EU tariff impasse harms auto component exporters

Agreement will see duties reverting to zero
ED RICHARDSON
THE NATIONAL Association of Automotive Component and Allied Manufacturers (Naacam) believes that an impasse over tariff reductions for SA exports of automotive components to the European Union will be settled soon. A pending agreement between the SA Department of Trade and Industry and the EU could see export duties return to zero. “Once the agreement is in place, we expect duties on components and aftermarket parts to revert to zero, and for two-way duties on built-up vehicles to be reduced over time, which will benefit both SA and the EU,” says Roger Pitot, executive director of Naacam. On February 3, 2006, the Department of Trade and Industry said that SA automotive components and after-market parts would no longer be permitted to enter the EU duty-free. As part of the SA and EU free trade agreement, automotive component exports are now subject to a 50% rebate upon entering the EU. Industrial assembly components now have an increased duty of 1.5% and 2.2% for the aftermarket. “Although this is not as advantageous as the GSP rebate, it is a lot better than the normal duty,” read the DTI statement. “This was an unexpected duty increase, and is contrary to assurances made to Naacam and the rest of the industry by the DTI last November, when we were told the automotive issues had been resolved and duties would continue to be zero on components and parts. “The effect of this is that suddenly the EU customers find themselves having to pay duty, which is a bad surprise, and has caused some problems for the SA exporters,” says Pitot. The rand’s strengthening against the euro has created further set-backs as it has put pressure on export margins. EU customers are now requesting cheaper prices from the SA exporters, who are subsequently at risk of losing business. “Going forward, the uncertainty of how long duties will continue to be paid will harm our automotive exports and certainly make us less competitive than before. This could be serious, as almost 70% of the total automotive exports from SA are destined for Europe,” says Pitot. The DTI says negotiations to resolve outstanding issues still need to be dealt with before the free trade area agreement is finalised. Once consensus is reached, the details will be made available.