Provisional anti-dumping duties were imposed on pasta, imported under tariff codes 1902.11 and 1902.19, manufactured in Egypt, Latvia, Lithuania and Turkey, on 1 April 2021 and will remain in place until 16 September 2021. If the anti-dumping investigation concludes before 16 September 2021 then these provisional duties will become final duties (possibly at a slightly different level). If the investigation concludes after 16 September, then these provisional duties will be refundable and new final duties will be imposed.
The level of duties imposed are as follows:
|Country||Anti-dumping duty imposed||Anti-dumping duty requested|
Only 2 exporters responded to the investigation, being Dobeles Dzirnavnieks from Latvia, and Amber Pasta from Lithuania. The Commission accepted the information submitted by the exporters to calculate the dumping margins. The same information was utilised to calculate the residual duty for each country. This is unusual as the residual duty is usually different (and higher) than the specific dumping margins for individual countries, but is likely the case because they may be the only producers in those countries.
Since no manufacturers from Egypt or Turkey responded, ITAC used the best information available, being the information supplied by the Applicants and the official import statistics of SARS, to calculate the dumping margins for those countries
Considering the outcomes, it is truly in the best interest of exporters and importers to respond to such an investigation. Turkey received the highest duty and was the 8th largest exporter of the product during the period of investigation. Egypt being the 5th largest exporter received a higher duty than Latvia and Lithuania combined.
Namibia is the big winner though, moving from 4 149 tons in 2017 to 9 811 tons in 2020, displacing Lithuania (18% of total import volume) and Latvia (16%) as the number 2 and 3 suppliers during the period of investigation (January 2017 to December 2021). Namibia accounted for 15% of the import volume for the investigation period, yet accounts for the 22.5% of the most recent 12 months of data we have (March 2020 to February 2021), however total volume imported has moved from 36 100 tons in 2017 to 49 100 tons for the recent period.
The Commission implemented the duties on both tariff subheadings 1902.11, “pasta containing eggs”, and 1902.19, “other,” as the applicant requested, arguing that these products are substitute products and a duty on a single tariff heading can lead to increased imports in the tariff heading without duties.
ITAC received a few comments regarding this decision. Interested parties explained that main raw materials and main ingredients for different pasta products have different tariff subheadings. A wide variety of different products falls under 1902.19 “other” and certain products should therefore be excluded.
Interested parties further explained that semolina flour is more expensive than other types of flour. This means that different raw materials impact the prices resulting in more expensive end products.
ITAC ignored the comments from interested parties trying to differentiate the products, simply stating all the products are classifiable under tariff heading 1902.1 in terms of the South African tariff schedule.
ITAC based their decision on the following:
- The production process is the same, the only difference is the type of raw materials
- The products are substitutable
- The end use is the same
Some of the logic is questionable, but nevertheless this is what ITAC decided.
What will happen to trade flows now?
Nambia’s key advantage, their access to duty-free wheat and their ability to send their pasta into South Africa duty free, will be somewhat eroded by the temporary removal of duties on wheat. This will only last as long as the global price of wheat remains high, but once it begins dropping (which it will), the duties will increase and Namibia will once again be more competitive.
The volume from Turkey (1 400 tons for the most recent period) and Egypt (2 600 tons) will dry up, as those anti-dumping duties, which are levied on top of the 40% normal Customs duty, will make it impossible to import competitively from those countries.
It is strange to not see more pasta flowing into SA from Botswana, when a Botswana company was a co-applicant, but certainly the opportunity here is significant. Given these duties will last for 5 years, we may see pasta factories popping up in Lesotho and eSwatini too, as these countries also benefit from duty-free wheat. Lesotho already produces flour, so it could be a small leap for them to also manufacture pasta and ship that pasta into South Africa.
Portugal could also be a big winner, as their volumes actually dropped from 5 100 tons in 2017 to 1 400 tons in 2020, so they clearly do have the ability to supply and they have no duties at all. I am not sure about the volume of pasta they can supply, but their prices are only slightly more expensive than pasta out of Latvia and cheaper than out of Lithuania (for 2020). When the anti-dumping duties are added, Portugal becomes the cheapest supplier out of the Europe.
While it is possible South Africa may increase its pasta production capacity, this is unlikely to happen to any material degree because of the wheat duty issue. We need to bear in mind that we import 50% of the wheat we require and this is not going to change soon. Given that wheat accounts for around 50% of the cost of pasta, this will remain a disincentive to investment. If you are going to expand your capacity, companies would likely find it more appealing to do in Lesotho or eSwatini where this risk is completely removed and you can still access the South African market duty-free.