is an unfortunate move to use understandable frustration at the delays, to undermine the institutions so painstakingly built.

3. Claim 3: Reciprocal commitments are a bad idea in trade policy:

The XA Report makes its views on the irrevocable firm undertakings (‘reciprocal commitments’), suggesting that they add costs, slow down the process and are uneven applied inter alia. All while patronizingly reducing the policy rationale for such undertakings to ‘smiling workers’. Some context to these undertakings may be helpful.

Reciprocal commitments by firms in tariff amendment investigations emerge from a 21 April 2016 Trade Policy Directive (‘the Directive’) from the then Minister of Economic Development (now ‘Minister Trade, Industry and Competition’ referred to hereafter as ‘the Minister’), issued to ITAC in terms of section 5 of the International Trade Administration Act 71 of 2002 (‘the Act’).

This directive read with the 2021 Trade Policy for Industrial Development and Employment Growth framework, is aimed at ensuring that ‘tariff support (does) not blunt competitive pressures on firms’; and is aimed at building firm level capabilities, competitiveness and aligning firm level to national interests. Rather than being the ‘blue pill’ for all social ills that the XA report suggests is the rationale.

Once again the Report, choosing a selective sample of the willing for catchy soundbites, dismisses a series of measures and commitments made by firms which have yielded realizable gains in production, employment, investment, pricing and exports in many firms who have made such undertakings.

 4. On the Nature’s Garden matter:

The Ministers of Trade, Industry and Competition and Finance, remain the ultimate decision-makers on matters of trade policy.

In terms of Schedule 2, Item 2(1) of the ITA Act read with Section 4(2)(a) of the Board on Tariffs and Trade Act, 1986, which stipulates the following:

“(2). Upon receipt of the report and recommendations referred to in subsection (1) (b),
the Minister may -

(a). accept or reject such report and recommendations or refer them back to the Board
for reconsideration;”. In this instance, the Minister decided to reject the
Commission’s recommendation.

In this instance, the Minister decided to reject the Commission’s recommendation.

Furthermore, in terms of Regulation 22.3 of the Amended Tariff Investigations, the Commission is obligated to publish the outcome of its investigations on its official website after the relevant action by the Minister. This has happened. The public and stakeholders were notified of the outcome of the investigation through a General Notice No. 1881 of 2023, which reflects this final decision, lists the factors that the Minister considered in making his decision to reject the application.

Thus, the Commission’s recommendation as contained in its Report must be seen as being superseded by the decision of the Minister as the aforementioned Notice contains the final outcome of the investigation.

Lastly, the Commission continuously reviews its regulations, administrative and other processes, to ensure that its processes allow for effective, prompt, and comprehensive interventions. There are processes in place currently to ensure that the ‘conveyor belt’ between the Commission’s recommendations and the final policy decisions made as per section 6 of the Act is strengthened. We remain seized with this work.