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Monday, 22 July 2019

Custom duties on some steel products: Fears of dumping

Steel producers and the government are at loggerheads over a decree imposing customs duties on some steel imports

Mona El-Fiqi , Friday 14 Jun 2019
Steel
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Legal action has been taken by several steel factories against a ministerial decree imposing temporary customs duties on semi-finished products of iron or non-alloy steel and steel rebar (bars, rods and coils) for six months.

The decree, number 346 issued in April, imposed 25 per cent customs duties on imports of steel rebar in all its forms and 15 per cent on semi-finished iron products such as billets.

The decision is aimed at protecting the local steel industry against dumping.

Local producers agreed that imposing customs duties on steel rebar as final products in all its forms was a decision that would protect the local industry.

However, imposing 15 per cent duties on semi-finished iron products was negatively received by some producers that use imported semi-finished iron to produce billets.

They said that market needs of billets exceeded total local production and that they needed to cover the gap between production and consumption.

The owners of 22 steel factories harmed by the application of the decree filed a lawsuit that is currently being examined by the Administrative Court in Cairo.

During a session held last week, the court decided to postpone its decision until 15 June in order to review documents presented in past sessions.

Defending the decree, officials said that all the procedures taken were correct and in accordance with World Trade Organisation (WTO) regulations.

They said that the results of investigations clarifying the harm to local industry due to the dumping of imported steel had been sent to the WTO.

However, producers harmed by the decision said that the Ministry of Trade and Industry had taken the decision in response to a complaint from three local factories that produce billets, saying that the imports of billets harmed their sales in the local market.

“The data concerning the volume of steel imports included in the complaint were unclear and inaccurate,” said Tarek Al-Gioushi, a member of the Chamber of Metallurgical Industries and CEO of Al-Gioushi Steel.

He added that documented figures showing steel imports during the past two years according to the customs and tax authorities had been included in the lawsuit documents.

He said he had made representations to the Federation of Egyptian Industries, the Ministry of Trade and Industry, and the prime minister requesting the cancelation of duties on billets until the investigation had finished.

Imposing 15 per cent duties on semi-finished iron products would mean that 22 factories would be unable to produce and compete in the marketplace, Al-Gioushi said, adding that the factories, whose production represents 20 per cent of market needs, were facing a crisis because production had been halted seven weeks ago due to the decree.

“If the government insists on applying the decree, the 22 factories will shut down and steel rebar production will be monopolised by a few giant factories,” Al-Gioushi added.

The decision has also started to affect the market, with steel prices seeing an increase over the past few weeks that will be reflected in development and construction projects in Egypt.

The price of a ton of steel has increased from LE10,800 to LE11,800, according to Al-Gioushi, who said the increase was unjustified since international billets and scrap or iron ore prices were low and the Egyptian pound had appreciated against the dollar.

Factory owners say that imposing duties on the raw materials used to produce billets will also have a negative impact on government revenues since reduced sales will mean lower income from value-added tax.

The total investment in the factories is around LE3.5 billion, and they employ some 150,000 workers, according to Al-Gioushi.

*A version of this article appears in print in the 13 June, 2019 edition of Al-Ahram Weekly under the headline: Bracing against steel 

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