Tuesday, January 18

The scrap industry ‘cannot and should not’ bear a double burden related to exports


The Metal Recyclers Association (MRA), which represents the majority of scrap metal recyclers in the country, has called on the government to remove the recently imposed export duty on scrap, or to keep it at 0% until the “Ineffective” Price Preference System (PPS)) lapses.

The export duty was supposed to replace the PPS in August.

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However, Trade, Industry and Competition Minister Ebrahim Patel extended the system for another two years, apparently to “support the export tariff.”

The MRA said that repudiation of the political decision to end the PPS at the last minute was “legally and constitutionally inconceivable.”

In its latest presentation to the National Treasury, the association said that the industry should not and cannot bear the burden of both the export tariff and the PPS.

R360m achieved so far

So far, the export tax has cost the industry more than R360 million, which is equivalent to 15% of the total exported value. This is in addition to the discount imposed by the PPS.

The PPS was introduced around 2013 to ensure that local consumers had access to quality and affordable scrap prior to export. Scrap had to be offered to the domestic market at a discounted price (ranging between 10% and 30%), and only if there was no capture could it be exported.

An investigation by the International Trade Administration Commission, on the minister’s instructions, found the system to be ineffective because it had failed to provide quality and affordable scrap to smelters and steel mills.

Export tariffs on scrap were imposed at 0% from March 1 of this year to the end of July, as August 1 was the date when the export tariff should have replaced the PPS.

Contradiction

The MRA communication argued that the Department of Commerce, Industry and Competition (dtic) “clearly contradicted” the new policy for scrap metal announced by the National Treasury and the finance minister (that the PPS be replaced by the export tariff from of August) .

The dtic, without prior public consultation, published a notice proposing the extension of the PPS, less than two months before the introduction of the export tariff.

It then went ahead and extended the PPS until July 2023 along with the export tariff.

At a National Treasury workshop on December 10 on technical tax proposals for amendments in the 2022 Budget Review, the MRA said there is no “practical, legal and financial” justification for the two systems to coexist.

Faulty consultation process

International trade attorney Clive Vinti of XA International Trade Advisors, representing MRA, said recyclers made business decisions on the fact that export duties were supposed to replace PPS.

The association argued that the imposition of the export duty was based on a “flawed consultation process whose integrity and rationality has been irretrievably compromised by the DTIC.”

He noted that while the PPS is in place, no export permits are granted for scrap for which there is a local requirement.

“It follows from this that the only scrap that is exported while the PPS is in operation is scrap for which there is no local requirement.

“There would be no reason to apply an export duty to scrap for which there is no local requirement.”

Rule of law

He requested that the export tariff be suspended or remain at 0% while the PPS is in operation.

“Failure to do so exposes the duty to export to accusations of partiality, caprice, bad faith and irrationality, which is an element of the rule of law according to the Constitution.”

The National Treasury said it took note of the industry’s concerns, stating that it followed the parliamentary process (to introduce the export tax) under the assumption that it would have replaced the PPS.

He said he could not accuse another department in an open forum of “going the other way” or of “reneging,” adding: “We are in consultation with the corresponding department (dtic) and the matter will be resolved.”

However, the Treasury did not commit to setting a timeline for when the matter will be resolved.


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