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The Process for Amending or Reviewing the SACU Agreement


The Process for Amending or Reviewing the SACU Agreement

The Process for Amending or Reviewing the SACU Agreement

There are strong indications that the SACU Agreement may be amended – or “reviewed” – during the next year.[1] Why has this become necessary and what would such a process entail? How will stability in the SACU region be affected? What does the SACU Agreement say about amendments?

The present SACU Agreement was adopted in 2002 and entered into force in July 2004. However, it was never fully implemented. New institutions were established (the Tariff Board, National Bodies and an ad hoc Tribunal) to provide for a collective modus operandi but did not become operational. The South African International Trade Administration Commission (ITAC) manages the SACU Common External Tariff (CET) and takes decisions about tariff changes, trade remedies and rebates. This happened on the basis of decisions adopted by the SACU Council of Ministers.

There was one amendment, in 2013, when the SACU Summit was added as an extra institution. The Summit “shall define the political and strategic direction and the priorities of SACU” and oversees the work of the Council.[2]

The wording of the decisions mandating ITAC to act as SACU’s Tariff Board suggests a temporary arrangement. Botswana, eSwatini, Lesotho and Namibia (the BeLN countries) have often indicated that they want the official SACU structures to become active. (South Africa has a different view.) The BeLN states argue that ITAC is a South African institution which cannot act on their behalf.

There are also differences of opinion about the SACU Revenue Sharing Formula. The sharing of customs revenue (mainly generated by South African imports) has always been part and parcel of the SACU raison d’être. Article 34 and Annex I explain how the shares of the Member States of the total customs, excise and additional duties collected in the Common Customs Area during any financial year, are calculated and paid. This has become an important feature of SACU and contributes to financial stability in the region. Pretoria wants to re-visit the present arrangement. This cannot happen without a formal amendment.

The SACU Members have occasionally discussed the possibility of improving the functioning of the Organization. However, a formal amendment of the Agreement or a comprehensive review was not decided. The current SACU Workplan mentions the following:

  1. Architecture for Tariff Setting, Application of Tariffs, Rebates, Refunds or Duty-drawbacks and Trade Remedies;

  2. Public Policy Interventions and Tools to Promote Industrial Development and Regional Value Chains; and

  3. Sharing of SACU Revenue.

This may not be a complete list of issues for SACU to resolve. Earlier versions of the SACU Workplan were more detailed.

If “discussions” become de facto “negotiations for amendment”, the basic rules of the game will change, to include substantive as well as procedural matters. Amendments require formal procedures and negotiations. Sensitivities and different scenarios will surface, and trade-offs are likely. Agreement on prior modalities, negotiating principles and rules of procedure will be required.

This may result in the re-visiting of the whole Agreement. It also offers an opportunity for technical improvements.[3] Such a development needs careful planning and buy-in by all Members. If they want a more limited exercise, clear boundaries should be drawn.

The SACU Agreement contains an amendment clause but does not mention “review”. “Any Member State desirous of amending this Agreement shall put forward its proposal for such amendment, together with its submissions in motivation of the proposed amendment, to the Council for consideration. An amendment of this Agreement shall be adopted by a decision of the Summit.[4] There can also be an expansion of the Agreement through Annexes.[5]

The entry into force of amendments is not clear. Article 43 only indicates how amendments are adopted, not how they enter into force. If the intention is that adoption (on the basis of consensus) constitutes unanimity and that subsequent ratification is unnecessary, this should be stated in clear terms.

The same concern applies to Article 42: The Council may develop such annexes as may be necessary to facilitate the implementation of this Agreement. All such annexes shall form an integral part of this Agreement. This provision does not indicate how Annexes shall enter into force. It does not refer to the amendment procedure in Article 43, or a role for the Summit.

The new Article 7A contains the following clause: Subject to Article 43 of the Agreement, the Summit shall adopt legal instruments for the implementation of the provisions of the Agreement.[6] It means that an additional element has been added to the SACU amendment procedure.

A “review” of an existing inter-state arrangement refers to a more informal stock-taking exercise through which lessons learned about better implementation can be implemented. If the outcome of a review indicates satisfaction with the status quo, there will be no changes.

Where does the present situation leave SACU? The non-implementation of core provisions in the SACU Agreement[7] has resulted in a unique situation which differs from what the Agreement requires. This came about through decisions of the Council and without formal amendments and has resulted in a lack of legal clarity and less space for the BeLN countries to implement domestic policies on economic development or industrialization. They cannot take decisions about tariff changes, rebates or trade remedies.

An exercise aimed at amending or reviewing SACU, and the consequences for the whole region, should be carefully weighed. SACU is in many ways a well-functioning regional space. Perhaps the Brexit saga contains lessons about the dangers in dismantling a regional integration arrangement.

[1] The South African Minister of Trade and Industry has announced that this Agreement will be “reviewed”.

[2] Art 7A.

[3] The Agreement does not contain a non-discrimination or general exception clause. It also repeats verbatim certain provisions of the 1969 SACU Agreement, which predates the establishment of the WTO.

[4] Art 43.

[5] Art 42.

[6] Art 43 provides for SACU’s amendment procedure. (This provision is listed above.)

[7] The common policies on agriculture, competition, industrial development and internal unfair trade practices are also outstanding. So is the common negotiating mechanism mentioned in Art 31.

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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