The International Trade Administration Commission (ITAC) has recommended an increase in the general rate of customs duty on certain rock drilling equipment parts, classifiable under tariff subheading 8467.99.90.
The recommendation comes after Gauteng-based Derry Engineering (Pty) Ltd applied for an increase in the general rate of customs duty on certain rock drilling equipment parts, from free of duty to the WTO bound rate of 20% ad valorem. The applicant specialises in the manufacture and supply of valve gear and consumable spares for rock drills.
As motivation for the application, the applicant cited, amongst others, the following reasons:
• The rock drilling components subject to this application are currently imported into South Africa free of duty. By contrast, the main raw material used to manufacture the subject product carries an import duty of 10% ad valorem, resulting in a negative effective rate of protection;
• The intensified low-priced imports, mainly originating in Asia, have distorted the trading environment and effectively replaced local volumes;
• Due to increased import volumes, the applicant has lost significant market share, which has led to job losses;
• The applicant has made significant investments in the manufacture of the subject products, including investment in the latest machining technology; and
• Tariff support will enable the domestic industry to replace the high volumes of significantly low-priced imports, mainly originating from Asian countries. As imports are replaced by local production, new job opportunities could be created and domestic capability to manufacture the subject product would be preserved.
The application was published in Government Gazette No. 52523 of 17 April 2025 under Notice 3139 of 2024 for a period of four (4) weeks, for interested parties to comment.
Industry and market
The subject products are parts (components) used in rock drilling equipment. The products include valve gear and consumable spares for rock drills such as S215 and S25 and also include valves, valve plugs, valve boxes, front heads and back heads.
The applicant operates in accordance with the latest ISO rating and guidelines, and all components go through inspection at each stage of manufacture by both the operators and inspectors. The equipment is regularly calibrated and checked for any defects.
ITAC report
In its report ITAC said the Commission considered the following factors amongst others, to arrive at its decision:
• The increase in imports of the subject products into the domestic market, with most imports originating in Asia. This has the effect of eroding the market share of the domestic industry manufacturing the subject product;
• The decline in production and sales volumes of the domestic manufacturing industry, resulting in a decline in capacity utilisation during the period under investigation;
• The price disadvantages experienced by the domestic manufacturing industry against imports of similar products, indicating that the industry is price uncompetitive against imports of the subject products, and the likelihood that this will continue into the foreseeable future;
• The negative effective rate of protection for the industry, indicating the negative impact of the current duty structure of the entire industry value chain. This is due to the duty anomaly in the value chain, with a higher rate of customs duty of 10% ad valorem for the main input material, steel bar, relative to a 0% tariff rate applicable to the subject products; and
• The subject product forms part of the domestic steel industry value chain.
The South African Steel and Metal Fabrication Masterplan identified the decline in production volumes, increased imports, rising prices of electricity, and high prices of raw materials to be amongst the long-standing problems facing the domestic primary steel manufacturing industry and the entire value chain.
The Commission concluded that the requested tariff support should enable the domestic industry manufacturing the subject products to utilise its existing under-utilised production capacity, achieve economies of scale, resulting in increased volumes with a reduction in the marginal cost of production.
In light of the foregoing, the Commission recommended an increase in the general rate of customs duty on certain rock drilling equipment parts, classifiable under tariff subheading 8467.99.90, from free of duty to the WTO bound rate of 20% ad valorem.
Furthermore, the Commission recommended that the proposed duty on the subject products be reviewed after a period of 3 years following implementation of the tariff support (unless otherwise determined by the Commission) to assess the performance of the domestic industry.
Full details of the final determinations and recommendations are on Report 774.
