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Launch Of Free Trade Protocol In South Africa

12 November 2008   (0 Comments)
Posted by: Author: Nelisa Mali
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Launch of Free Trade Protocol In South Africa 


The launch of the Free Trade Area in South Africa on 17 August 2008 formalises the elimination of trade tariffs among Southern African Development Community (SADC) member states, enhances economic integration and creates bigger regional markets.


Angola, Botswana, the Democratic Republic of the Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe are SADC member states.The introduction of the Free Trade Protocol is intended to phase down tariffs by South Africa within eight years of accession. Most tariffs will be zero per cent in a period of four years.SADC states have a period of twelve years within which to reduce tariffs to zero per cent.


The introduction of the SADC Free Trade Agreement encompasses a lot of issues; among them being customs administration and compliance.As we move towards the free tariff lines, there is a great need to enhance customs compliance in order to avoid abuse of trade agreements by smugglers and for the honest trader to enjoy the benefits of the free trade area.


The opening of trade lines does not necessarily mean that customs clearance will be relaxed or disappear.Actually now is the time that traders must be seen to comply.Traders need to have full appreciation of the Free Trade Area Protocol.Each and every trade agreement has rules of origin peculiar to it.It is in the rules of origin where the do’s and don’ts of accessing the benefits of trade agreement are prescribed.The rules of origin for products to be traded between the member states of the SADC prescribe various methods of qualification for tariff free trade.  


To serve as  an illustration, the general requirement for origin criteria is that goods shall be accepted as originating in a member state if they are consigned directly from a member state to a consignee in another member state and: (a) they have been obtained in any member state incorporating materials which have not been wholly produced there, provided that such materials have undergone sufficient working or processing in any member state.


The Free Trade Protocol goes on to explain what ‘produced or wholly produced’ means and the kind of evidence needed to support the facts.The claim that goods shall be accepted as originating from a member state, in accordance with the provisions of the annex to the protocol, shall be supported by a certificate given by the exporter or their authorised representative.The certificate shall be authenticated with a seal by an authority designated for this purposes by each member state.


Every producer, where such producer is not the exporter, shall in respect of goods intended for export, furnish the exporter with a written declaration to the effect that the goods qualify as origination in the member state under the provisions of  protocol.


The competent authority designated by an importing member state may request, in exceptional circumstances and notwithstanding the presentation of a certificate issued in accordance with the rules of the protocol required in case of doubt, further verification of the statement contained in the certificate.


The importing member state shall not prevent the importer from taking delivery of goods solely on the grounds that it requires further evidence, but may require security for any duty or other charge which may be payable; provided that where goods are subject to any prohibitions, the conditions for delivery under security shall not apply.


The above requirements highlight few of the areas of compliance the customs administrations will be looking at in order to have one’s goods cleared for customs purposes.


In terms of the Free Trade Protocol, the following shall be regarded as wholly produced in the member states:

(a) Mineral products extracted from their ground or seabed;

(b) Vegetable products harvested there;

(c) Live animals born and raised there;

(d) Products obtained there from live animals;

(e) Products obtained by hunting or fishing conducted there;

(f) Products of sea fishing and other products taken from the sea by their vessels;

(g)Products made on-board their factory ships exclusively from products referred to in sub-paragraph (f)

(h)Use articles collected there only for the recovery of of raw materials;

(i)  Waste and scrap resulting from manufacturing operations conducted there;

(j) Products produced there exclusively from one or both of   the following:


(i)  products specified in (a) to (i) above;

(ii) materials containing no element imported from outside the member states or of undermined origin.                                                                                                                                        

Of importance in the Free Trade Protocol is that sugar and automobiles are excluded irrespective of their originating status.In order to avoid the abuse of  any trade agreement, customs administrations always ensure that goods smuggling does not take place as way of getting around the ‘rules of origin’. More often than not this exercise has the effect of impacting on the honest trader.However, the customs administrations are moving towards building mechanisms to appreciate the compliant trader, among them being accreditation and granting of Authorised Economic Operator status (AEO).


The AEO status will assist the trader towards mutual recognition with the aim to move the trader’s cargo faster than when the goods and clearance documents are supposed to be double checked in both the export and import country.When the export country is satisfied of certain pre-clearance quality standards, the import country will be in position to clear the goods without stricter requirements.


It is to the benefit of the trader to comply with the customs requirements.The goods will be free of import duties; that on its own will benefit the trader in that it assists the trader with a cash flow rather than the trader having to pay duties on importation and later having to recover his expenses when the goods are sold.


Source: By Nelisa Mali (TaxTALK)


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