A few weeks ago CECE was informed of the investigation of the South African ITAC – International Trade Administration Commission (ITAC). This investigation is assessing the petition of Bell Equipment requesting an increase in the preferential customs duty rate on Dumpers designed for off-highway use, a category including several types of machines.
This investigation is a reason of concern. South Africa represents an important market for the construction equipment sector. Several European OEMs manufacture and export construction and mining equipment to South Africa for use in mining, quarrying, and construction industries. More specifically, exports of dumpers designed for off-highway use (under HS subheading 870410) from the EU-27 to South Africa totaled almost € 10 million in 2019, while the same exports from the UK in the same period totaled £ 35 million.
Given the importance of ensuring smooth trade with South Africa, CECE decided to make a submission to ITAC requesting not to increase the tariff rates on any kind of dumpers designed for off-highway use under HS subheading 8704.10 and to maintain the current preferential rates.
Higher tariffs will have a negative consequence for South Africa on the one hand, as it will lead to increased cost for end customers in the mining, quarrying and construction industries. On the other, an increase in tariffs will make EU exports of dumpers less competitive in South Africa. This will lead to monopoly and lack of diversity in dumpers offering in South Africa and distort the local market situation.
It must be acknowledged that all construction equipment industry experiences similar difficulties due to the Covid-19 pandemic. On top of that, as a result of Covid-19 crisis exporting manufacturers are facing higher transport costs and longer lead times by which local manufacturers are not impacted.
On a more general note, higher tariffs risk undermining confidence in the trade and investment climate in South Africa, which remains a key market for trade and investment in the construction & mining equipment industry, for example by hosting bauma Conexpo Africa, the leading trade fair for Construction and Mining Machinery in sub-Saharan Africa.
In order to stay competitive and be the leading market in the region, South Africa should avoid protectionism. Only a climate of openness will foster trade and investment, which will ultimately be the driver for building back our economies.