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SA’s formal submissions ‘will involve a substantial amount of time and money, with no guarantee of success’.
SA’s formal submissions ‘will involve a substantial amount of time and money, with no guarantee of success’.

Rob Davies calls for exemption on US tariffs


By Mark Allix - Mar 26th 2018, 11:09

SA’s formal submissions ‘will involve a substantial amount of time and money, with no guarantee of success’. 

Trade and Industry Minister Rob Davies has formally requested that SA be excluded from US duties on steel and aluminium.

This comes after President Donald Trump, in a presidential proclamation published late last week, temporarily exempted the EU, Canada, Mexico, Argentina, Australia, Brazil and South Korea from 25% tariffs on steel products and 10% tariffs on aluminium.

As "friendly nations", these countries have until May 1 to negotiate levies on steel and aluminium. But their exemption means South African steel exports to the US will be hit with a 25% duty.

Paolo Trinchero, CEO of the Southern African Institute of Steel Construction, says SA’s formal submissions "will involve a substantial amount of time and money, with no guarantee of success".

He says the tariff applies to primary steel and some secondary products such as tube and pipe. Products with high value-add such as machinery are not included, Trinchero says. "I think the US approach is to flag items which are easy to classify and ring-fence. As products become more complex with substantial value-add they disappear into categories famously referred to as ‘other’," he says.

Trinchero said earlier in March — when Trump first announced the tariffs — that the right approach was for the US to apply to the World Trade Organisation for anti-dumping measures, bound tariff rates, and safeguards, if necessary.

The Department of Trade and Industry says SA’s ambassador to the US, Mninwa Mahlangu, has been engaging with White House national security council staff, the US state department and the Office of the US Trade Representative on the tariffs. Davies has also had a teleconference with Curtis Mahoney, the deputy US trade representative for investment, services, labour, environment, Africa, China and the western hemisphere.

The tariffs come amid broad industry investigations under section 232 of the Trade Expansion Act of 1962, as amended, to help the US determine the effects of imports on it national security.

In January, the US commerce department delivered section 232 reports on steel and aluminium to Trump. These conclude that the steel imports were nearly four times US steel exports and that aluminium imports had risen to 90% of total demand for primary aluminium.

Trichero says the section 232 stipulation of national security applies to imported steel used in the US military industrial complex and "does not really work" when it comes to importing a fridge or a pump.

"Perhaps quotas could form part of a negotiation or application" to lessen the effect of the tariffs, he says.

The South African Iron and Steel Institute (Saisi) says customs data show that total domestic exports of primary steel products to all countries in 2017 came to 2.4-million tonnes or about 35% of SA’s estimated primary steel output of 6-million tonnes. The value of these exports was about R26bn. The US makes up only about 10% of this.

Saisi’s Abri Audie says that according to Trump’s proclamation, steel including ingots, blooms, billets, slabs, coils, plates, sheets, bars, rail accessories, structural shapes, pipe, wire and many other steel product types are affected.

Davies, in his submission to US authorities, has emphasised that South African exports of aluminium products to the US each year are equal to about 1.6% of that country’s total aluminium imports. These products consist of specialised aluminium sheet, coil, and plate for processing in the US automotive, battery and aerospace industries.

Hulamin CEO Richard Jacob says South African exporters to the US "are likely to be disadvantaged" depending on who they compete within the exempted countries. The group is an aluminium beneficiator that supplies electric vehicle maker Tesla among other US-based industries.

"The tariff codes include both primary aluminium and certain other categories of processed aluminium," Jacob says.

But what this might mean in terms of SA’s automotive exports to the US "is still unclear", he says.

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