An Assessment of the WTO Compliance of the Recent Regulatory Regime of South Africa's dumping and anti-dumping Law

• Author: Lonias Ndlovu
• Position: Department of Prívate Law University of Zululand KwaDlangezwa South África lndlovufSjpan.uzulu.ac.za
• Pages: 29-40

This is a revised version of an earlier paper which was presented at the Annual Congress of the Society of Law Teachers of Southern Africa hosted by the Faculty of Law, University of KwaZulu Natal, Pietermaritzburg, South Africa from 13 -16 July 2009. I am very grateful to Dr W.J Ndaba, a colleague in the Department of Private Law for reading and making corrections to an earlier draft of this paper. The paper was republished in Kierkegaard, S. (2009) Legal discourse in Cyberlaw.IAITL.

Page 29

1 Introduction

Compared to other countries in Africa, and indeed the whole world, South Africa has one of the most widespread and documented histories of applying anti-dumping measures.¹ The history of South Africa's anti-dumping law dates back to 1914;² and the first anti-dumping duties are said to have been imposed in 1921.³ At the WTO⁴ level, in all documented disputes in which South Africa appeared, and only as respondent, the subject matter was dumping/anti-dumping.⁵ Page 30

On 14 October 2005, South Africa published the draft International Trade Administration Amendment Bill for public comment. Broadly speaking, the bill seeks firstly to revise South Africa's anti-dumping regulations⁶ to reflect the lessons learnt in the application of the regulations thus far.

To cater for the bill's proposed amendments, South Africa has had to amend her anti-dumping regulations. ⁷ Firstly, and perhaps most importantly, it has been argued that the bill will align South Africa's anti-dumping regulations in sympathy with her World Trade Organisation (WTO) obligations.⁸ Secondly, it is the bill's intention to streamline processes and procedures in order to alleviate what the International Trade Administration Commission (ITAC) sees as an overload on their capacity brought about by the present operation of the regulations.⁹

While the Bill may generally be regarded as a positive intervention, this paper argues that to a large extent, the amendments to selected anti-dumping regulations go against the object and purport of the WTO anti-dumping agreement and are even in conflict with South Africa's international Trade Administration Act itself. The reservations made above are specifically directed at general provisions relating to confidentiality, investigations, termination based on de minimis margins and interested party hearings. In order to substantiate the above reservations, this paper first outlines the basics of WTO anti-dumping law and then proceeds to critique aspects of South Africa's anti-dumping law and practice which do not seem to incorporate WTO compliant procedures. Finally, through the aid of selected WTO jurisprudence, this paper also comments on pertinent impugned changes encapsulated in the bill, and concludes that the new law is unlikely to be WTO compliant.

2. Basic Issues in Dumping and Anti-dumping Law

2. 1 General Definitional and Conceptual Issues

In international trade law governed by the WTO, the law relating to dumping is encapsulated in Article VI of GATT 1994¹⁰ and the subsequent Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement). Dumping is said to take place when a product is introduced into the commerce of another country at less than its normal value.¹¹ Normal value is normally defined as the selling price in the country of export.¹² Page 31

In order to allege that dumping has occurred, the affected entity has to lead evidence proving not only that imports are introduced at less than normal value, but further that such imports cause or threaten material to cause material injury to local industry producing like products.¹³

Therefore, the WTO Agreement, often called the 'Anti-Dumping Agreement', allows governments to act against dumping where there is genuine ('material') injury to competing domestic industry.¹⁴ The Agreement does not outlaw dumping as such but prescribes how governments can or cannot react to dumping.¹⁵ Why dumping occurs is not considered relevant under WTO rules.¹⁶ Additionally, it has been argued that there is no textual basis in article VI for the view that states harboured an intention to include other forms of dumping such as 'social' dumping.¹⁷

Despite the foregoing remarks, there are three main reasons for the widespread disapproval of dumping.¹⁸Firstly, it has often been argued that dumping has the effect of distorting market fundamentals because it enables an exporter to gain market share in an importing country without necessarily being an efficient producer.¹⁹

Secondly, dumping is said to contribute to a form of unfair competition/unfair trade because the perpetrators thereof are exporters who enjoy the special privileges on the domestic market on which they can charge very high prices while banking on the absence of 'real' competition in the importing country.²⁰ This scenario would be more than likely in the absence of arbitrage opportunities for competitors in the importing country.

