Discussions

Zimbabwe re-brands Statutory Instrument (SI) 64

Zimbabwe re-brands Statutory Instrument (SI) 64

16 Nov 2017

Elisha Tshuma, Customs and Trade Facilitation Expert, provides an update on recent import control measures introduced by Zimbabwe

In the year 2016, Zimbabwe gazetted Statutory Instrument 64 of 2016 (SI 64). The SI 64 required traders to obtain an import licence from the Ministry of Industry and Commerce before importing basic commodities such as coffee creamers, bottled water, white petroleum jellies and body creams, canned fruits and vegetables, peanut butter, plastics pipes and fittings, builders-ware products, metal clad insulated panels, baked beans, cereals, fertilizers, flash doors, beds, wardrobes, bedroom and dining suites, office furniture and woven fabrics of cotton, among many others. The SI 64 was designed to meet two specific national objectives, namely:

  • Limiting consumer spending on luxury imports, since Zimbabwe is facing a huge Balance of Trade deficit, which is putting pressure on foreign currency balances; and

  • Industrialise by import substitution, and promote “buy local”. This component features prominently in the country’s Industrial Development Policy (2012-2016).

SI 64 was in addition to other Statutory Instruments that had been gazetted earlier for the same purpose. These included SI 8 of 1996, SI 22c of 2000, SI 137 of 2007, SI 138 of 2007, SI 150 of 2011, SI 6 of 2014, SI 126 of 2014, SI 18 of 2016, SI 19 of 2016 and SI 20 of 2016. Put differently, SI 64 was extending a list of goods that required an import licence before importation of the same to Zimbabwe.

When SI 64 was published, Zimbabwe’s cross border traders and travellers in general reacted angrily to its implementation as no prior notice had been given. It was implemented with immediate effect. There were violent demonstrations which resulted in the burning of a Zimbabwe Revenue Authority warehouse. Zimbabwe’s major regional trading partners, South Africa and Zambia, also raised concerns over Zimbabwe’s ever increasing list of goods requiring import licence. SI 64 became infamous with traders.

Recently, Zimbabwe repealed SI 64 including and all its predecessors listed earlier and consolidated their contents into one Statutory Instrument known as SI 122 of 2017. Although SI 64 is no more, import controls remain in force through SI 122 of 2017. SI 122 like its predecessors, does not have a specific life span, a clear indication that Zimbabwe is not yet prepared to let go the import controls. To avoid travellers’ outcry which resulted in violent demonstrations when SI 64 was published, SI 122 of 2017 allows travellers to import some basic commodities in given quantities for personal use once in a calendar month without an import licence. However, the import licence fee was increased from $30 to $70. Each product requires its own import licence. Some observers have interpreted this as commercialisation of government services as a way to raise revenue.

Whilst on one hand Zimbabwe was gazetting Statutory Instruments to introduce or extend import controls, on the other hand it was participating and entering into agreements to abolish non-tariff barriers and to stop introducing fresh non-tariff barriers. It was like a driver indicating right when he was actually turning left. During the period 1996 and 2017, Zimbabwe signed the COMESA treaty, also signed the SADC Trade Protocol in 1996, which requires elimination of non-tariff barriers and phasing down of tariff which began in 2002 and was to be completed in 2012.gned and recently signed the interim EAS-EU Economic Partnership Agreement. All these agreements require that Zimbabwe removes prevailing non-tariff barriers and not introduce new ones. For example ARTICLE 49 of the COMESA Treaty states that:

“Elimination of Non-tariff Barriers on Common Market Goods

  1. Except as may be provided for or permitted by this Treaty, each of the Member States undertakes to remove immediately upon the entry into force of this Treaty, all the then existing non-tariff barriers to the import into that Member State of goods originating in the other Member States and thereafter refrain from imposing any further restrictions or prohibitions.

  2. For the purposes of protecting an infant industry, a Member State may, provided that it has taken all reasonable steps to overcome the difficulties related to such infant industry, impose for the purposes only of protecting such industry for a specified period to be determined by Council, quantitative or like restrictions or prohibitions on similar goods originating from the other Member States:

Provided that the measures are applied on a non-discriminatory basis and that the Member State shall furnish to Council proof that it has taken all reasonable steps to overcome the difficulties faced by such an infant industry.

  1. The Council shall adopt criteria for determining that an industry is an infant industry.

  2. The Secretariat shall keep under constant review the operation of any quantitative or like restriction or prohibitions imposed under the provisions of paragraph 2 of this Article and deliver an opinion to the Member State concerned and report the matter to the Council with its recommendations.

  3. Notwithstanding the provisions of paragraph 1 of this Article, if a Member State encounters balance-of-payments difficulties arising from the application of the provisions of this Chapter, that Member State may, provided that it has taken all reasonable steps to overcome the difficulties, impose for the purpose only of overcoming such difficulties for a specified period to be determined by the Council, quantitative or the like restrictions or prohibitions, on goods originating from the other Member States.”

