A response to the application by SACU manufacturers for remedial action against IFG for the alleged dumping of pasta imported from Latvia

Nova Economics (Pty) Ltd. was contracted by Shepstone and Wylie attorneys on behalf of the International Food Group (IFG) and the Latvian-based diversified food product manufacturer, Dobeles Dzirnavnieks, to respond to an investigation by the International Trade Administration Commission (ITAC) into the alleged dumping of pasta imported from Egypt, Latvia, Lithuania and Turkey.  

Background and context  

The application was lodged by jointly by four SACU-based food manufacturing companies including Bolux Group (Pty) Ltd, Namib Mills (Pty) Ltd, Pioneer Foods (Pty) Ltd and Tiger Brands Limited (“The Applicant”). The Applicant alleged that the dumped pasta product, classifiable under tariff subheading HS 1902.19 and a potential substitute – pasta containing eggs (classifiable under HS 1902.11), was causing material injury to domestic producers. On this basis of evidence provided by the Applicant, ITAC found that there was prima facie proof of dumping of the subject pasta product from these countries and that there was prima facie proof of material injury to the domestic manufacturing industry. 

Purpose of the study 

Nova Economics was instructed to review the application, focusing on imports of pasta to South Africa from Latvia.  The overall purpose of the study was to provide an independent critique of the arguments and evidence presented in the pasta anti-dumping application and in particular to independently review and calculate the margin of dumping and to assess whether there was evidence of injury a– in particular a loss of market share, price depression and/or suppression. 

Key findings 

Our analysis showed that no evidence of a significant margin of dumping between pasta sold in Latvia in the ordinary course of trade and same products sold in South Africa. Our calculation of the dumping margin was based analysis of detailed invoice data from Dobeles Dzirnavnieks showing the value and volume of both domestic orders in Latvia and export orders by IFG in South Africa. We calculated a dumping margin of 1.71%, which cannot be used to justify the imposition of anti-dumping measures. 

We also noted that the Applicant’s calculation of the margin of dumping imports of pasta to SACU from Latvia was fundamentally flawed as the Applicant did not estimate the margin of dumping for the ‘like product’ for exports of pasta from Latvia (99.5% of which are made from soft wheat in 2019) and may have deliberately inflated the normal value by averaging the prices of both soft wheat and durum wheat pasta prices. Our analysis showed that pasta products made from durum wheat are roughly double the price of soft-wheat pasta products in South African retail stores – they were an average of 212% of the price of soft wheat pasta in 2019. 

Furthermore, while our analysis supported the Applicant’s claim that imports of the subject product have increased, and that one member of the SACU industry is losing market share to its competitors (including exporters of soft wheat pasta based in Egypt, Latvia, Lithuania and Turkey), we found no evidence that this was due to dumping of pasta by the Latvian exporter Dobeles.  

Outcome  

Our independent assessment of the evidence of dumping of Latvian pasta was include in the client’s submission which was filed with ITAC.  ITAC will consider this evidence together with other evidence supplied by the applicant and respondents when deciding whether there is a case for the implementation of an anti-dumping duty on imports of pasta.