Min­eral ben­e­fi­ci­a­tion leapfrogs ex­ports

China the test case for WTO ac­tion on po­ten­tial vi­o­la­tion of its obli­ga­tions

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - JACK­WELL FERIS

DUR­ING Oc­to­ber last year the World Trade Or­gan­i­sa­tion’s (WTO) dis­pute res­o­lu­tion panel con­cluded that ex­port re­stric­tions im­posed by China in re­spect of cer­tain rare earths (min­er­als) vi­o­lated in­ter­na­tional trade law. China con­trols ap­prox­i­mately 90% of the world’s mar­ket for rare earths, which are es­sen­tial min­er­als for the man­u­fac­tur­ing of high-tech elec­tronic equip­ment (ie smart­phones, com­put­ers, wind tur­bines, mis­siles etc). As a re­sult of the re­stric­tions on the ex­port of rare earths their prices in­creased dra­mat­i­cally.

Ja­pan, the US and the Euro­pean Union pe­ti­tioned the WTO dur­ing 2012, stat­ing that Chi­nese ex­port du­ties, ex­port quo­tas, and re­stric­tions of rare earths vi­o­lated cer­tain pro­vi­sions of the Gen­eral Agree­ment on Tar­iff and Trade and China’s 2001 ac­ces­sion agree­ment to the WTO. China re­sponded to the al­le­ga­tion stat­ing, amongst oth­ers, that the re­stric­tions im­proved eco­nomic de­vel­op­ment in China and pro­tected its nat­u­ral re­sources. The writ­ten rul­ing of the WTO dis­pute res­o­lu­tion panel has not yet been for­mally re­leased to con­sider in de­tail.

The pro­posal by the South African gov­ern­ment to re­strict the ex­port of min­er­als, min­eral prod­ucts or petroleum des­ig­nated by the min­is­ter of min­eral re­sources for lo­cal ben­e­fi­ci­a­tion, as cur­rently con­tained in the draft Amend­ment Bill to the Min­eral and Petroleum Re­sources De­vel­op­ment Act No 28 of 2002 (min­eral act), may also be deemed as a vi­o­la­tion of SA’s in­ter­na­tional trade obli­ga­tions and open SA up to pos­si­ble com­plaints at the WTO sim­i­lar to China.

The cur­rent pro­posal im­plies that a min­eral des­ig­nated by the min­is­ter (whether coal, man­ganese, iron ore etc) may not be ex­ported un­til such ag­gre­gate of raw min­er­als as de­ter­mined by the min­is­ter and sub­ject to the dif­fer­en­ti­ated price has been made avail­able to lo­cal ben­e­fi­ci­a­tors.

It is an of­fence for a per­son to ex­port such a des­ig­nated min­eral with­out meet­ing the do­mes­tic quota of the min­eral for lo­cal ben­e­fi­ci­a­tion or with­out the writ­ten con­sent of the min­is­ter. On con­vic­tion this could re­sult in im­pris­on­ment or a penalty of 10% of a com­pany’s an­nual turnover.

The South African pro­posed amend­ments to the min­eral act to re­strict the ex­port of des­ig­nated min­er­als to en­sure the lo­cal ben­e­fi­ci­a­tion of a cer­tain per­cent­age thereof is not unique to SA, as a num­ber of other re­source-rich coun­tries are also con­sid­er­ing such re­stric­tions or have al­ready im­ple­mented re­stric­tions. In­done­sia (the world’s 16th largest econ­omy by nom­i­nal GDP and a re­source-rich coun­try) has also re­cently adopted leg­is­la­tion which came into ef­fect on 12 Jan­uary this year pro­hibit­ing the ex­port of raw min­er­als or ore to en­sure that such min­er­als are ben­e­fi­ci­ated lo­cally to im­prove eco­nomic

It is an of­fence for a per­son to ex­port such a des­ig­nated min­eral

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