Taxes on Chinese tyres may make travel in South Africa costly – but will save jobs, say local producers

Tyres arriving from China will now incur additional duties of 38.33% as part of a preliminary dumping determination by the International Trade Administration Commission.

Higher duties on Chinese tyres will make travel and transport more expensive in South Africa, according to importers.

But allowing these cheap tyres to flood into South Africa will create more unemployment, argue local manufacturers.

A battle is raging over Chinese tyres flooding into South Africa, with importers arguing that higher duties will make travel more expensive and local manufacturers drawing attention to widespread job losses.

Tyres imported from China are now subject to additional duties of 38.33%, according to a recent government gazette signed by the South African Revenue Service’s (SARS) head of legislative policy tax, customs, and excise.

This new provisional duty on tyres imported from China is the result of a preliminary dumping determination by the International Trade Administration Commission (ITAC). The Commission was approached to investigate "unfairly traded" tyres from China, which are said to have undercut and crippled local manufacturers.

These tyres are being imported at "unfairly low prices", argues the South African Tyre Manufacturers Conference (SATMC) in its application for relief from ITAC, and are causing "material injury to the local industry."

Local tyre manufacturers want anti-dumping duties applied to Chinese imports, which, it hopes, will create better price competitiveness and give the South African sector a fighting chance to revive. The recently announced provisional payments, welcomed by SATMC, will be in place until March 2023 while ITAC continues its investigation.

But there’s fierce opposition to SATMC’s push for pricier Chinese tyres, namely from the Tyre Importers Association of South Africa (TIASA), which has already called on government to reverse the latest duties. During the period under investigation by the Itac – August 2020 to July 2021 – R5.7 billion worth of tyres were imported into South Africa, with almost half coming from China.

Tyre importers argue that additional duties, which it says could range between 8% and 69%, will ultimately increase the cost of travel and transport in South Africa.

"These increases will be extremely difficult for financially constrained consumers to afford given the current inflationary climate," said Charl de Villiers, Chairperson of TIASA, in response to the latest duties.

"The unfortunate consequence is that people will either delay replacing their tyres or trade down to illegally regrooved tyres, both exceptionally dangerous outcomes, especially as we head into the end of year holiday season."

Key to TIASA’s argument against higher import duties is their claim that SATMC members – Continental, Bridgestone, Goodyear, and Sumitomo – import the "vast majority of the over 3,000 different models of tyre ranges they sell."

"They have to do this because it is not cost-effective to set up production lines for that many models within one plant," said De Villiers.

Anti-dumping duties imposed on tyres from China, will, according to De Villiers, have a knock-on effect on the price of goods and specifically food, because tyres are the third biggest input cost in transport, after wages and fuel.

Costlier Chinese tyres also have the potential to impact bus and taxi commuters, said De Villiers. Taxi operators, for example, will now pay 23% more for tyres, at least a portion of which will be passed onto commuters.

Local manufacturers argue that TIASA is determined to shift the narrative towards cost increases, which it knows is a particularly sensitive topic among cash-strapped South Africans, and away from the issue of employment, which SATMC says is the real crux of its application for anti-dumping duties.

"Consumers and ourselves should not be misled by the short-sighted narrative of the importers that travel will be expensive and start to focus on the country maintaining and creating more jobs for its citizens," Nduduzo Chala, SATMC’s managing executive, told Business Insider SA.

"An environment that is conducive to improving and increasing industrialisation is one that will ensure the people have jobs and the economy will prosper. There is no substantial investment being made or ever made by importers. It’s local manufacturers that contribute to the growth of the country, and that should be protected."

Chala added that the local tyre manufacturing sector currently employs 6,500 direct employees and 19,000 indirectly and that "these are at risk if unfair trade is not addressed, and local manufacturers continue to be uncompetitive."

TIASA argues that its members "are all South African wholesale companies, many of which have been in business for two or three generations, employ a collective 3,000 people directly, and support at least 55% of those 19,000 indirect jobs claimed by SATMC."

"The point is that every single job sustained in our country is valuable," said De Villiers.

"The additional duties will push many of these companies out of business, destroy jobs, [and] add an excruciating financial burden on every motorist in the country, every bus company, every taxi owner and every commuter."

Interestingly, both parties – SATMC and TIASA – have drawn parallels between import duties on Chinese tyres and South Africa’s controversial anti-dumping duties on imported chicken. Anti-dumping duties imposed on imported poultry, in an attempt to save the local industry, were recently suspended to help consumers amid rising financial pressures.

"Earlier this year, government absorbed some of the increases in the fuel levy, passing this saving onto consumers and businesses," said De Villiers.

"Similarly, in August, the Minister of Trade, Industry and Competition decided, in the public interest, to suspend the imposition of anti-dumping duties on imported chicken. This shows that government is prepared to make difficult decisions that are in consumers’ best interest."

Chala cited cheap chicken imports into South Africa, and the impact on local jobs, as an example of what happens when local producers are undercut.

"In South Africa, we have witnessed the closure of large organisations because of not comprehending the future consequence of unfair trade, and the poultry industry is such a case, where there were massive job losses. We cannot have the same in the tyre sector," said Chala.

Source: https://www.businessinsider.co.za/south-africa-war-on-cheap-tyres-imported-from-china-2022-9

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