Warning over higher costs for motorists in South Africa
The Tyre Importers Association of South Africa (TIASA) warns that the cost of tyres could increase by up to 41% if the four large domestic tyre producers – Continental, Bridgestone, Goodyear, and Sumitomo, collectively known as the SA Tyre Manufacturers Conference (SATMC) – are successful in their duty application.
The group said it is opposing SATMC’s application to the International Trade Administration Commission (ITAC) to impose additional duties of between 8% and 69% on passenger, taxi, bus and truck vehicle tyres imported from China. There are already import duties levied on tyres of between 25% and 30%, it said.
The TIASA said it has applied to the court to compel ITAC and the SA Tyre Manufacturers Conference (SATMC) to disclose critical information being withheld with respect to SATMC’s application for the imposition of anti-dumping duties on imported tyres and to challenge the manner in which the ITAC is conducting the investigation.
“We are operating in the dark when it comes to this application for additional duties, and the stakes are high for South Africa. If ITAC decides to impose the maximum duty percentage requested by SATMC, we could see price increases ranging from 41% for taxi tyres, 38-40% for passenger tyres and an average of 17% for truck and bus tyres,” said Charl de Villiers, chairperson of TIASA.
The imposition of duties is expected to have a material impact on the price of tyres, not only for passenger vehicles but also for trucks and for the vast network of taxis and buses that transport citizens across the length and breadth of the country daily. Tyres are the third biggest cost driver in transport, after wages and fuel, the association said.
If the application is successful, the taxi industry will be hit hardest, with the cost of taxi tyres set to increase by 41%, it said. Consumers will also be hit hard, with small passenger vehicle tyres expected to increase by 38-40%; and truck and bus tyres by an average of 17%.
“These increases will have dire consequences for commuters, the transport sector, and consumers, who are struggling with climbing inflation. Last week, Stats SA announced that consumer inflation had accelerated to a new 13-year high of 7.8%, saying that the usual suspects of food, fuel and transport costs were the main drivers,” said de Villiers.
Import information
Domestic manufacturers are unable to produce the full range of tyres, and so they themselves import 80% of the variety that they sell to meet local demand. SATMC concedes that in addition to manufacturing tyres locally, it also imports tyres, but refuses to disclose what they import, from where, and for what reason, said the TIASA.
Donald MacKay, CEO of XA Global Trade Advisors said: “This information is critical, as causality is a foundational principle of an anti-dumping case. In other words, it’s necessary to prove that any injury to the local industry must have been caused by the dumping, and not by something else.
“If SATMC members are importing a significant volume of tyres themselves, they would be inflicting their own injury, which would need to be offset for any injury they claim. They would therefore need to demonstrate a compelling reason for the imports.”
This is not confidential information, and it is material to their import duty application and their rationale, said MacKay.
“For example, we know Continental and Goodyear import 100% of truck and bus tyres, yet these domestic producers are importing these tyres instead of purchasing them from the other domestic producers who do manufacture them locally.
“Why? SATMC has refused to share any of this information with TIASA, and ITAC has accepted this. We have therefore been forced to apply to the court to compel them to do so.”
ITAC product sampling flawed
ITAC received an enormous response to the investigation, from over 60 companies, and so instead decided to only review a small sample of submissions as the basis for its final decision, TIASA said. It added that there was no consultation in respect of the sampling, with ITAC refusing to allow TIASA to make any comment or input on the sampling methodology.
“With a complex product like tyres, where the local market sells over 3000 different models, it is almost impossible to select a truly representative sample. To base a duty decision on such a flawed process, is deeply concerning,” MacKay said.
Correction of ITAC’s process is critical
The TIASA said it is asking the court to direct ITAC to remedy its sampling, provide it with SATMC’s import data, and the reasons for their imports, and to allow the group sufficient time to make a submission to ITAC before it takes any decision on the imposition of duties.
De Villiers said: “If the current process is not corrected, it’s likely that ITAC will impose provisional duties without SATMC’s import information, or indeed TIASA’s submissions which have – to date – been excluded from consideration by ITAC. This will be a clear impingement on the rights of affected parties to meaningfully participate in this process.
“But most concerningly, ITAC’s decision will add a significant cost burden to motorists, taxi and bus operators and trucking and logistics companies. This means that it is South Africa’s cash-strapped consumers who will bear the brunt of increased protection for the four tyre manufacturers. But it’s a safety issue too.”
Vehicle owners, when faced with such dramatic cost increases, may trade down to second-hand, illegally regrooved or illicit tyres, or simply delay replacing their tyres, placing every road user at greater risk of accidents, he said.
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