SOUTH AFRICA – The South African Revenue Service has announced the increase of the most favoured nation duties (MFN) on imports of bone-in chicken from 37 percent to 62 percent, and for boneless portions from 12 percent to 42 percent which was effected as of March 13, 2020.
The announcement comes more than one year after the International Trade Administration Commission of South Africa (ITAC) received application for the increase of the MFN rate of customs duties on frozen meat and edible offal of fowls Gallus domesticus from the South African Poultry Association (SAPA).
In its application, SAPA requested an increase in the general rate of customs duty on bone-in chicken portions from 37 percent ad valorem to 82 percent.
SAPA also applied for the existing duty of 12 percent ad valorem on boneless chicken cuts to be increased to 82 percent as well, which is South Africa’s bound duty rate under the World Trade Organization.
SAPA stated various reasons for its request including, that the Southern African Customs Union (SACU) is a globally efficient producer of chicken.
Despite this, the industry has faced, and continues to face, enormous profitability challenges linked to increasing volumes of opportunistic imports which significantly undercut the industry.
SAPA also highlighted that dutiable imports of frozen chicken have increased drastically over the period 2015 to 2017.
According to the association, these low-priced imports limit the industry’s ability to increase prices in line with the increases in costs (price suppression), reduce sales volumes and market share.
The United States, Brazil and the European Union are the leading exporters of poultry to South Africa and could be impacted in some degree.
While the MFN duty increases apply to chicken imports from the United States and Brazil, the European Union will not be subject to these increases due to their tariff free market access established under the Economic Partnership Agreement between the Southern Africa Development Community and the European Union.
Since 2016, the United States has shipped the majority of its poultry to South Africa under a tariff rate quota (TRQ) that was initially set at 65,000 metric tons.
The TRQ applies to bone-in chicken portions only and has since increased to 68,590 metric tons. Exports above this volume are subject to a prohibitively high antidumping duty currently set at R9.40/kg, which was initially put into place in 2000.
South Africa last increased the import duty in August 2013 when ITAC recommended an increase of import duty on five poultry products: whole bird, carcasses, boneless cuts, bone-in and offal.
At that time, this increases impacted Brazil predominantly, as the United States was not exporting to South Africa due to the antidumping duty and absence of the TRQ.
Anticipated Impact of Import Duties on the Chicken Trade
According to the report, the increases in import duties is expected to grant the European Union a competitive advantage over other trading partners, such as the United States, Brazil and Argentina due to the duty-free access enjoyed under the SADC-EU EPA.
Some of the market share enjoyed by these trading partners could shift towards the European Union depending on market conditions.
However, although the European Union is not subjected to the MFN duties and the increases, its imports from certain member states are subject to other barriers in the South African market, including antidumping duties, a safeguard measure and/or sanitary and phytosanitary restrictions as a result of the recent Highly Pathogenic Avian Influenza (HPAI) outbreaks.
Six EU member states have HPAI-related bans imposed on poultry exports to South Africa. Several poultry companies in Germany, the Netherlands and the United Kingdom are subjected to antidumping duties while all the EU countries are subject to a safeguard duty currently set at 25 percent.
These restrictions have led to the overall decline in market share for the European Union.
Nonetheless, the recent removal of HPAI restrictions on imports from the Netherlands, the reduction of the EU-wide safeguard duty over the following three years and the new increases to the applied MFN duties suggest that the European Union is positioned to recapture the market share it lost, potentially at the expense of the United States and Brazil.