Director of the Dominica-based soap manufacturer DCP Successors Yvor Nassief gives his take on the recent decision by Caricom’s Council for Trade and Economic Development (COTED) that companies in Jamaica are not eligible to receive Certificates of Origin for their soap exports thereby not enjoying duty free access to Caricom. The full text of Nassief response is published below.

The recent press coverage of the decision by Caricom’s Council for Trade and Economic Development (COTED) that companies in Jamaica are not eligible to receive Certificates of Origin for their soap exports thereby not enjoying duty free access to Caricom, is one sided and contains inaccuracies and misrepresentations. I seek to clarify some of these.

The COTED ruling resulted from action brought by the Government of Dominica on behalf of DCP Successors Ltd, a renowned soap manufacturer.

DCP SUCCESSORS (DCPS)

DCPS, located in Dominica, is a leading manufacturer of soaps and has supplied cruise lines and leading hotel chains. The company has also made international brands under contract including Palmolive, Protex, Jergens, Dial, Tone, Imperial Leather, to name a few.

The company was devastated by two weather events in quick succession which caused the plant to close and lay off all 150 employees.

Given its importance to the Dominican economy, a group of Caribbean investors, myself included, bought the factory in 2017 while Jamaica’s Kirk Distributors acquired the brands.

WHAT IS SOAP MANUFACTURING?

Soap manufacturing requires a chemical transformation from the raw material to the finished product. Put differently, the tariff code of the finished product cannot be the same tariff code as the raw material.

The soap making process is called saponification, which is the reaction that occurs when oils or fatty acids come into contact with caustic soda. This process produces fatty acid salts (otherwise known as soap) and glycerin.

The Jamaican companies do not engage in this process. Instead, they import soap in chip form and skip the saponification process which is where the skilled jobs, value added and craftsmanship in soap making reside.

Contrary to their claims, this definition of soap manufacturing is not unique to Caricom. In obtains in all developing countries seeking to deepen their manufacturing base.

By way of example, it is like importing Nestle chocolate chips (the ones used in chocolate chip cookies), heating and extruding those chips into bars and then claiming you are making chocolates.

IT IS NOT JUST ABOUT CHIPS

The press coverage suggests DCPS’s motive is to “force Jamaican companies into buying its chips”. That is incorrect and misses the point. All DCPS seeks is that the Jamaican companies play by the same rules and on a level playing field.

Selling soap chips is like selling cocoa beans rather than chocolate bars. The former is a low value activity, the latter higher value requiring deeper manufacturing skills which is the objective of the Revised Treaty of Chaguaramas (RTC) and what the region needs. DCPS would welcome any move on the part of the Jamaican companies to invest in their own saponification equipment so it can focus on its mission, to create and market successful regional brands for the international market.

COMPETITIVENESS

The Jamaican companies complain that they can buy chips cheaper from Asia. If Jamaica adhered to the rules and levied the appropriate duty, chips from DCPS would be competitive with Asian imports.

But even if DCPS was not competitive, that is not a reason for Jamaican companies to not pay duty or be issued Certificates of Origin. The rules of origin require saponification, which requires them to invest a couple million dollars in equipment.

One of the companies is a Jamaica Stock Exchange listed company. Why would they want to continue the narrative that they are making soap?

The other is building a US$40-million import distribution centre. Surely it can invest a couple million US dollars in a saponification plant and become an authentic export manufacturer, employ more people and engage in deeper manufacturing.

None of us can ever compete against countries with populations of 70 million. Implicit in the RTC is that no territory in this region (Jamaica included) can successfully compete against larger economies given their scale and lower labour costs and hence the need for the protection as provided by the RTC.

Are we saying to forget manufacturing because we can import items cheaper from outside the region? In that case, Jamaica Broilers, Caribbean Broilers, Seprod, to name a few, would become a shadow of themselves if not completely wind down. Try telling their directors that chicken, cooking oil and milk can be imported for substantially less than they produce it for. That, however, is not the issue. The issue is, do we value having a local manufacturing base, the skill sets and employment it creates and the resiliency which must be part of any successful economic model

QUALITY ISSUES

The Jamaican companies complain about the quality of chips from Dominica. For the record, the one company that did purchase chips from DCPS never officially complained about their quality. The issue concerned moisture loss during shipment which is an easy matter to address. The matter has been addressed directly with the party involved and hopefully we can move forward.

They also claim that they had to dump the 105 metric tonnes of soap chips. This is a surprising statement. We know that the chips were used to make soap and were not dumped. If they can provide a dump certificate for the chips, DCPS will reimburse them.

THIS IS NOT OVER

While logic has prevailed on the Certificate of Origin issue, the companies continue to import chips duty free for local production. DCPS contends this is illegal and is in the process of legally challenging the continued importation of soap chips duty free from outside the region. Again, all DCPS is asking for is a level playing field.

The only fair and just remedy is that they pay duty on the extra-regional chips. To avoid this, they can buy chips from DCPS, or better yet, invest in saponification equipment.

Why should a county of 2.5 million people seek, through unfair trade practices, to disenfranchise a small island with 70,000 people, the population of May Pen, from its rights under the RTC. If DCPS can afford to play by the rules, they certainly can.

The Jamaican manufacturers are also contending that it is unfair to abruptly end a customs classification that has existed for 19 years, and on which basis they would have made significant investments for production and exports to the Caribbean region.

This is a misguided argument. It is incumbent on any person investing in manufacturing to invest in the equipment necessary to achieve the required transformation and rules of origin. Whether or not there was a chip manufacturer in the region is irrelevant as the rules clearly state what is required to qualify as a manufacturer.

THEY KNEW WHAT THEY WERE DOING

A DCPS representative met with one of the companies before they started operations and advised them that merely importing chips was against the rules of origin and did not qualify as manufacturing. This earnest intervention was summarily brushed aside.

JAMAICANS WRITE OFF CARICOM MARKET?

That a fair, correct and just ruling from Caricom would cause the affected companies to question the relevancy and benefits of Caricom is unfortunate. With due respect, that question is better addressed by GraceKennedy, Rainforest Seafoods, Wisynco, Lasco, Campari who have their brands on supermarket shelves across the region.

Companies within the DCPS group represent great Jamaican companies like Rainforest Seafoods, GraceKennedy, Juici Patties and Wisynco in Dominica and other EC islands.

The private sector tends to blame politicians and technocrats for perceived failures in Caricom. If we dig deeper, we will discover that many of the failures are instigated by private sector players.

By way of introduction, I am married to a Jamaican and have long-standing Jamaican friendships and business relationships. Over the years my family has made a number of significant equity investments in Jamaica including Seprod, Carib Cement and DB&G.