Second Plastics Industry Conference Triple Bottom Line – People, Planet & Profit: international trade considerations MELULEKI NZIMANDE March 2016

Plastics Industry and international trade What is international trade Why is it relevant to the plastic industry and Plastic SA? Plastics SA represents all sectors of the South African Plastics Industry including polymer producers and importers, converters, machine suppliers, fabricators and recyclers. (Plastic SA's Annual Report, 2014/2015) The SA plastics industry is currently in the throes of one of the most challenging periods in its history. Not only are we facing increased electricity, transport and raw material costs on the local front, but the sharp increase in imports also poses a very real threat to our progress. (Philip de Weerdt – Chairperson of Plastics SA, Chairperson's message, Plastic Catalyst SA, 2013/2014)

Plastic Industry AND INTERNATIONAL TRADE Relevance of international trade to the plastic industry and Plastic SA "…the recent phase-out of import tariffs on polymers and other inputs…will contribute to the more competitive input prices" – Importance of trade (Philip de Weerdt, Plastic SA's Annual Report, 2014/2015) Exports – opportunity for growth - Plastics industry is priority sector - contributing 1,6% to South Africa’s GDP 14.2% to the Manufacturing (Sector Plastic SA's Annual Report, 2014/2015).

Trade Regulation IN SA Trade, Import & Export Regulation in SA World Trade Organisation (WTO) and Other Agreements SA is party to International Trade Administration Commission (ITAC) International Trade Administration Act, 71 of 2002 (ITA Act) Minister of Economic Development & Minister of Trade and Industry Customs Division of the South African Revenue Service (SARS) Customs and Excise Act, 91 of 1964 soon to be replaced by the Customs Control Act, 31 of 2014; Customs Duty Act, 50 of 2014 and Excise Duty Act, 91 of 1964 Minister of Finance, Deputy Minister of Finance; Commissioner for the South African Revenue Service SA mandated to act for the Southern African Customs Union (SACU) Fair trade measures vs Unfair trade measures

Fair Trade Measures MFN duties: policy based & subject to WTO bindings; tariff policy seeks to promote industrialisation and growth of manufacturing of value added goods Tariff increase and decrease applications (ITA Act and Amended Tariff Investigations Regulations) Commitments by applicants (jobs etc.) Applied to all countries except EU, EFTA, SADC SACU Agreement – common external tariff applied by SACU states

Fair Trade Measures Cont'd Safeguard measures (non – agricultural): Emergency action against imports of particular products to make room for structural adjustment of producers in importing country Applied where "product under investigation is being imported into the Common Customs Area of SACU in such increased quantities, absolute or relative to SACU production, and under such conditions as to cause or threaten to cause serious injury to the SACU industry that produces like or directly competitive products, and as a result of unforeseen developments and of the effect of the obligations incurred by the Republic (or SACU) under the World Trade Organisation" (Regulation 1 of Amended Safeguard Regulations)

Fair Trade Measures Cont'd Safeguard measures cont'd Based on Article XIX of GATT 1994 & WTO Agreement on Safeguards Injury determined over more than three representative years Provisional measures imposed for not longer than 200 days Definitive measures: four plus two years (Article 7(4) of WTO Agreement on Safeguards permits 8 years)

Fair Trade Measures Safeguard measures cont'd measures to be progressively liberalised applicants must furnish competitiveness adjustment plan measures imposed for more than three years, are reviewed at halfway mark to determine whether: the continued application is still required measure cannot be liberalised faster applicants are implementing the adjustment plan

Remedies to Unfair Trade Practices Countervailing Duties – not common ANTI-DUMPING DUTIES Dumping: - the introduction of goods into the commerce of the Republic or the Common Customs Area at an export price contemplated in section 32(2)(a) that is less than the normal value, as defined in section 32(2), of those goods (ITA Act, Section 1) Export price (ITA Act, Section 32(2)(a)): - the price actually paid or payable for goods sold for export, net of all taxes, discounts and rebates actually granted and directly related to that sale.

Remedies to Unfair Trade Practices Export price cont'd If no such export price exists or price paid is not reliable or there is "an association or compensatory arrangement" between the exporter and importer, the export price may be calculated with reference to the price charged to the first independent buyer or other reasonable basis (ITA Act, Section 32 (5) and (6)) Normal value: the comparable price paid or payable in the ordinary course of trade for like goods intended for consumption in the exporting country or country of origin; or

Remedies to Unfair Trade Practices Normal value cont'd in the absence of information on a price contemplated above, either- the constructed normal value; or the highest comparable price of the like product when exported to an appropriate third or surrogate country

Remedies to Unfair Trade Practices In determining the margin of dumping, reasonable allowance must be made for differences in conditions and terms of sale, differences in taxation and other differences affecting price comparability (Section 32(3), ITA Act) Non-Market Economy status - use third or surrogate country (Section 32(4), ITA Act) China - Agreement with SA: Market economy; "ordinary course of trade test" Dumping investigation period: normally 12 months or more, but not less than 6 months. Period ending not more than 6 months before the initiation of the investigation

Remedies to Unfair Trade Practices Injury to the producers in importing country: sales volume, profit and loss, output, market share, productivity, return on investment, capacity utilisation, cash flow, inventories, employment, wages, growth, ability to raise capital or investments, any other relevant factors injury investigation period: usually more than three years Causation no causal link - no anti-dumping remedy Non-attribution principle

Remedies to Unfair Trade Practices Investigation process preliminary phase – provisional duties final phase – final definitive duties Duties are country and, if possible, exporter specific Duration anti-dumping typically imposed for five years changed circumstance review sunset review Anti-circumvention review

Remedies to Unfair Trade Practices Anti-Dumping Duties on Polyethylene Terephthalate (in primary forms) imported from India (54.1%), Korea (19.7%) and Chinese Taipei (75%) – subject of sunset review

Interesting Issues and Trends in Trade Burden of evidence (Initiation of investigation) Difficulty of obtaining price information in exporting countries Injury – threat vs actual dilemma Normal value and export price adjustments Protection of confidential information Developments Trade, Development and Cooperation Agreement (Article 16 applications) / SADC – EU Economic Partnership Agreement Technical Regulation – Black spots issue in EU

CONTACT INFORMATION MELULEKI NZIMANDE Tel.: 011 530 5000 Email: meluleki.nzimande@webberwentzel.com

Legal Notice: these materials are for training purposes only and do not constitute legal or other professional advice