ITAC Presentation on Economic Development Workshop

1. Presentation to the Portfolio Committee on Economic Development Workshop Presented by Nomonde Somdaka Date: 18 August 2015

2. ITAC - Mandate, Vision, Mission and Core Functions Tariff Investigations Unit Policy and Legal Framework Tariff Amendments Job Drivers Assessment Criteria Application Process Examples of Tariff Amendments (Increase, Reduction and Rebate Provision) End – Questions and Comments OUTLINE

3. MANDATE, VISION, MISSION, AND CORE FUNCTIONS • 21days The aim of ITAC, as stated in the Act, is to foster economic growth and development in order to raise incomes and promote investment and employment in South Africa and within the Common Customs Union Area by establishing an efficient and effective system for the administration of international trade subject to this Act and the SACU Agreement. Mandate An institution of excellence in international trade administration, enhancing economic growth and development. Vision ITAC aims to create an enabling environment for fair trade through: efficient and effective administration of its trade instruments; and technical advice to the Economic Development Department and thedti. Mission Tariff Investigations, Trade Remedies, Import and Export. Core Functions

4. TARIFF INVESTIGATIONS UNIT • TARIFF INVESTIGATIONS 2 • Motors • Metals • Machinery , Mechanical Appliances, & Electrical Equipment. • Automotive Production and Development Programme (APDP) • TARIFF INVESTIGATIONS 1 • Agriculture • Agro-processing • Chemicals • Plastics • Clothing • Textiles • Leather and Footwear

5. New Growth Path (NGP), Industrial Policy Action Plan (IPAP) South African Trade Policy and Strategy Framework ITA Act Tariff Investigations Regulations Customs & Excise Act International Agreements (WTO). Regional Integration (SACU and SADC). Bilateral Agreements (EU; EFTA; & MERCOSUR). Other domestic laws e.g. Promotion of Administration Justice Act (PAJA), Constitution. POLICY AND LEGAL FRAMEWORK

6. As enunciated in the New Growth Path and the IPAP, the Commission follows a developmental or strategic approach to tariff setting with the objective of promoting domestic manufacturing activity, employment retention and creation, and international competitiveness. Customs Tariff Amendments Increasein customs duty - is considered, on a case-by-case basis, to support domestic producers, particularly those that are important from an employment or value-addition perspective, that are experiencing threatening import competition. Reduction in customs duty - is considered, on a case-by-case basis, where goods/ substitutes are not manufactured or unlikely to be manufactured locally. Tariffs for mature resource-based capital-intensive upstream industries are selectively reviewed and in some cases reduced in the interest of lowering input costs into labour–intensive employment creating downstream activities. Rebate Provision – is a waiver of customs duty and therefore an availability at world competitive prices of inputs that are not manufactured/ insufficiently manufactured locally for the manufacture of products for both domestic and export markets. The principle of reciprocity – the tariff amendments are conditional, beneficiaries have to commit on how they will perform against the government’s set policy objectives, including plans to improve competitiveness, increase in production and employment creation and retention. TARIFF AMENDMENTS

7. Sectors of particular relevance to ITAC that have been prioritised for job creation (Jobs Drivers): Infrastructure - In promoting the domestic sourcing of components for infrastructure programmes, ITAC may provide tariff support to new industries that would supply such components or give support to existing ones. Green Economy - ITAC embarked on the analysis of the tariff regime for green goods with a view of identifying opportunities and threats. Dedicated tariff lines have been created for goods including wind turbine blades, generators for wind turbines, thermocouples and electric vehicles. Accurate data is essential for trade monitoring and tariff support. Agriculture value chain - Tariff support for agro-processing are considered on a case-by-case basis taking into consideration the global distortions, value chain implications, food security and contribution to rural development through improving geographical spread of economic activities to rural areas. Mining value chain - Tariff support downstream and Export Control measures will be positioned in a manner that supports domestic mineral beneficiation (e.g. export restrictions on scrap metal). Manufacturing sectors- Tariffs on downstream industries that are strategic in terms of employment may be retained and in some cases increased. Tariffs on mature capital-intensive upstream industries have been reviewed in the interest of lowering input costs into the labour intensive downstream industries. TARIFF INVESTIGATIONS (JOBS DRIVERS)

8. Comprehensive criteria for adjudicating tariff applications have been set. It is consistently applied across all sectors based on information obtained through comprehensive questionnaires and on site verifications. The adjudication process is evidence-based and is carried out on a case by case basis considering the implications for the full value chain. Domestic production capacity and potential; Market share; Trade data Demand and supply conditions; Employment and social impact Investment Price and cost structure Productivity Financial state of the industry (including profitability and return on investment ratios); Price differentials (price advantage or disadvantage) between the domestically manufactured product and the equivalent imported product. CRITERIA FOR ADJUDICATING CUSTOMS DUTY APPLICATIONS

9. Receive application Preliminary assessment Preliminary submission Preliminary findings Commission Publish in the Government Gazette Final submission Final determination Commission Recommendation – Minister of thedti Implementation – Minister of Finance Publication Notice – SARS Turnaround Times (6 months) Monitoring and Evaluation 1 – 5 years APPLICATION PROCESS

10. INCREASE IN CUSTOMS DUTY (Examples)

11. REDUCTION IN CUSTOMS DUTY (Examples)

12. REBATE PROVISION(Examples)

13. END