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Trade under AfCFTA Rules started on 1 January 2021, but hard work lies ahead


Trade under AfCFTA Rules started on 1 January 2021, but hard work lies ahead

Trade under AfCFTA Rules started on 1 January 2021, but hard work lies ahead

At its 13th Extra Ordinary Session held virtually in Johannesburg on 5 December 2020, the Assembly of the African Union (AU) announced that trade in goods under the AfCFTA will start from 1 January 2021[1]. Trading shall take place based on “legally implementable and reciprocal Tariff Schedules and Concessions, with agreed Rules of Origin, and Customs Documentation as attached hereto as Annexes”. For trade to start under the AfCFTA, an arrangement had to be made as regards tariffs and rules of origin that are still being negotiated. For this purpose, the Assembly approved the Schedules of Tariff Concessions submitted by Member States and Customs Unions so far, to apply to trade between the State Parties. Products for which Rules of Origin have not yet been concluded, cannot be traded under preferences. The outstanding work on Rules of Origin, Trade in Goods and in Services must be concluded before the end of June 2021. These ongoing negotiations will generate further tariff offers, also to be implemented as part of this interim arrangement: “Subsequent offers and tariff schedules submitted by State Parties shall be provisionally implemented once approved by the Council of Ministers, pending adoption by the Assembly at its next Ordinary Session thereafter…

It is important that the legal basis for the interim AfCFTA trade regime that commenced on 1 January 2021 should be clear. Importers and exporters need legal certainty, and they must know what jurisdiction governs transactions. This includes information about binding interim tariff schedules, rules of origin, customs procedures, standards, transport etc, as well as where and how to obtain it. Traders also need to know what remedies apply.

What could be implemented from the beginning of January 2021 will be the national responses (in the form of domestic tariff book amendments, with the relevant AfCFTA tariff offers included) to the Johannesburg Decisions. Without these responses national customs officials will not be able to process the interim preferential trade in goods as envisaged. A legally implementable reciprocal tariff schedule that will, in the absence of final AfCFTA Tariff Schedules, allow trade in goods, must be enacted by the State Parties ready to do so. That is why some have published special Government Gazettes in late December 2020.[2]

Customs unions must pay special attention to how they will implement the Johannesburg decisions. A distinction is drawn between customs unions whose Members have all ratified the AfCFTA Agreement or by those members of the Customs Unions that have ratified the AfCFTA Agreement and can legally implement the Schedule of Tariff Concessions on an individual basis. A customs union has a common external tariff (CET). The member states must make joint tariff offers and must adopt and implement final offers jointly. There are still missing pieces, as the Decision recognizes. Botswana, a member of the Southern African Customs Union (SACU) has, for example, not yet ratified the AfCFTA Agreement.

Firms interested in utilizing the opportunities of early AfCFTA trade, need clarity and certainty. The State Parties and Customs Unions will have to enact amendments to national tariff books and must publish Government Gazettes explaining the extent, procedures, and conditions applicable to the interim AfCFTA regime. And it must be noted that despite all AU Members submitting tariff offers, only firms in the State Parties will be able to use the interim trade opportunity. Non-State Parties have no obligations and rights under any AfCFTA legal instruments.[3]

The overall level of ambition for the AfCFTA needs to be mentioned again. The modalities adopted for liberalizing trade in goods provide that 90% of tariff lines (not 90% of trade) should be liberalized. In many tariff lines there is no or very little intra-African trade. Three per cent of tariff lines may be excluded, they may presently account for significant volumes of trade. Seven per cent of tariff lines may be designated as sensitive, which means that liberalization will take place over a longer time period. Rules of origin are the other side of this coin, and are critical to the trading outcomes under the AfCFTA regime. They are expected to include, in some instances, product specific rules and will, for products like textiles and garments, probably require double-stage transformation[4]. Strict rules of origin will have major consequences; if a product does not meet these requirements, it cannot be exported at preferential rates. Strict rules of origin may mean that, despite tariff reductions, very little trade will take place.

[1] Ext/Assembly/AU/Decl.1(XIII)

[2] An example is the South African Government Gazette No 44049, No R. 1429 of 31 December 2020. For Mauritius see: pdf Customs Tariff Schedules (Integrated Tariff) HS 2017 Version with amendments to 01 January 2021 (14.37 MB) .

[3] Art 23 AfCFTA Agreement.

[4] As the rules of origin in the SADC FTA require.

About the Author(s)

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.

Trudi Hartzenberg

Trudi Hartzenberg is the Executive Director of tralac. She has a special interest in trade-related capacity building. Her research areas include trade policy issues, regional integration, investment, industrial and competition policy.

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