Finally, dumping can produce overwhelmingly negative consequences for the government of the importing country, its domestic producers and the general public.²¹

The above negatives notwithstanding, anti-dumping measures remain a prominent feature of contemporary international trade regulation largely due to the immense political support they enjoy.²²

Some ways of establishing if a product is being dumped lightly or heavily exist. The Anti-Dumping Agreement provides three methods to calculate the products' normal value.²³ The main method uses the exporter's selling price in the domestic market.²⁴ If the exporter's selling price in the domestic market cannot be used, then the next method is to use the price charged by an exporter in another country.²⁵ The third method is to use, as a basis of calculation the exporter's production costs, other expenses and normal profit margins.²⁶ The AntiDumping Agreement also specifies how a fair comparison can be made between the export price and what would be a normal price. A comparison between the export price and the normal value will yield the 'dumping margin'.²⁷

Detailed procedures are set out on how anti-dumping investigations, which, barring the existence of special circumstances must be concluded within one year.²⁸ Conditions for initiating investigations, conducting them and ensuring that interested parties are given an opportunity to present evidence are provided for.²⁹ Anti-dumping Page 32 measures must expire five years after the date of imposition, unless an investigation shows that ending the measure would lead to injury.³⁰ To prevent a proliferation of vexatious and baseless investigations and obviate the potential and actual abuse of process, the Anti-Dumping Agreement enjoins the authorities to examine the accuracy and adequacy of the evidence provided in the application in order to determine whether there is sufficient evidence to justify the initiation of an investigation.³¹

WTO members are urged to bring their anti-dumping laws and regulations into conformity to the antidumping agreement. Additionally, they must inform the WTO Committee on anti-dumping practices about all preliminary and final anti-dumping actions, promptly and in detail.³² South Africa has always strictly adhered to the requirements of Article VI of GATT 1994 and the anti-dumping Agreement, especially the notice requirements³³.

2. 2 The South African Legal Framework Overview

South Africa has been a member of the WTO since 1 January 1995.³⁴ Although all the WTO agreements were ratified by the country's parliament, they still do not form part of South African public law. The reason is that the agreements are yet to be promulgated as South African municipal law³⁵.

In a nutshell, the legal regime regulating dumping/anti-dumping in South Africa is encapsulated in the GATT 1994 and the attendant agreement, the constitution, the Customs and Excise Act³⁶, the International Trade Administration Act (ITAC Act)³⁷ and the accompanying regulations.³⁸ With specific regard to dumping/antidumping, South Africa's minister of Trade and Industry will make the regulations pursuant to the provisions in section 59 (b) and (c) of the ITAC Act. South Africa's first anti-dumping regulations were passed on the 14 November 2003.³⁹ Since November 2005, proposed amendments to the Anti-Dumping regulations have been published for public comment.⁴⁰

2.2. 1 The Salient Constitutional Provisions

Despite the fact that the WTO Agreements are yet to be promulgated as South African law, the constitution explicitly states that international agreements should be used as references and guidelines in the interpretation of domestic laws.⁴¹ In this regard, the following constitutional provisions are worth highlighting.⁴²

An international agreement binds the Republic of South Africa only after it has been approved by resolution in both the National Assembly and the National Council of Provinces,⁴³ unless it is an agreement of a technical, administrative or executive nature.⁴⁴ Page 33

International agreements of a technical, administrative and executive nature or agreements that do not require either ratification or accession, entered into by the national executive, bind the Republic without approval by the National Assembly or the National Council of Provinces. The only...