On Friday 31 January 2020 ITAC initiated a rebate investigation on titanium dioxide classifiable under the tariff subheading 3206.11 for use in the manufacturer of paints, varnishes, and prepared driers classifiable in tariff subheadings 32.08, 32,09, 32.10 and 32.11. Titanium dioxide normally attracts a 10% duty and if this rebate is approved, it would allow this duty to be rebated if the titanium dioxide was used in the manufacture of paint products.
The investigation was initiated following an application by Kansai Plascon. It is important to note that this is a Schedule 3 rebate subject to conditions as ITAC may allow by specific permit. This type of rebate provision restricts what the Titanium dioxide will be used for. In this case the manufacture of paints, varnishes and prepared driers. Titanium dioxide imported under this rebate provision cannot be used for anything else apart from what is specified in the rebate provision.
As motivation for the application, Kansai Plascon stated the following reasons:
- Titanium dioxide is a vital raw material in the manufacturing of coatings or paint products in the South African Customs Union (“SACU”). In addition, titanium dioxide serves as a vital raw material across many other manufacturing industries, including inter alia adhesives, paper, plastics and rubber, printing inks, coated fabrics and textiles, ceramics, floor coverings, roofing materials, cosmetics, toothpaste, soap, water treatment agents, pharmaceuticals, food colourants, automotive products, sunscreen and catalysts.
- Paint manufacturers are one of the biggest users of titanium dioxide in the SACU market as it is used as the base of most paint colours. Nonetheless, there is currently no SACU manufacturer of titanium dioxide. The last local manufacturer, Huntsman closed down its manufacturing facility in 2016.
- Since the closure of Huntsman, all titanium dioxide requirements of downstream manufacturers have to be imported at a 10% customs duty. The duty currently serves to unnecessarily increase the cost of importing titanium dioxide and consequently the cost and prices of manufactured end products including paint.
- Given the escalating prices of titanium dioxide on the global market, it is imperative that the rebate facility be created to reduce the cost burden on Kansai Plascon and other manufacturers in the paints and coatings industry.
- Local coating manufacturers are also facing significant import competition of paint originating in other countries. The duty on titanium dioxide thus creates a cost and price disadvantage for locally manufactured paint.
- There is a potential local manufacturer of titanium dioxide, Nyanza Light Metals and support for this effort is acknowledged. The creation of a rebate facility will be an equitable solution for all parties whilst Nyanza Light Metals continues with its work for construction of a titanium dioxide plant.
All interested parties have until 28 of February 2020 to respond.