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August 13, 2024
2024-1543

South Africa publishes amendments to customs duties on lead-acid batteries

The general customs duty to import lead-acid batteries of a kind used to start piston engines1 has been increased from 15% to 30% ad valorem.2 The automotive industry is a crucial pillar of South Africa's industrial landscape, contributing significantly to job creation and economic growth within the Southern African Customs Union (SACU) region. Automotive lead-acid batteries, an important component of the automotive manufacturing industry, are used to power the starter motor, lights and the ignition system of a vehicle's engine. The batteries supply voltage to vehicle accessories such as air-conditioners, radio, music players, wipers and charging plugs.

Background

In 2015, the International Trade Administration Commission (ITAC) considered an application to increase the customs duties from 5% to 30% ad valorem.3 The application was based on the increasing flow of imported automotive lead-acid batteries into the SACU market and the difficulty that local manufacturers had in competing with the pricing of imported batteries. The imports predominantly originated from countries where battery manufacturers enjoyed government-sponsored grants and incentives. Further, battery importers were sending scrap batteries back to the country of manufacture, which, in turn, raised the cost of domestically recycled lead. At the time, ITAC could not justify an increase in the customs duty to 30% (as this would adversely affect industrial users and consumers) but raised it to 15% ad valorem.

Despite the initial success of tariff support implemented in 2015, which saw a reduction in low-priced imports and an increase in market share for local producers, the industry has faced a resurgence of cheap imports and high export volumes of scrap batteries. These imports and exports are believed to be undermining local production and employment within the industry.

Amendment

With this background, as of 19 July 2024, Schedule 1 to the Customs and Excise Act 91 of 1964 (the Act) in respect of lead-acid batteries of a kind used to start piston engines was amended to increase the general customs duty from 15% to 30% ad valorem.

This adjustment is expected to enable SACU manufacturers to improve their competitive stance, reclaim market share, capitalize on underutilized capacity, and support job retention and creation. However, there has been opposition from stakeholders, raising concerns about potential negative impacts on consumers and asserting that the existing duties supporting local manufacturing are sufficient and that other trade remedy instruments should have been explored prior to the increase in the duty.

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Endnotes

1 Specifically, goods classified under tariff items 8507.10.91 and 8507.10.99.

2 Regulation 5055, Government Gazette No. 50969 (dated 19 July 2024).

3 ITAC Report No 491.

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Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young South Africa

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
 
 

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