A victory by DCP Successors Limited has left Jamaican soap manufacturers pondering their next move as the Caribbean Court of Justice (CCJ) has ruled that Jamaica is in breach of regional trade rules by not applying tariffs to soap noodles imported into the country from non-Caricom sources.

The ruling on Wednesday has created a state of perplexity for Jamaican consumers who might be faced with an additional cost at corner shops and supermarkets for their everyday soap products. Prior to the ruling, several Jamaican soap manufacturers imported their key raw materials — soap noodles — from countries like Indonesia and Malaysia before transforming them into finished soap products at home.

However, this situation might change as the CCJ ruled that Government of Jamaica was in breach of the Revised Treaty of Chaguaramas (RTC) by not applying the 40 per cent common external tariff (CET) to soap noodles imported into Jamaica from these non-Caricom states. The CET is meant to remove barriers for intra-regional trade among Caricom members whose goods have received a Caricom certificate of origin — a passport to confirm that a good was made in Caricom and is exempt from the CET.

“The Court was not convinced by the evidence that suggested that DCPS’ soap noodles were rancid or otherwise unfit for purpose. The Court also found that DCPS was capable of supplying soap noodles to the entire single market of the community. The Court noted that the view that, notwithstanding the adequacy of regional supply, Jamaica should be entitled to import from third states soap noodles free of the CET produced a result that was at variance with the aims and objectives of the RTC and with its clear provisions,” stated the summary of the CCJ judgement.

This ruling might further impact publicly listed soap manufacturer Blue Power Group Limited which first noted the impact of losing preferential treatment to Caricom in November 2019. At the time, 20 per cent of Blue Power’s sales or about $88.07 million came from Caricom sales. It reduced its exports to those markets following that event and instead focused on improving its production capacity while increasing its exports to markets like the United States of America, Canada, and the United Kingdom. These moves along with the increase in contract manufacturing resulted in its revenue topping $871.32 million, with exports now accounting for about ten per cent of sales.

“Blue Power Group was not a party to this lawsuit. The position of Blue Power Group before, during and after this lawsuit is the same. Blue Power is engaged in the production of high-quality soaps for market-leading brand owners and distributors as well as consumers in Jamaica. We are a reliable supplier and we offer competitive, high-quality products. We always comply with the trade policy and trade rules applicable to Jamaican manufacturers,” said Blue Power Chairman Jeffrey Hall in a statement to the company’s stakeholders.

Some of the other Jamaican producers mentioned in the ruling included Bomber Manufacturing Limited, Island Products Manufacturing Company Limited, Kirk Distributors Limited, and Kirk FP Limited.

All Jamaican soap producers were granted relief under the Productive Input Relief Programme (PIRP) in September 2021, which was the basis for the Jamaican authorities to not apply the CET to the import of soap noodles from non-Caricom markets. The PIRP allows for duty-free importation and income tax relief of specific items intended for productive use by companies in targeted sectors.

Yet, this did not satisfy DCP Successors, which filed a claim in the Supreme Court of Jamaica against the trade administrator, The Trade Board Limited, commissioner of customs and excise, Jamaica Customs Agency, and Blue Power to refer questions to the CCJ regarding its concerns on the CET not being applied and the classification coding being changed for these imports. However, Justice Dale Staple refused the application in March 2022.

With the CCJ ruling, there are still several questions to be answered which not only includes the PIRP, but also the impact by soap manufacturers’ choice between DCP Successors and their current suppliers, which might have a 40 per cent premium applied to their imports. There have been significant price increases in logistics costs with the reduction in ships passing through the Panama Canal and other shipping delays in the Far East, which is likely to have an impact on the price of all soaps without factoring in this decision.

When the Jamaica Observer reached out to Yvor Nassief, managing director of DCP Successors, about the ruling, he noted that he is still in consultation with his attorneys Hylton Powell about the next steps forward and would limit commentary now. There is set to be a case management conference on February 16 at 9:00 am to discuss the modalities for determining possible remedies or relief for DCP Successors. The ruling noted that Nassief highlighted Jamaica as being 50 per cent of Caricom’s market for soap.

“The case that was made by the Government of Jamaica was intended to support Jamaican manufacturing and the PIRP legislation. This legislation is extremely important to Jamaican manufacturers and Jamaica was right to defend the use of this legislation by soap manufacturers. The decision by the CCJ against Jamaica may result in some changes to our manufacturing process to maintain our markets and financial strength over time. There will, however, be no change to the core operating principles of the Blue Power Group,” explained Hall to the Caribbean Business Report about the potential impacts to Blue Power and government policy.

Blue Power has been actively focused on expanding its soap-making capacity in recent times as its 2023 volumes climbed by 10 per cent. Blue Power purchased $110.77 million in land and equipment in 2023 as it moves towards expanding its soap production space and developing a third-party logistics and warehouse centre.

“The investment included new stamping machines as well as processing machines for the production and blending of key raw materials used in the soap-making process. We also invested in the expansion of our laboratory which allows for wider innovation capabilities and a more efficient formulation process,” said Blue Power General Manager Vishwanauth Tolan.

Blue Power’s stock did not trade on Thursday and remained unchanged on Friday at $3.40, which leaves it up 27 per cent year-to-date with a $1.92-billion market cap.

Michael Hylton, KC, Sundiata Gibbs and Timera Mason represented DCP Successors while Jamaica was defended by Stuart Stimpson of Hart Muirhead Fatta and Sherise Gayle, senior assistant attorney general.