Papers have been served on ITAC and Minister Patel to compel the Minister to remove the anti-dumping duties on frozen potato chips from Belgium and the Netherlands.
The legal issue is simple. Once an anti-dumping investigation initiates, it must be completed within 18 months. No exceptions are allowed. Anti-dumping regulation 20 actually says “All [anti-dumping] investigations and reviews shall be finalised within 18 months after initiation”. It is hard to imagine a clearer injunction, yet the 18 months was missed and so the duties should be removed.
All of this is happening in the context of the most aggressive protectionist drive in the history of democratic South Africa. Minister Patel has The Secret List of 42, which identifies 42 industries for localisation, a concept which is neither legally defined nor properly understood by anyone. The Ministry of Small Business Development, upped this and published a list of 1 000 items which not only must be produced locally, but also should be produced by SMMEs. There is a bizarre chicken anti-dumping action afoot, which is premised on material injury being caused to the local producers by precipitously falling import volumes, at a time where we have a serious avian influenza outbreak. Ignore all the noise in the media and think for a moment about how it is possible for the local chicken producers to be suffering injury from falling import volumes?
Why did the anti-dumping duties on frozen chips expire?
If only locally produced goods should be consumed by South Africans, how did we get to a point of the anti-dumping duties on chips expiring?
When an anti-dumping case initiates, the interested parties (foreign producers and local importers) have 30 days to respond. Once the responses are in, ITAC will raise questions about the submissions (known as deficiency letters), which have to be responded to in full within 7 calendar days. No extension of the 7 days is allowed. Hold this thought in your mind, because it is relevant to what happened here.
Once the deficiencies have been addressed, ITAC will verify the information submitted. Think of this like an audit. If you “fail” the audit because you cannot supply supporting information for a particular piece of information in your submission, ITAC can discard your information or can replace it with best information available. A typical verification visit to a foreign producer (bear in mind these happened in Europe in January 2019, before the plague was upon on us) would take 5 days. ITAC cut these times back to 3 days and then dramatically increased the sample sizes. The combination of much larger sample sizes and shorter time periods was devastating. It simply became an impossible task, so companies who cooperated fully, often working through the night to secure the information required, would be told their information could not be verified, even though sufficient supporting information was supplied.
The situation deteriorated so badly, that a request was put out for the European Union to provide an observer to one of the verifications because there was a concern that no one would believe what was happening in the verifications.
Then the pestilence was upon the face of the earth and everyone flew back to South Africa.
Followed by nothing. Just silence for a very long time.
In October 2020, a problem was identified with a response to a question posed to the applicant (they had inappropriately claimed confidentiality on something which was not confidential). In January 2021, a year after verifications in Europe, ITAC instructed them to remedy this. They told ITAC they would decide if they are prepared to provide this information and ITAC did nothing to compel them to provide this missing information. This is in breach of the regulations. If a deficiency is identified, you have 7 days to remedy it, whether you are the applicant or the respondent.
Nothing further happened. 26 January 2021 rolled around, the date the 18 month-limit was reached, and the duties remained in place. Letters were sent to ITAC and the Minister, all of which went ignored until eventually litigation commenced this week, to force the termination of the duties, backdated to 26 January 2021.
With an investigation conducted in the Holy Church of Protectionism, how did this investigation pass the 18 month mark? I have no idea. But this is not the first time this has happened, since Minister Patel took over as Minister of Trade, Industry and Competition. At the beginning of 2020, anti-dumping duties were imposed on the last day of the 18 month period on float glass from Saudi Arabia and the UAE. Such was the rush to impose these duties, that one of the products actually missed the deadline and was imposed a week late. In that case, the company chose to not litigate.
Bending the rules to achieve a desired outcome
You need to make a choice. You either have a predictable process, which leads to unpredictable outcomes or you have predictable outcomes, where you twist and warp the process to get to the predetermined result.
Predictable processes matter. It’s all we have to trust in. Imagine for a moment a completely unpredictable process in a rugby match. Everyone knows the rules, but no one knows how they will be applied. The ref on the other hand knows what the outcome needs to be, so when there is a forward pass by the team whose job it is to win, nothing is done. When the team who was preordained to lose, scores a try, it is disallowed. Very soon no one would watch rugby and soon after, no one would be interested in playing either.
When the processes are messed with (cutting short the amount of time for a verification, while trebling the amount of work to be done in that period, or not holding the applicant to the same standard as the respondents), you destroy trust in the process. The companies on the other side of this experience have a lot to lose. Not because they are dumping, but because they will be found to be dumping just because the process doesn’t allow a different outcome.
Messing with the process is a tricky business though. The legislation is no longer the friend of the regulator. You are being bombarded by angry producers and their advisors, who are trying to hold you to book. It’s stressful and the pressure is immense. You are forced to address the bad behaviour of the applicant (as happened here) and the applicant doesn’t want to play ball. After all, they too would probably think the regulations are merely an impediment to be overcome to reach the outcome they expect. So ITAC does not kick them out of the investigation, as required. They do nothing. The clock ticks. The 18 months passes and the case ends. Only it doesn’t. And now the litigation starts.