United States investigation into South Africa

South Africa has asked the United States to exempt the country from the 12.5% tariffs it imposed after an investigation into forced labour in the production of goods. 

Trade Minister Parks Tau said the United States is a vital trading partner for South Africa and the government will continue to engage with it on all matters, including the investigation. 

The United States Trade Representative (USTR) is investigating South Africa under Section 301 of the country’s Trade Act of 1974. 

This act governs the trading of goods that are produced using forced labour, and the investigation is to determine whether countries fail to effectively prohibit such activity. 

The aim of such an investigation is to prevent exports from countries from outcompeting American goods in the US economy. 

If goods produced in a country used forced labour, they tend to be cheaper than legitimately produced alternatives, unfairly taking market share. 

The US government is also concerned about the trade of goods produced using forced labour more broadly and is investigating whether South Africa and other countries let these goods into their markets. 

“Despite the international consensus against forced labour, governments have failed to effectively enforce measures banning goods produced with forced labour from entering their markets,” USTR Jamieson Greer said. 

South Africa has been found to fall foul of Section 301, with the United States imposing a 12.5% tariff on all goods from the country entering the American market. 

Following the imposition of the tariffs, the South African government sent a delegation to Washington to ask the United States to exempt it. 

The Department of Trade, Industry and Competition participated in a public hearing in Washington in July, where it testified that it has laws that prohibit forced labour. 

It also made it clear that it has the legal framework to prevent the importation of goods produced using forced labour. 

“South Africa maintained that it has enabling legislation that contains provisions that can be invoked to deal with forced labour,” the government said. 

“As a result, South Africa requested that the United States consider exempting the country from the 12.5% tariff proposed for countries that failed to effectively enforce the prohibition of importation of goods produced using forced labour.” 

In particular, Tau asked the United States to exempt platinum, precious metals, vehicles, citrus, wine, and nuts in the interim, as there is no evidence that they are being produced using forced labour. 

Tau said he will continue engaging with the United States on a bilateral basis, including the Section 301 investigation and Section 232 tariffs that affect steel and aluminium exports. 

A stroke of luck for South Africa

South African companies exporting to the United States may get some relief from an unexpected ally – US Democrat lawmakers. 

On 4 August, 25 states sued the Trump administration over its Section 301 tariffs on 60 countries, describing them as unlawful. 

The BBC first reported that it had seen a legal document from the coalition of Democratic states that said the decision was “arbitrary, capricious, and contrary to law”. 

The states argue that the administration is using a different legal authority to bring back tariffs that the US Supreme Court ruled were unlawful. 

Trump has been clear that these Section 301 tariffs serve the same purpose as his original barrage – levelling the economic playing field. 

The states argue that the administration rushed the Section 301 investigation to impose tariffs for political reasons and not to stop the use of forced labour. 

They have asked the US Court of International Trade to block the measures and order refunds of any tariffs already collected. 

White House spokesman Kush Desai said in a statement that the administration was exercising its lawful authority to address practices that impact American businesses. 

The administration believes that foreign countries’ failure to deal with the importation of goods made using forced labour is unreasonable and must be addressed. 

It is unclear whether the legal challenge will win out in court, with Trump using Section 301 to justify tariffs on China in his first term. 

These tariffs survived challenges in court, meaning South Africa cannot rely on the court challenge to save it from tariff pain.