On 14 June 2021, the International Trade Administration Commission of South Africa (ITAC) announced the initiation of an investigation to evaluate the creation of two temporary rebate provisions in conjunction with the Trade, Industry and Competition Minister’s directive regarding the review of the poultry tariff structure - Government Gazette of 16 March 2021 - for rebate of the full duty on:
(a) Boneless leg quarters, frozen, offal of the species Gallus Domesticus, classifiable in tariff subheading 0207.14.15, at such times, in such quantities and subject to such conditions as ITAC may allow by specific permit, provided the product is not available in the Southern African Customs Union (SACU) market; and
(b) Wings, frozen of the species Gallus Domesticus classifiable in tariff subheading 0207.14.95 for further processing by means of cooking, seasoning and marinating in a sauce, at such times, in such quantities and subject to such conditions as ITAC may allow by specific permit, provided the product is not available in the SACU market.
The application was lodged by Werner Van Eeden Slagtery CC trading as Matador Slagtery, and Barbecue Rib Manufacturers (Pty) Ltd.
The Minister directed ITAC to review the entire tariff structure for poultry (fowl of the species Gallus Domesticus) taking into consideration, inter alia, the following aspects:
(a) Considering the introduction of specific rather than ad valorem customs duties;
(b) Considering simplifying the tariff structure by reducing the number of tariff lines for poultry in Schedule No.1 to the Customs and Excise Act, 1964, by operating at a 6-digit, 7-digit or 8-digit level;
(c) Considering specific anti-dumping measures where appropriate and consider how these impact on the level of the ad valorem tariffs;
(d) Considering the introduction of an appropriate system of rebates whereby tariff levels on certain imports can be reduced where parties are achieving exports; and
(e) Considering the possibility of other measures, such as an entry price system.
Matador Slagtery reasoned that:
- Due to a South African market demand for chicken kebabs, Matador Slagtery established a facility aimed primarily at the production of this product (in 2009).
- The frozen, boneless leg quarters were found to be the ideal base product (raw material) to be used in the manufacture of chicken kebabs due to the moisture of the flesh and the high yield/low loss incurred during the production process (typically <3.5%).
- As per client request, the raw material cannot be injected with brine or tumbled.
- The duty currently serves no protection purpose as there is no local industry producing this particular product to protect.
- The current duty of 42% contributes to increasing the cost of importing the raw material and consequently, to the cost and prices of producing the final product namely ‘Chicken Kebabs’.
BRM Brands reasoned that:
- Wings and drumettes (subject product) are a vital raw material in the manufacture of cooked and marinated wings.
- BRM processes the wings into ready-to-eat cooked and marinated wings.
- The largest cost component of the final cooked product is the subject matter (raw material wing and drumette), accounting for about 51% (including duty) of the total cost to produce, whereas the rest of the cost incurred relates to local value-added processes.
- The motivation for this application is the shortage of wings in the SACU area.
- This shortage dates back to 2016. The shortage of wings and drumettes not only persists but has in fact worsened, while the local demand for bone-in cut chicken has increased.
Comment is due by 29 June 2021.
Story by: Riaan de Lange
