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Rules of origin key to success of AfCTA

17 Sep, 2020 - 00:09 0 Views

The Herald

Sitshengisiwe Ndlovu

The protocol of trade in goods is comprised of 32 articles and nine annexes in the Africa Continent Free Trade Agreement (AfCFTA).

Annex 2 of the protocol of trade in goods focuses on rules of origins and is complemented by various appendixes.

These mentioned instruments pertain to movement of goods across borders and regulate trade in the context of origin to ensure goods that are produced in Africa qualify for preferential treatment under the AfCFTA.

The rules of origins remain a significant instrument in the success of the AfCFTA.

Compliance with these rules is a process that calls for transparency and integrity by all the stakeholders involved in the entire chain right up to the issuance of the certificate of origin.

Member states agreed under the AfCFTA to liberalise 90 percent tariff lines of non–sensitive products within five years for developing countries and 10 years for least developed countries (LDCs).

They also agreed to liberalise seven percent tariff lines of sensitive products within 10 years for developing countries and 13 years for least LDCs.

Three percent of goods will be totally excluded from liberalisation.

For the products to enjoy liberalised tariffs, they must qualify through the fulfilment of the laid conditions in relation to the rules of origins and should be certified.

Simply put, rules of origin confer nationality on products.

In certain circles, they are equated to a passport that enables goods to be moved into a country at preferential rates of duty.

A certificate of origin is granted on qualifying goods to enjoy preferential treatment in the importing country.

The major challenge of the AfCFTA has been to design rules of origin that are simple, transparent and business friendly.

Naturally, the nature of rules of origin is that they remain a complex phenomenon and very much unpredictable.

This is because of the inherent risk in the form of trans-shipments from outside the continent and possible dumping of goods that do not qualify.

Preferential agreements in developing countries tend to favour flexible criteria while the developed world goes with strict criteria.

In the SADC Free Trade Agreement, for instance, the rules of origins have been guided by the product specific rule, which may be classified under the strict criteria route.

The election of flexible rules of origins in some parts of Africa have been determined by lack of institutional capacity to handle challenges that may emanate from the processes.

The origin criteria of the goods to qualify to trade under AfCFTA has been streamlined into wholly produced, non-originating material, value added, change in tariff sub-heading and specific process.

These categories are further subject to detailed conditions that have not been covered in this instance.

Multi stakeholder consultations spearheaded by private sector needs to guide member states on input into the rules of origins that will enable their uptake and utilisation to ensure economic growth of the member states.

Simple rules of origin may derail the vision of AfCFTA as countries may experience dumping of goods through unscrupulous mercantile activities claiming false origin on goods.

Furthermore, non-tariff barriers (NTBs) may surface due to the complexity of rules of origin.

When not designed properly, the rules of origins may appear protectionist.

In extreme cases, the rules may impede trade through red tape and bureaucracy.

As part of trade facilitation measures countries are adopting block chain e-certificates of origin to counter false claim to preference while at the same reducing delays at border posts due to the long process of authenticating certificates of origin.

The AfCFTA has designed an online African Trade Observatory trade portal to provide information and data that assist traders to register any encountered barriers at ports of entry.

AfCFTA has been driven by the need to accelerate industrialisation in Africa by taking advantage of huge population that present a huge market while creating employment.

UNCTAD research reveals a 15 percent value addition on exports to global markets in comparison to 40 percent of exports being sent within Africa. This data reveals that there is scope for rapid growth through exports in African intra-trade.

Creation of local content within value chains will create jobs.

In addition, a high percentage local content within the value chains within Africa will be achieved through backward linkages that will seek to use local raw materials as opposed to importation.

Nevertheless exportation of raw or semi–processed products without value addition costs countries a lot of jobs.

The impact of rules of origin on the revenues collected from customs duties has been studied. However, the benefits of industrialisation far out weight the benefits of revenues forgone.

It will be important for industrialists to support the AfCFTA as governments have already demonstrated political will by forgoing public revenues in order to recoup same through African intra-trade.

The Zimbabwe National AfCFTA Implementation Strategy has identified key sectors with a huge scope for value addition and trade diversification that can be used by industrialists to design the trade map.

AfCFTA will enable trade across Africa through rules of origin that are already existing at Regional Economic Communities level.

It is prudent therefore for companies to familiarise with rules of origins to achieve the competitiveness of their products in other member states and be able to identify any false claims to origin that may impede industrialisation and job creation.

In view of the foregoing, the expertly designed rules of origin will play a vital role in accelerating industrialisation and job creation under AfCFTA.

Sitshengisiwe Ndlovu is president of OWITZIMBABWE: She writes in her personal capacity. For more on trade matters visit her Blog on website: owitzimbabwe.org

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