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 lines | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 | Year 9 | Year 10 | Year 11 | Year 12 |
| Edible offals | ||||||||||||
| 0206.10.90 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| 0206.21 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 215 | 237 | 261 | 287 |
| 0206.21 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 215 | 237 | 261 | 287 |
| 0206.29 | 1 005 | 1 106 | 1 206 | 1 307 | 1 407 | 1 508 | 1 609 | 1 709 | 1 810 | 1 910 | 2 011 | 2 111 |
| 0206.30 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| 0206.49 | 5 000 | 5 500 | 6 000 | 6 500 | 7 000 | 7 500 | 8 000 | 8 500 | 9 000 | 9 500 | 10 000 | 10 500 |
| Worked cereals | ||||||||||||
| 1104.19.10 | 150 | 165 | 182 | 200 | 20 | 242 | 266 | 293 | 322 | 354 | 390 | 429 |
| 1104.29.10 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| 1107.10.10 | 2 373 | 2 613 | 2 874 | 3 161 | 3 478 | 3 825 | 4 204 | 4 628 | 5 089 | 5 595 | 6 152 | 6 771 |
| 1107.20.10 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| 1108.11.10 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| Meat preparations | ||||||||||||
| 1602.10 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| 1602.50.30 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| 1602.50.40 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| 1602.90.20 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| UHT or Long-life milk | ||||||||||||
| 0401.10.07 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| 0401.20.07 | 6 353 | 6 986 | 7 701 | 8 457 | 9 315 | 10 234 | 11 256 | 12 379 | 13 625 | 14 973 | 16 485 | 18 119 |
| 0401.40.07 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| 0401.50.07 | 100 | 110 | 121 | 133 | 146 | 161 | 177 | 195 | 214 | 236 | 259 | 285 |
| Preserved cucumbers and olives | ||||||||||||
| 2001.11 | 1 302 | 1 432 | 1 576 | 1 732 | 1 905 | 2 096 | 2 305 | 2 536 | 2 791 | 3 069 | 3 376 | 3 714 |
| 2001.90.10 | 270 | 297 | 328 | 360 | 396 | 436 | 480 | 527 | 580 | 638 | 701 | 771 |
| Chocolate | ||||||||||||
| 1806.31 | 3 046 | 3 350 | 3 655 | 3 959 | 4 264 | 4 569 | 4 873 | 5 178 | 5 482 | 5 787 | 6 091 | 6 396 |
| 1806.32 | 938 | 1 032 | 1 126 | 1 220 | 1 314 | 1 408 | 1 501 | 1595 | 1 689 | 1 783 | 1 877 | 1 971 |
| 1806.90 | 7 196 | 7 916 | 8 635 | 9 355 | 10 074 | 10 794 | 11 514 | 12 233 | 12 953 | 13 672 | 14 392 | 15 112 |
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 code | Tariff decription | Y3 reference volume | Y3 import volume | Possible duty |
|---|---|---|---|---|
| 0206.29 | Meat 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: Other | 1 206 | 4 295 | Zero |
| 0206.49 | Meat and edible meat offals: Edible offal of bovine animals, swine, sheep, goats, horses, asses, mules or hinnies, fresh, chilled or frozen: Of swine, frozen: Other | 6 000 | 6 909 | Zero |
| 0401.20.07 | Dairy 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 product | 7 701 | 16 024 | Zero |
| 1806.31 | Cocoa and cocoa preparations: Chocolate and other food preparations containing cocoa:: Other, in blocks, slabs or bars: Filled | 3 665 | 3 803 | 20% |
| 1806.32 | Cocoa and cocoa preparations: Chocolate and other food preparations containing cocoa:: Other, in blocks, slabs or bars: Not filled | 1 126 | 1 373 | 20% |
| 1806.90 | Cocoa and cocoa preparations: Chocolate and other food preparations containing cocoa: Other | 8 635 | 9 122 | 17% |
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
