THE International Trade Administration Commission (Itac) is investigating a "recent significant surge" of imports in frozen chips or french fries from mainly the European Union (EU) that is allegedly causing "serious injury" to the industry in the Southern African Customs Union (Sacu).

A major producer of frozen potato chips, McCain, with the support of two smaller producers, lodged an application in September this year for safeguard actions against the importers, saying the recent, sudden, sharp and significant surge in imports was threatening the sustainable profitability and employment in the industry. The application is also supported by the Food and Allied Workers Union.

Itac published its decision to investigate the matter, based on prima facie information supplied by McCain, in the Government Gazette on November 23.

According to the World Trade Organisation (WTO), safeguard measures are emergency actions taken regarding the increased imports of particular products, if such imports endanger the domestic industry.

Such measures — taking the form of the suspension of concessions or obligations — can consist of quantitative import restrictions or duty increases higher than the rate under the General Agreement on Tariffs and Trade, a multilateral global trade agreement.

Safeguard measures are one of three trade protection options available to WTO members. The others are antidumping measures and countervailing, or antisubsidy, measures.

South Africa become a signatory to the WTO agreement in 1994 and made tariff commitments on frozen chips. Safeguard actions are available when the surge of imports can be attributed to "unforeseen developments" since South Africa signed the agreement in 1994.

According to McCain, the Sacu market for frozen potato chips at that time was in its infancy. "In the period between 1994 and the present, household purchasing patterns have developed into a more convenience food market. In addition, since 1994, there has been a proliferation of quick service restaurants or so-called take-aways in the Sacu market."

These developments had led to opportunities for investment and job creation in an industry barely existing in 1994, McCain said in its application.

 

During that time "excessive investment" in the frozen potato chip industry took place in the EU. "The financial crisis that dampened demand in the EU for frozen potato chips since 2008 created surplus capacity with producers in Europe. This encouraged EU producers to follow an aggressive export strategy to dispose of their surplus capacity onto the world market, thereby depressing the world price and forcing local manufacturers to compete with imports at that price level," McCain said in its application.

A commentator close to the process said there had been a surge, but it had passed. Information supplied to Itac was "outdated" and it was difficult to understand why safeguard actions could be an appropriate remedy.

The producers, mainly from Belgium, Ireland and the Netherlands, and four importers in South Africa have until January 9 to make submissions to Itac.