NEWS

Dodging the Duties: How Anti-Dumping Measures Are Being Circumvented

Safeguard protection is granted whenever an industry is suffering from serious financial injury, caused by an increase in imports, which was because of unforeseen developments stemming out of the 1994 GATT negotiations, to which South Africa was a signatory.

Safeguard measures are enacted to ensure enough breathing room for the domestic manufacturing industry in distress to adjust and become more competitive, usually within a period of 3-6 years.

For this remedial protection to be effective, these safeguard duties need to be monitored and enforced across the board. However, as part of the Safeguard Agreement, the Safeguard Regulations creates an “Exempted Countries” list. This exemption has shown to provide a safeguard duty-free roue for imports from countries which are developing in nature and from where imports did not originate prior to the imposition of the safeguard duties.

The” circumvention” becomes a problem when the bigger importers switch their sources from imports from the traditional exporting countries like China and Russia, to smaller, developing nations, like Taiwan and Indonesia, effectively bypassing the Safeguard duties in their entirety.
Other WTO member countries would normally act quickly against these changes by removing these “developing nations” quickly once its import volume exceeds the established threshold. No further investigation is required.

In South Africa, the remedial action linked to the imposition of safeguard measures are failing because the officer in charge of this administrative action, the Minister of Trade, Industry and Competition, Minister Dave Patel, fails in his duty to authorise these exempted country removals immediately, or at all in some cases. Imports that reduced because of the imposition of the safeguard duties, with a resultant uptick in local production, regained lost ground within a year of the duties being imposed, rendering the safeguard protection completely impotent.

Below is an import chart, providing insight on how imports of Hexagon Nuts, a product protected by safeguard duties have climbed to almost pre-safeguard levels, because of a lack of action by the government to curb imports from developing nations.

Anti-dumping duties (ADDs) are designed to protect domestic industries from unfairly priced imports. However, these measures are increasingly undermined by circumvention tactics that render them ineffective. This summary outlines key circumvention methods, notable case studies, enforcement challenges, and proposed policy responses (these are a few of the many taking place all over the world).

Key Circumvention Methods:

1. Transshipment: Rerouting goods through third countries to disguise origin (e.g., China via Malaysia).
2. Product Modification: Slight changes (e.g., hot-rolled to cold-rolled steel, non-alloy to alloy steel, etc.) to avoid covered tariff codes.
3. Assembly in Third Countries: Minimal processing to alter country-of-origin designation.
4. Component Disaggregation: Shipping in parts to evade duties, reassembled after import.
5. Undervaluation/Misclassification: Manipulating invoice values or tariff codes (illicit practices).

Case Studies:

• USA: Chinese steel pipes transhipped through Vietnam. Enforce and Protect Act used to extend ADDs.
• EU: Chinese solar panels routed through Malaysia/Taiwan. ADDs extended under Reg. 2015/776.
• South Africa: ITAC flagged circumvention in fastener/steel cases. Customs limitations hinder enforcement.

Legal and Institutional Challenges:

• WTO Gaps: Anti-Dumping Agreement lacks explicit anti-circumvention rules. Article 9.5 on New Shipper Reviews may be misused due to the low bar required and the inability to add conditions, such as requiring the providing of representative volumes (Mexico – Anti-Dumping Measures on Rice).
• Customs Weaknesses: Limited post-clearance audits, forensic tools, and interagency coordination in many countries.

Policy Responses:

• National Measures: The U.S, EU, and Australia allow anti-circumvention investigations and duty extensions.
• Technology: Blockchain, QR systems used in pilot programs to track origin integrity (in infancy stages.
• Multilateral Reform: Proposals to strengthen WTO frameworks via interpretive notes or working groups.

Circumvention undermines the protective intent of ADDs and challenges the credibility of global trade rules. Strengthened enforcement, smarter customs, and WTO reform are essential to maintain the integrity of trade remedies.

-Misha De Lange