In the past six months the International Trade Administration Commission (Itac) has initiated the lowest number of tariff investigations brought by the private sector in 21 years, which has a dire economic impact, according to XA International Trade Advisors.
In its fourth import duty investigation report launched yesterday, XA has warned that the delays by the Itac and the government in completing import tariff investigations hurt the economy.
Tariffs are an important policy instrument as they protect local companies from being negatively affected by cheap imports of the goods they manufacture while also raising funds for the national fiscus.
In 2013, Itac revised the timelines to complete investigations on import tariff applications from 12 months to nine months for trade remedies, and from 12 to six months for normal tariff investigations following an outcry from industry.
However, XA’s CEO, Donald MacKay, yesterday said the reality had unfolded very differently as investigations had gone from taking eight months to complete to now averaging 28 months.
MacKay said that their study of import tariffs investigations over the past 20 years has shown that getting a decision on an application, whether to impose a tariff or remove it, had really become a drag.
“That is astonishing statistics and I believe indicative of the business sector losing faith in the process. This is a reasonable reaction when instead of a decision on a tariff application taking six months, it now takes 57 months and you are expected to sign away a kidney before approval is given and even then, it’s not certain,” MacKay said.
“It takes three times longer to complete a tariff investigation than 20 years ago. So, we're taking longer to do less would be a different way to put it. It's really bad, it's just embarrassing.
“At least 50% more tariff investigations are open now than 20 years ago. So even though fewer cases are kicking off because so few of them are being completed, they're simply piling up and piling up. It's just a huge backlog of cases that remains unresolved.
“What seems to be happening is an almost complete disengagement from these processes, and that has potentially quite serious implications. What we should be seeing in times of economic distress should be the opposite of this. We should be seeing higher levels of engagement. But instead, all of this seems to be moving in what appears to be the wrong direction.”
South African consumers are paying R89 billion in duties currently, according to the XA report.
Most of the duties paid are paid on automotive, clothing, textile, and footwear imports (74%) and that 71% of these tariff codes were last reviewed before 2003.
XA said duty reviews were relatively uncommon compared to duty increase, reduction, and rebate applications, yet they were as important, and it could not be left to the thousands of businesses in South Africa to know when they should apply to have duty levels reviewed.
MacKay also said the crux of the delays lay in what happened after the Commission’s recommendation left Itac to then go to the Minister of Trade and then the Minister of Finance.
Trade officials yesterday could not comment on the report as they had not seen it.
“The bulk of the time is being spent with the two ministers. Now, there's no way to separate out the time spent with the Minister of Finance or the Minister of Trade. So we've had to lump them together.
“But the ministers are where the bulk of the time is being spent. That presents a problem because the bulk of the work has to be done by Itac, but the bulk of the work is not to be done by the ministers.”
As a result, XA has made a series of proposals to fix these problems, including getting rid of reciprocal agreements, reviewing all duty increases in the last decade, removing duties on all products where over 90% of the duties were already rebated, and agreement on an implementation process between Itac the department of trade and industry, National Treasury and SA Revenue Service.
BUSINESS REPORT