EU-SA deal revs up automotive industry outlook

Implementation date for duty cut to be announced ALAN PEAT THERE IS a big saving for the SA automotive export industry just round the corner, with an expected duty reduction on fully built-up car exports to the European Union (EU) imminent. As part of an agreement reached last week between the EU and SA’s department of trade and industry (dti), the EU has agreed to phase down the import duty on car imports from SA by 2008 – and as reciprocation, SA will cut duty on European car imports from the current 25% to 18% by 2012. The industry is now waiting for the final implementation date for the duty cut to be announced by the dti, according to Norman Lamprecht, executive manager of the National Association of Automobile Manufacturers of SA (Naamsa). “That’s the missing link,” he told FTW. But, he added, although the EU has reportedly said that the detailed plan would be implemented by both sides by December 1, that might be too tight a time schedule. “Although the SA export industry certainly hopes that it will be this year,” he said. What is now needed is the submission from the European authorities to the dti – from where it will be processed and passed on to the department of finance for implementation by SA Revenue Service (Sars) customs. The original plan – with the automotive sector negotiated separately from the 2000 agreement on free trade between SA and the EU – was for duty in the EU to be reduced to 3.5% from this July 1, according to Lamprecht, with a further cut to 2.5% due for next January 1, and finally a cut to duty-free by January 1, 2008. This phase-in has been somewhat delayed, but the vehicle industry is still hopeful that the processing of the agreement will be fast-tracked by the various government departments, and cuts will start before year-end. According to Lamprecht, it would be even more beneficial if the deal was made retrospective – but he doubts if this will happen. Naamsa said 25 000 locally produced vehicles worth about R5-billion were exported from SA to the EU last year – about 18% of the record 139 912 new vehicles exported to various countries last year. Vehicles and motor components worth a total of R21-bn were exported to the EU last year compared with R38-bn of vehicles and components imported from the EU. The SA automotive industry rates the duty reductions on its exports as more significant than that on imports. This because very few importers have been paying the full import duties – these being effectively reduced by export credits earned under the motor industry development programme (MIDP).