Howden Power, a division of Howden Africa (Pty) Ltd (“Howden” or the “applicant”), applied for an increase in the general rate of customs duty on plate-type heat exchange elements for air pre-heaters, classifiable under tariff subheading 8404.90, from free of duty to the WTO bound rate of 5% ad valorem, by way of creating an additional 8-digit tariff subheading.
An air preheater is a large mechanical device that is designed to preheat the combustion air that is used in coal fired boilers at power stations for the purpose of increasing the thermal efficiency of the boiler. The core of the preheater, the heat exchange surface, is composed of multiple thin corrugated metal plates known as elements, which is the subject product in this case.
The hot exhaust gasses that pass out of the boiler are passed through the air preheater over the elements. Eskom Holdings SOC Limited is the main user of the subject product and most of the imports of the product originate in Asia, mainly in China.
The Commission considered all the relevant information at its disposal. In particular, the Commission took the following factors into account:
• In terms of Industrial Policy, the subject product resides in the downstream industry, which remains an important pillar of South Africa’s industry landscape and contributes to job creation as well as economic growth;
• Howden is the only manufacturer of the subject product within the SACU region, with significant capital investments dedicated to the manufacture of the product;
• Import volumes of the subject products have increased over the three-year period under review;
• The increased imports into the SACU region have resulted in the displacement of local production, a decline in market share, production volumes, capacity utilisation and employment opportunities; and
• The SACU industry manufacturing the subject product is facing increasing costs of production, declining profitability, and declining competitiveness against similar imported products.
The Commission concluded that tariff support of 5 per cent ad valorem would enable the SACU industry manufacturing the subject products to grow its market share, increase economies of scale and utilize its existing under-utilized capacity. This should enhance the competitive position of the industry vis-à-vis imports of similar products into the SACU market. In addition, tariff support would result in the retention of existing jobs and the creation of additional jobs within the sector.
The Commission recommended that the rate of customs duty on plate-type heat exchange elements for air pre-heaters, classifiable under tariff subheading 8404.90, be increased from free of duty to the World Trade Organisation bound rate of 5% ad valorem, by way of creating an additional 8-digit tariff subheading.
Please click on the link below to access the full report:
ISSUED BY THE INTERNATIONAL TRADE ADMINISTRATION COMMISSION SOUTH AFRICA