The South African Poultry Association (SAPA) is truly unrelenting in their quest for more protection. Coming hot on the heels of a dubious bilateral safeguard duty on bone-in chicken from the EU, SAPA have now requested a duty increase for bone-in and boneless chicken from countries not in the EU. The requested position is to increase bone-in chicken from 37% 82% and boneless chicken from 12% to 82%. Let that number sink in. It’s a lot.

The tariff codes covered by this duty increase application are 0207.14.9 for bone-in and 0207.14.1 for boneless chicken.

Reasons for the increase request

SAPA gave the following reasons for needing the duty increase:

  1. The SACU poultry industry (meat and eggs) supplies more than 60% of the animal protein consumed in SACU and makes up almost 20% of South Africa’s agricultural gross domestic product. It is the single largest part of agriculture in SACU and is core to SACU food security;
  2. The poultry industry is the second biggest user of maize in the region and by far the biggest user of soybeans. The South African Government’s soybean development strategy is dependent on the success of the local poultry industry;
  3. The SACU domestic broiler industry directly employs at least 47,025 people with a further 58,383 people indirectly employed in support industries that are dependent on the broiler industry. The crops which are used as feed in the poultry industry account for approximately 17,738 workers in the crop farming sector;
  4. SACU is a globally efficient producer of chicken. Despite this, the SACU poultry industry has faced, and continues to face, enormous profitability challenges. These have resulted in downsizing in late 2016 and early 2017, resulting in job losses and a deterioration in SACU’s food security position;
  5. The profitability challenges experienced by the SACU Industry are directly linked to increasing volumes of opportunistic imports of frozen chicken which significantly undercut the SACU industry;
  6. Dutiable imports of frozen chicken have increased drastically over the period 2015 to 2017. This has caused and threatens to cause the serious injury; and
  7. These low priced imports limit the SACU industry’s ability to increase prices in line with the increases in costs (price suppression) and also reduce sales volumes and market share (as there is a preference for the lower priced imports). The SACU industry has limited storage capacity and export opportunities. This means that when these opportunistic imports enter the SACU market, the SACU industry is forced to lower its prices in order to sell stock and create storage capacity.

The social impact of such a large duty increase

When VAT was increased to 15%, there was a huge social outcry. SAPA in fact drove an initiative to have local chicken zero rated, but were unsuccessful. That 1% increase in VAT is truly insignificant next to the size of the increase they are seeking now and make no mistake a duty increase will result in a price increase. This is clear from their own application which states “low priced imports limit the SACU industry’s ability to increase prices…”. This could not be clearer.

It should also be noted that this increase application comes on the back of a truly spectacular year for the local chicken industry, with Astral posting a profit of R1.2 billion, up 235% from 2016.

If you import, sell or consume chicken, this investigation will have a significant impact on your business.

If you wish to respond, please contact us on info@xa.co.za

The deadline to respond is 28 December 2018

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