The Economic Partnership Agreement (EPA) is a trade agreement between SACU + Mozambique (confusingly referred to as SADC in the agreement) and the EU. Article 35 of the EPA is a provision meant to safeguard the “SADC” region from a surge in imports of a very specific range of products from the EU. Mozambique is not yet an active participant, so the comments below relate only to SACU.

Unlike a normal or bilateral safeguard, an agricultural safeguard under the EPA can be automatically triggered if the import volumes on the designated list of the products exceeds a reference level for any given 12 month period. ITAC have just published the proposed guidelines to the agricultural safeguard instrument under the EPA, for comment.

Interested parties have until 28 October 2019 to submit comments.

If you need assistance, please contact us on info@xa.co.za

The reference period concept

The EPA was implemented on 16 October 2016. From this date, for the next 12 years, the agreement is broken into rolling 12-month periods, with year 1 running from 16 October 2016 to 15 October 2017 and so on. Each of the next 11 periods is then allocated a reference volume per eligible tariff code. If the import volume for a rolling 12-month period, exceeds the reference volume for the relevant reference period, it will automatically trigger an agricultural safeguard duty on that product.

This means that if the import volume for tariff code 1806.31, for the period Sept 2018 to Aug 2019 is 3 803 tons, the duty could be triggered, because the reference volume for that period (Year 3 – Nov 2018 to Oct 2019) is 3 655 tons.

The table below shows the tariff codes and the reference import volumes, per period:

Reference quantities (metric tons)           
Tariff linesYear 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10Year 11Year 12
Edible offals
0206.10.90100110121133146161177195214236259285
0206.21100110121133146161177195215237261287
0206.21100110121133146161177195215237261287
0206.291 0051 1061 2061 3071 4071 5081 6091 7091 8101 9102 0112 111
0206.30100110121133146161177195214236259285
0206.495 0005 5006 0006 5007 0007 5008 0008 5009 0009 50010 00010 500
Worked cereals
1104.19.1015016518220020242266293322354390429
1104.29.10100110121133146161177195214236259285
1107.10.102 3732 6132 8743 1613 4783 8254 2044 6285 0895 5956 1526 771
1107.20.10100110121133146161177195214236259285
1108.11.10100110121133146161177195214236259285
Meat preparations
1602.10100110121133146161177195214236259285
1602.50.30100110121133146161177195214236259285
1602.50.40100110121133146161177195214236259285
1602.90.20100110121133146161177195214236259285
UHT or Long-life milk
0401.10.07100110121133146161177195214236259285
0401.20.076 3536 9867 7018 4579 31510 23411 25612 37913 62514 97316 48518 119
0401.40.07100110121133146161177195214236259285
0401.50.07100110121133146161177195214236259285
Preserved cucumbers and olives
2001.111 3021 4321 5761 7321 9052 0962 3052 5362 7913 0693 3763 714
2001.90.10270297328360396436480527580638701771
Chocolate
1806.313 0463 3503 6553 9594 2644 5694 8735 1785 4825 7876 0916 396
1806.329381 0321 1261 2201 3141 4081 50115951 6891 7831 8771 971
1806.907 1967 9168 6359 35510 07410 79411 51412 23312 95313 67214 39215 112

If the import volume exceeds the reference volume, a duty can be imposed on that tariff code, which shall be the higher of 25% of the bound rate or 25%, but shall not exceed the General rate of duty. The bound rate is the committed rate agreed to when SA joined the WTO in 1995. In the case given above, the bound rate for 1806.31 is 21%, so 25% of this is 5.25%. The General rate of duty is 20%, so the duty rate to be applied is therefore the higher of 5.25% and 25%, but no more than 20%, which means a 20% duty will be applied to this tariff code.

Looking at the most recent 12-month period (Sep 2018 to Aug 2019), the import volumes of the following products already exceed the reference volumes:

Tariff codeTariff decriptionY3 reference volumeY3 import volumePossible duty
0206.29Meat and edible meat offals: Edible offal of bovine animals, swine, sheep, goats, horses, asses, mules or hinnies, fresh, chilled or frozen: Of bovine animals, frozen: Other1 2064 295Zero
0206.49Meat and edible meat offals: Edible offal of bovine animals, swine, sheep, goats, horses, asses, mules or hinnies, fresh, chilled or frozen: Of swine, frozen: Other6 0006 909Zero
0401.20.07Dairy produce; bird's eggs; natural honey; edible products of animal origin, not elsewhere specified: Milk and cream, not concentrated nor containing added sugar or other sweetening matter:: Of a fat content, by mass, exceeding 1 per cent but not exceeding 6 per cent:: Ultra high temperature (UHT) or "long life" milk in containers holding 1 li or less, whether or not containing added minerals, vitamins, enzymes and similar additives solely for the purpose of increasing the nutritional value and provided these additives do not exceed 1 per cent by volume of the final product7 70116 024Zero
1806.31Cocoa and cocoa preparations: Chocolate and other food preparations containing cocoa:: Other, in blocks, slabs or bars: Filled3 6653 80320%
1806.32Cocoa and cocoa preparations: Chocolate and other food preparations containing cocoa:: Other, in blocks, slabs or bars: Not filled1 1261 37320%
1806.90Cocoa and cocoa preparations: Chocolate and other food preparations containing cocoa: Other8 635 9 12217%

For those instances, where the possible duty is shown as zero, this means that the General rate of duty is currently zero. Should these duties be increased and the import volumes exceed the relevant reference volumes for that period, the safeguard duties could be triggered at that point.

Period of implementation

If duties are triggered, the duties will remain in place for the remainder of the calendar year or 5 months, whichever is longer. So, in the example given above, if the duties were to be imposed in November 2019, they would only remain in place until 31 December 2019, but if they were instead imposed on 1 January 2020, they would remain in place until 30 May 2020.

The process of the duties being implemented

Once the trigger import volumes out of the EU have been reached, ITAC will send a Minute to the Minister of Trade Industry and Competition, recommending the imposition of an agricultural safeguard duty.

On approval of the recommendation, the SACU Secretariat will be notified and the Minister of Finance will be requested to implement the duty. It is not clear if the Minister of Finance conducts any sort of investigation or whether he simply implements the request.

Within 10 days of the duty being implemented, SACU will notify the EU in writing and provide the supporting data. SACU will also notify the Trade and Development Committee within 30 days after imposition of the duties.

There is no investigation

There is no publication of an investigation in which importers get to submit arguments. If the reference volumes are breached, then the duties will be imposed. Tracking the import volumes for any products covered by the agricultural safeguard therefore becomes extremely important.

Visit stratalyze.com and sign up for a 7 day trial license to see if you are impacted by these agricultural safeguard duties and to be alerted if the products you currently trade in find themselves at risk in terms of this provision.

Interested parties have until 28 October 2019 to submit comments.

If you need assistance, please contact us on info@xa.co.za

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