Council was not notified about the actions of Zimbabwe with respect to SI 64 which has now been re-branded to SI 122. The COMESA Council of Ministers has not deliberated on SI 64. At the same time, Zimbabwe entered into the COMESA Free Trade Area through the signature of the Head of State, and deposited instruments of ratifications of the COMESA treaty. By its design, a free trade area in free from quantitative restrictions, such as permits or licences of SI64. A country cannot impose trade restrictions on another member that signed the Treaty. Thus SI 64 or SI 122 is a restriction (Non-Tariff Barrier).

Zimbabwe is a signatory to the SADC Protocol on Trade. Its objectives include the promotion of intra-regional trade by eliminating trade barriers, both tariff barriers and non-tariff barriers. Zimbabwe initially reduced or eliminated duties under Categories A and B. This constituted 87% of the tariff lines under its tariff phase down commitments. Zimbabwe experienced serious economic challenges from 1997 when the Zimbabwean dollar lost its value against major currencies to the period leading to 2009. It experienced unprecedented high levels of inflation, companies closed down and shortages of basic commodities were among the economic challenges. Zimbabwe then failed to implement tariff phase down for Category C products. This phase down was supposed to commence in 2009 ending in 2012. Zimbabwe applied for derogation from implementing the phase down in accordance with Article 3.1 ( C) of the SADC Trade Protocol for Category C products.

In 2011, Zimbabwe was granted a 2 year derogation which ended in 2012. The phase down was supposed to resume immediately thereafter and be completed in 2014. This did not happen. Instead Zimbabwe introduced a surtax in 2012 and has been reversing the phase down for Category A and B products by reviewing the rates of duty upwards. Examples are soap, beverages and cooking oil among others. Zimbabwe’s justification for its actions is that it is still facing economic challenges and it aims to nurture its infant industry.

Category

Phase down period

A
Immediate liberalisation-tariff lines with low duties were to have duties reduced to 0% as from the date of implementation i.e. 2000
B
Gradual phase-down-goods gradually phased down to 0% over eight years from 2000 to 2008
C
Sensitive goods – products sensitive to industrial and agricultural activities to be phased down between 2009 and 2012
E
Excluded products list – goods such as firearms and ammunition excluded from the phase down process

Source: Competition and Tariff Commission, 2017.

“To deter Member States from abusing the derogation provision, the SADC Council of Ministers of Trade (CMT), approved a stringent criterion for applying for derogation under Article3 (1) of the Protocol on Trade. This is shown in Annex X and Appendix 1

Zimbabwe has been requested to submit an application for derogation in line with Annex X of the SADC Protocol on Trade. Annex X, however, imposes limitations on the number of products (not more than 5) that are allowed to be granted derogation. Zimbabwe has more than 1000 tariff lines in Category C which need to be considered and therefore conditions in Annex X did not accommodate Zimbabwe’s unique situation. Appendix 1 of Annex X also spells out the information needed covering sixteen variables for each of the tariff lines, at eight digit level, as a major limitation to practical usage of the criteria.

A proposal was tabled by Zimbabwe to the Council of Ministers of Trade in 2017 for it to apply for a special dispensation, outside the set criteria so that it could regularise its commitments under the SADC Protocol on Trade. The Council of Ministers has given the green light to submit an application for a special dispensation for derogation on the outstanding tariff commitments. If granted, this would allow Zimbabwe time and “policy space for local industry to retool and build production capabilities to enhance competitiveness” (Competition and Tariff Commission, 2017).

It is our view that Zimbabwe is approaching the Council of Ministers with dirty hands as it unilaterally reversed some of its tariff phase downs in Categories A and B and introduced the surtax in 2012. In addition it has come up with a very long list of products requiring an import licence before importation. Zimbabwe should have raised its concerns that “Annex X did not accommodate Zimbabwe’s unique situation” during the negotiations of the agreement to amend the Protocol on Trade. Instead, Zimbabwe was one of the “early birds” to sign the Agreement. Its behaviour does not foster predictability in trading with Zimbabwe. SI 122 of 2017 expanded the list of items requiring import licence. The items now include school uniforms. The statutory instrument does not give tariff codes for school uniforms and neither does it define what a school uniform is making it difficult for traders to understand what exactly is being controlled.

While Zimbabwe argues that the derogation being applied for and the extension of the list of goods requiring an import licence are meant to “allow Zimbabwe time and policy space for local industry to retool and build production capabilities to enhance competitiveness”, SI 122 includes goods which are in short supply in Zimbabwe. An example is crude oil. Zimbabwe imports more than 90% of its crude oil from countries such as South Africa and Brazil. Such actions have bolstered observers’ argument that the issue of the import licence is now being used as a government revenue generating measure. There is no evidence that the licence fees collected have been used to retool the local industry and there is no justification for raising the licence fees from $30.00 to $70.00, except to raise revenue.

Zimbabwe’s import controls are not time bound. When traders thought that SI 64 was about to be repealed and import controls lifted, Zimbabwe merely repealed SI64 and its predecessors and consolidated their contents into one statutory instrument, SI 122 of 2017. The list was even extended to include school uniforms and crude oil. SI 122 of 2017 is a re-branded SI 64 of 2016.

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Zimbabwe Competition and Tariff Commission: Public statement on Trade Developments Under SADC: Zimbabwe’s tariff Phase Down Commitments published in the Herald of October 2017.

COMESA Treaty

SI 122 of 2017

SI 64 of 2016

2013 Zimbabwe National Budget Statement