The International Trade Commission of South Africa (ITAC) has imposed provisional 38.3 percent anti-dumping duties on car, passenger, truck and bus tyres, with effect from September 9, 2022.
These will remain in place until March 8, 2023.
These duties, levied on top of the 25 percent to 30 percent duties already in place, will drive up tyre prices by around 23 percent and given the importance of tyre costs to the transport industry, will manifest in higher taxi fares and trucking transport costs.
Local manufacturers of tyres, Continental, Bridgestone, Goodyear, and Sumitomo (the makers of Dunlop) - collectively known as the South African Tyre Manufacturers’ Conference (SATMC) - applied to ITAC for the imposition of substantial additional duties on passenger, taxi, bus and truck vehicle tyres imported from China.
According to SATMC, new pneumatic tyres of rubber of a kind used on motor cars, buses or lorries originating in or imported from China, were being imported into SACU at lower prices than they are sold for in China and these prices caused material injury and threaten to cause material injury to the SACU industry. On January 31, 2022, ITAC initiated an investigation into these allegations.
A lot of companies opposed the application (62 Chinese producers and 18 importers, plus an importer and producer association), making this the largest response in the 19-year history of ITAC, says Donald Mackay, founder and CEO of XA Global Trade Advisers. “Feeling somewhat overwhelmed, ITAC decided to sample the producers they would look at. Given that the allegation of dumping is made against the Chinese manufacturers, only the manufacturers can demonstrate, using their own data, if they indeed sold to SACU at lower prices than they sold for in China.
“This also means that when the calculations were done for the preliminary duties imposed, ITAC ignored the data provided by the respondents,” MacKay adds.
Charl de Villiers, chairperson of the Tyre Importers’ Association of South Africa, says: “It’s not difficult to see how crippling the impact of these duties will be on consumers. What is difficult to understand is that this announcement comes as the Cabinet is debating the introduction of an economic relief package to help South Africans survive the rising cost of living and rampant inflation.”
In late August, Stats SA released the latest consumer inflation figures, which shows the cost of transport has increased significantly. According to StatsSA, those using public transport saw a 9 percent increase in July, pushing the annual increase to 16.4%. While there is some good news for commuters and the transport and logistics sector with this month’s decrease in the petrol price, the imposition of provisional duties on tyres imported from China will negate this relief, and drive up the price of all tyres. Since tyres are the third biggest input cost in transport, after wages and fuel, these new duties will have a knock on effect on the price of goods and specifically food.
“These increases will be extremely difficult for financially constrained consumers to afford given the current inflationary climate. The unfortunate consequence is that people will either delay replacing their tyres, or trade down to illegally regrooved tyres, both exceptionally dangerous outcomes, especially as we head into the end of year holiday season.
“Government’s rationale for the imposition of duties is ostensibly to help protect local manufacturers, but in the case of tyres, the local manufacturers themselves are having to import the vast majority (80 percent) of the over 3000 different models of tyre ranges they sell. They have to do this because it is not cost effective to set up production lines for that many models within one plant,” says De Villiers.
However, despite the enormous volume and variety imported by the applicants, they have refused to disclose why they import, according to the preliminary ITAC report.
“This matters because we don’t want a situation where duties are imposed and the largest beneficiary are foreign producers from countries besides China,” says MacKay. “Given the dire costs which will now be levied on consumers through this action, it seems reasonable to understand why these imports occur. ITAC has refused to instruct the SATMC to disclose their reasons for importing, leading us to the current legal challenge by TIASA to have this important information disclosed.”
Bear in mind that the applicants are importing 43 percent more tyres than three years ago and Continental and Goodyear import 100 percent of their truck and bus tyres. “If we don’t understand why these companies import instead of buying from other local producers, then it becomes difficult to see if the new duties will actually benefit local production,” he adds.
The domestic industry now has the duties they wanted, but quite clearly they will not be able to supply everything demanded from their local facilities. After all, they only produce around 20 percent of the variety of models consumed in SACU, according to MacKay.
Interested parties have until September 23, 2022, to respond to the preliminary ITAC report, but litigation is a given, according to industry insiders, and SATMC and ITAC have already given notice that they will oppose.
BUSINESS REPORT