We are regularly alerted to the fact that some businesses or industries are suffering due to foreign competition. The complaint is almost always that the foreign products are so much cheaper than the local products. In some instances the foreign products are not only cheap but the quality leaves much to be desired. Many businesses are simply of the opinion that these foreigners can outcompete them on, for example, cheap labour or economies of scale.

The fact of the matter is that in many instances the foreign industries do not have some comparative advantage which allows them to sell more competitively priced products, but they are in fact illegally selling cheap products in the South African market. Few businesses are aware that they can actually stop the flow of these illegally cheap products.

In terms of our legislative framework products can be illegally cheap either because it is being dumped in South Africa or because the foreigners receive some form of a subsidy from their governments which allows them to price their products cheaply. However just because a product is competitively priced does not mean that it is illegally cheap and it is thus important to know what would constitute a dumped or subsidised product. Dumping occurs when a foreigner sells a product more cheaply in South African than in the foreigner's own country. As an example, dumping would be present if a Chinese manufacturer sells his product in China for R10 and in South Africa for R8. Thus a foreigner may sell his product in South Africa for less than the price of the same South African product, but the foreigner may not sell his product in South Africa for less than he sells it in his own market.

A product is considered to be subsidised if that product receives specific governmental assistance in order to make it more competitive. Such assistance may take the form of a financial contribution (such as an interest free loan or a tax holiday) or it could be that the government provides assistance for the provision or acquisition of goods and services needed by the foreigner. Often you will find that when there is a cheap foreign product in the South African market it is both being dumped and subsidised.

Dumped and subsidised products are illegal in terms of our law and thus South African business can take action to prevent these goods from entering the market at these artificially low prices. This result can be achieved by raising the tariffs (import duty) on these dumped and subsidised products by instituting anti-dumping duties and countervailing measures respectively. The amount by which the tariffs will be raised will thus effectively eliminate any price advantage which the foreigner illegally enjoyed.

South African businesses do not have to go through expensive High Court litigation or foreign courts or adjudicators in order to have these anti-dumping duties or countervailing measures instituted. Instead they may apply to the International Trade Administration Commission of South Africa (commonly known as ?ITAC?), preferably with the assistance of experienced international trade lawyers, to have the alleged dumping or subsidisation investigated. If you can convince ITAC with your legally sound application that there is a cause for concern, ITAC will investigate your allegations as well as the foreigners' attempts to refute your allegations. Typically this avenue is cost effective, efficient and results in fair competition from the cheap foreign products.

For any assistance or queries related to competition from foreigners, kindly contact Rian Geldenhuys on 021 403 6321.