TRALAC - Trade Law Centre

US duties to knock South Africa's AGOA exports

Monday, 16 July 2018 Published: | Linda Ensor

Source: Business Day (South Africa)

South Africa has raised its concern with the US government about possible duties on vehicle and vehicle component imports, pointing out that their imposition on South African exports would significantly erode the benefit the country is meant to enjoy under the Africa Growth and Opportunity Act (Agoa).

Following its decision to impose import duties on steel (25%) and aluminium (10%), the US decided to investigate whether it should do likewise with regard to vehicles and car components under section 232 of the Trade Expansion Act.

The act gives the US president the power to impose tariffs on imports that threaten national security.

Trade and Industry Minister Rob Davies raised concern about the threatened tariffs in Washington last week when he met US trade representative ambassador Robert Lighthizer and Commerce Secretary Wilbur Ross, as well as senators Chris Coons and Johnny Isakson.

He pointed out that were section 232 export duties to be imposed on vehicles from SA, this would significantly erode its Agoa benefits, as section 232 tariffs effectively suspended Agoa preferences.

He said that SA accounted for 0.4% of total US imports of automotive products. In addition, he said, one of SA’s vehicle manufacturers, BMW, would no longer be exporting to the US, which would significantly reduce SA’s exports to the US.

SA’s automotive industry achieved total export sales of vehicles and components worth R164.9bn in 2017 with R18.8bn going to the US. Exports to the US are duty-free under Agoa, a nonreciprocal trade agreement, which allows duty-free access for selected goods into the US from eligible African countries.

However, National Association of Automobile Manufacturers of SA director Nico Vermeulen pointed out on Sunday that a rise in duties on vehicle imports would not have a significant effect on the local motor industry as the largest exporter, BMW, had shifted production from the 3-Series — which it used to export to the US — to the X3 SUV, which was now destined for Europe.

National Association of Automotive Components and Allied Manufacturers executive director Renai Moothilal said any new or raised import tariff would have a negative effect on the component sector and was likely to result in job losses.

motor factory southafrica

Second-highest export destination

"This could be significant given that the US market has been the second-highest export destination for South African components over the recent past as an outcome of contracts done under the Agoa framework. In 2017 the value of South African components into the US was just more than R4.2bn."

Moothilal said the components exported to the US included catalytic converters, engine parts, transmission components, cooling systems, automotive tooling, silencers and exhausts, as well as several after-market and replacement type components. "The catalytic converter and engine components subsectors [are likely to see] the most negative impact and possible job losses as both these categories have the US as a substantial export destination."

Davies was accompanied to the US by Small Business Development Minister Lindiwe Zulu and participated in the Agoa Forum, which brings together trade ministers from Agoa- eligible countries as well as representatives from the US government, private sector and civil society.

He continued to apply pressure for SA’s exemption from the steel and aluminium import duties. Canada, Mexico, Brazil, Australia, Argentina, South Korea and EU member states were granted temporary exemptions, pending further discussions. SA’s application for exemption was rejected, after it had argued that being such a small niche exporter to the US, it did not pose any threat to US national security.

Davies said SA’s steel exports to the US accounted for less than 1% of US imports and 0.3% of US steel demand.

Although this represents a small fraction of US imports, South African exports of steel to the US account for 5% of its production equating to 7,500 jobs in the steel value chain.

Aluminium exports from SA amount to about 1.6% of US aluminium imports.

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