No protection despite industry commitments to government. Picture - Citizen Stock.
The poultry industry expects to see an increase in dumped imported chicken, particularly from Brazil, within the next few months after receiving a “licence” to continue their dumping from Minister of Trade, Industry and Competition Ebrahim Patel.
According to a report by the FairPlay Movement, Rainbow Chicken (owned by JSE-listed RCL Foods) has called for the immediate imposition of anti-dumping duties on bone-in chicken portions from Brazil, Denmark, Ireland, Poland and Spain.
The South African Poultry Association (Sapa) says they have reconciled themselves to Patel’s decision to suspend the imposition of anti-dumping duties for 12 months, but it will hurt the industry.
The International Trade Administration Commission (Itac) found evidence of dumping and introduced provisional anti-dumping duties for six months at the end of last year.
After receiving submissions and comments from several importers from the affected countries and local stakeholders it recommended the introduction of the duties for a period of at least five years.
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However, Patel considered the “current rapid rise” in food prices locally and globally and the impact the imposition of the anti-dumping duty may have on the price of chicken and postponed the imposition of the tariffs by a year.
Sapa CEO Izaak Breytenbach says the minister has wrongly assumed that the tariff increase will lead to increased prices.
“We have always argued that an increase in tariffs has never led to an increase in consumer prices.” The main reason is that consumers never benefit from the lower prices. Imports are priced at market or slightly lower prices than the price of local products.
Breytenbach says the landed cost of imported chicken leg quarters from Brazil is currently around R12 per kilogram. The lowest price is on thighs from Australia at close to R9 per kilogram.
“Nobody sees chicken at that price on the shelves,” says Breytenbach.
“These imported products are being sold in South Africa at market prices and the importer pockets the difference.”
The remedy with anti-dumping tariffs is to make it less profitable and therefore less attractive to dump product in another country.
Sapa has commissioned a study by several economists to investigate the impact of tariff increases on consumer pricing.
When the time comes for the minister to reconsider the implementation of the tariffs he should have the results of the study – and be able to base his decision on facts and not on hearsay.
Breytenbach says Sapa expects to see the quantum of the increase in about three months’ time when the South African Revenue Service publishes the latest import statistics.
He says the industry will not take any legal action because of the suspension of the tariffs, but still finds it “surprising and disappointing” that the minister decided not to protect the local industry while acknowledging that dumping of bone-in chicken portions is causing producers “material harm”.
The chicken from some producers in Brazil lands in South Africa at a price that is 265% cheaper than it sells for in their own market.
Itac has recommended anti-dumping duties of between 6% and 50% on specific producers such as Seara and Copacol in Brazil and 265% on all other imports from Brazil.
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Danish producers export their bone-in chicken to SA at 67.4% lower than the Danes pay for their chicken, Ireland’s dumping margin is 158%, and most producers from Poland face anti-dumping duties of almost 97%. Spanish producers face an 85.8% anti-dumping duty.
In 2020 South Africa introduced a most favoured nation tariff of 62% on bone-in portions and 42% on boneless portions for all importers, excluding producers from the European Union.
Breytenbach says they have learned from previous experience that these tariffs don’t offer sufficient protection against dumping.
When the industry consulted with Patel on the Poultry Sector Masterplan it committed itself to massive investments and transformation in the industry in exchange for protection against dumping and illegal trade.
“We have invested R1.5 billion in the last two years and we have done a huge amount of work in terms of transformation,” says Breytenbach.
“That is why we found it surprising and disappointing when the minister suspended the imposition of the dumping duties.”
According to a FairPlay movement report Rainbow Chicken will continue with its R220 million investment at its Hammarsdale plant in KwaZulu-Natal.
SA Poultry Association broiler chair Gary Arnold explains why he doesn’t see the suspension of chicken import tariffs as good news:
This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.
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