Anti-dumping duties on French fries in the balance

The body responsible for investigating customs tariffs in SA has allowed the provisional anti-dumping tariffs on imported frozen French fries imposed in July 2022 to lapse.

Tariffs as high as 181.05% on Germany, 104.52% on the Netherlands and 23.06% on Belgium were imposed for a period of six months on the grounds that dumping was taking place.

But the lapse does not mean the threat of future duties on the industry has disappeared as investigations by the International Trade Administration Commission (Itac) — the organisation responsible for customs tariff investigations, trade remedies, and import and export controls — will continue. Once the investigation has been finalised Itac will make a recommendation on a final five-year tariff to trade, industry & competition minister Ebrahim Patel, who will decide on the matter.

In terms of the law, provisional duties can be imposed for a period of only six months while Itac conducts its investigation. It had until January 14 to update the French fry tariff, but as it had not completed its complex investigation by then it allowed it to lapse.

Previously, there were no duties for German producers, while Dutch and Belgian producers faced duties of not more than 30% under the previous five-year anti-dumping regime that expired in 2021.

French fries make up a large part of food sold by restaurants and takeaways.

Hume International, a major importer of frozen food, welcomed the lapse in duties. The company believes the lapse means local importers can claim refunds for duties paid since mid-January.

“We need to do everything in our power to bring prices down, which includes doing away with unnecessarily heavy duties,” Hume International MD Fred Hume said in a statement.

“Competition is integral to an economy’s ongoing welfare, and our food industry benefits greatly from global trade, which serves to fill shortages in the market and keep prices stable.

“While the local industry produces sufficient amounts of potatoes to meet consumer demand, the same cannot be said for the specific variant used to make French fries, and hence our reliance on imports.”

Hume noted that imports of French fries have decreased by a third since before Covid-19, largely due to the high import tariffs placed on the three major trading partners. Germany, which previously made up only about 6% of total imports and had very little impact on local prices, has largely stopped exporting fries to SA as a result.

Industry players have questioned the government’s decision to implement import duties on French fries given the lack of domestic production capacity and considering that they are VAT-exempt to make them more affordable. 

Donald MacKay, the founder and director XA International Trade Advisors, a major trade advisory firm in SA, said at a media briefing late last year that potatoes and fries are exempt from VAT under current government legislation. A zero VAT rating aims to provide basic foodstuffs at a reduced price to benefit the poor.

MacKay said the government needs to conduct an urgent review of the impact of import duties on the increasing cost of food, and remove the duties on imported French fries. He said the duties on fries specifically have increased the price by 88%, from R16/kg in 2021 to R30/kg in 2022.

According to MacKay, there is a shortage of domestic potatoes used to make fries and there is not enough processing capacity in SA to meet local demand. Industry players have also noted the general shortage in SA of the potatoes used for fries.

SA imported about 13,000 tonnes of frozen chips in 2020 despite low demand due to Covid-19 lockdowns, which brought economic activity to a near standstill. The figure nearly doubled to about 24,000 tonnes in 2021 amid local shortages.

ensorl@businesslive.co.za