Countervailing (anti-subsidy duties)
Competing against subsidised exports is difficult, if not impossible. The World Trade Organisation (WTO) recognises this and created a mechanism that companies can use to offset the effect of government subsidies known as a countervailing duty. South Africa has not been much of a user of countervailing actions, but the mechanism exists and can be accessed by companies impacted by subsidised exports.
In order for an anti-dumping duty to be imposed, there must be
Subsidies. Countervailable subsidies need to be specific (to an industry or even geographically). The applicant needs to produce a reasonable level of evidence that the subsidy exists and that the industry is likely a beneficiary of the subsidy.
Injury. Injury has to be suffered by the domestic industry and is measured through an array of injury indicators.
Causal link. The injury suffered by the local industry must be caused by the subsidised product and not by anything else. If all 3 factors are not in place, then countervailing duties cannot be imposed.
The size of the duties that can be imposed
Countervailing duties can be imposed on a more specific definition than provided in the normal tariff description. This means that if the tariff description for the tariff line impacted by the countervailing duty is “Other”, the countervailing description can actually describe the product concerned. A perfect example of this is the recent anti-dumping case on bone-in chicken. The anti-dumping item is described as bone-in chicken, but the tariff description says “Other”. In exactly the same way, countervailing actions can thus provide greater accuracy and also are brought against specific countries as opposed to being applied to all trading partners.
Industry standing. Before an application can be made to ITAC, the applicants need to represent more than 50% of the domestic industry, by sales volume. Technically, the applicants only need to represent more than 25% of domestic production, but practically a matter will not be initiated if less than 50% of the industry makes the application.
Make the application to ITAC. It is important to submit current and relevant information. The information should not be older than 6 months at time of initiation.
ITAC assessment of the information. ITAC will check all of the information submitted to determine if your application has merit.
ITAC verification. Once your application has been accepted as reasonable, it will be verified (audited) by a team of investigators from ITAC. This verification will incl
ude a factory visit and a fairly detailed review of the financial and business information supporting the application. If verification fails, the matter will not proceed.
Initiate and investigate. If ITAC decides to proceed with the investigation, the matter will be initiated. Initiation means that the investigation has commenced and interested parties will have 30 days to respond (with a 2 week extension usually granted). Any interested parties who do not respond in time will not have their information considered for either the preliminary or final decision.
Interested party verifications. All interested parties (usually importers and exporters) that submit compliant responses will be verified (audited) by ITAC. For importers this normally takes 1 day and for exporters 4 to 5 days. ITAC will usually be onsite for the full duration of the verification.
Preliminary decision. A preliminary decision will normally be taken within 3 months of initiation of a matter. At this point duties will be imposed and will be calculated as follows: All cooperating exporters will have duties imposed based on their actual verified information. This means that ITAC will use the actual exporters information to calculate the duty payable for imports from that exporter. Everyone else will face a residual duty, which is normally the original requested position.
Second round of submissions. All parties that submitted deficient responses will have until 2 weeks after the issuing of the preliminary decision to submit compliant responses. A response is deemed to be deficient if ITAC raised queries on the submissions made by interested parties and these have not been addressed to ITAC’s satisfaction. Any companies that miss this deadline (2 weeks after the preliminary decision), will be precluded from the investigation.
Second round of verifications. Following the same format as earlier, all cooperating parties that missed the initial deadlines, will now be verified.
Final decision. Once the investigation is complete, a decision will be implemented. That decision will remain in place for 5 years. At that point the duty will expire, unless a sunset review or changed circumstances application is brought.
It typically takes around 3 months for a preliminary decision to be implemented if an anti-dumping application is not opposed. If the application is opposed, it usually takes 6 months to impose a preliminary duty.
A final decision is usually implemented within 12 months of initiation, but under no circumstances may exceed 18 months. If an investigation exceeds 18 months, then the matter will automatically terminate.