Companies across South Africa’s steel value chain are gearing up to submit responses to a preliminary determination by the International Trade Administration Commission of South Africa (Itac) that proposes the implementation of sweeping tariffs on imported steel products.

The preliminary determination, which was gazetted on August 20 for a two-week public comment period, arose from an investigation initiated by Itac in March into the tariff structure for carbon and stainless steel products.

The review came amid indications from ArcelorMittal South Africa that it intended closing its Newcastle mill, in KwaZulu-Natal, partly because of surging imports but also because it claimed it could not compete with mini-mills that were receiving a scrap subsidy. In addition, companies across the steel industry were facing increased import competition, while their competitiveness was being undermined by unreliable power and logistics, and surging utility costs.

The investigation also coincided with the implementation of 30% import tariffs on South African exports to the US, where 50% tariffs on steel had also been instituted.

The review covered products listed under chapters 72, 73, 82 and 83 of the Customs and Excise Act, which includes everything from hot-rolled coil, bars and rods, to tubes, pipes, screws, bolts and garden tools.

Itac concluded that tariffs should be increased to the World Trade Organisation ‘bound rate’ on products included under 460 tariff codes.

However, it also proposed the creation of additional rebate provisions and said a committee made up of “industry role-players and members of the commission” would be formed to advise Itac on steel-related matters.

These hikes would affect all imports arising from countries that do not have a trade agreement with South Africa. In other words, imports from the EU and the Southern African Development Community would not be affected.

An analysis of the preliminary determination conducted by XA Global Trade Advisors shows that the 460 tariff codes affected by the preliminary determination cover yearly imports valued at R51.5-billion and will impact thousands of importers and traders.

MD Donald MacKay said that more than 70% of the tariff codes related to carbon steel products imported under chapters 72 and 73, while 90% of the value of the proposed duty increase was in relation to products included in chapters 73 and 82.

“If Itac increases all the duties to the bound rate, it would add R1.54-billion to the tariff bill for a year,” MacKay said during a webinar hosted on the preliminary determination.

He added that 10 845 importers could see their duties increase but said 16 importers, which were not identified, were most at risk, as they accounted for 21% of all steel imports.

The reaction of webinar participants to the preliminary determination was mostly one of anxiety, with many suggesting that it could undermine their manufacturing competitiveness and raise prices for users and consumers.

However, an upstream steel producer expressed support for the intervention, arguing that the industry was in need of protection from a flurry of imports, which was placing their survival, as well as jobs, at risk. The tariffs could also create space for import-substitution.

MacKay welcomed the decision by Itac to allow for further comment on the determination ahead of implementation, describing the move as unprecedented.

However, he said the trade-offs were significant and could result in casualties and, thus, suggested that Itac consider holding public- interest hearings before making a final decision.

That said, he urged those affected by the determination to provide comment ahead of the September 3 deadline, or apply to Itac for an exemption from the deadline to provide sufficient time to compile a comprehensive response.

In its Gazette notice, Itac stressed that no final decision had been made and committed to considering comments from members of the public before making a final determination.

No timeframe was provided for such a determination, but Itac has indicated previously that it views the finalisation of the review as a priority in light of the difficulties being experienced by the domestic industry.