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rules of origin for South Africa trade agreements

Wednesday 27 February, 2013

The Durban Chamber of Commerce hosted a seminar on rules of origin, which specified how products are treated for export/import purposes by countries which have various trade agreements (RTA’s-regional trade agreements).  The event was sponsored by SGS, a French company which facilitates trade in Africa by serving governments & non-governmental organizations (NGO’s) with import verification, trade, & aid efficiency programs.

The meat of the program was presented by Nathi Cazes of the South African Revenue Service, (SARS-not the disease).  SARS administers the trade agreements in which South Africa participates.  We discussed primarily agreements with the EU & EFTA that were initiated in 2000 & now encompass 27 & 8 countries respectively, & SADC, agreed upon in 2008 & accounts for 12 countries.  Countries are divided by how their products are treated for tax purposes, either non-preferential, upon which tariffs, quotas, duties are imposed, or preferential, which receive preferential treatment with lower or no tariffs, quotas, &/or duties.  South Africa also adheres to internationally-recognized General System of Preferences with the EU since 2004, Norway, Turkey, Russia, & Switzerland 2004-08.  South Africa also benefits from the AGOA act passed by the United States government, which provides preferential tariffs for African textiles entering the US.  Due to competitive pressures, the number of countries participating in some of these agreements is declining.

Proof of origin is required for products exported directly from member countries.  It’s important to determine if they were “wholly obtained” & “significantly worked.”  The rules of origin criteria are as follows:

  • Origin status- Origin verification can take 3 months with SADC, but up to as many as 10 months with other organizations.
  • Cumulation
  • Minimal operations
  • General tolerance rule- There are different value tolerances for agreements with different regions:  SADC 15%, EU & EFTA 15%, Turkey 5%, Norway 5%, & Russia 50%.
  • Direct transport
  • Proof of origin- Documentary evidence must be translated.
  • Approved exporter-  Approved exporters must make a minimum of 12 shipments per year to gain approval as approved exporters.

A value-added test & ex-works costs & prices are used to determine origin criteria.    Some processes which do not confer origins, such as packaging, dilution, & assembly, are addressed in other RTA’s. Minerals, vegetables, & livestock are considered wholly-produced goods.    SARS regulates the certificate of origin process whereby, for example, forms must be returned to customs.  It’s the responsibility of the exporters & importers to assure that their documentation is complete before sending it to customs & SARS.

There was a problem in shipments to Zimbabwe recently where customs officials suspected the illegal importation of good from China embedded in other shipments, so they opened every single box to inspect for these goods.  Needless to say, it provided a major discouragement to shipping to Zimbabwe.

The South African government is working on agreements between the EU & Eastern African Countries (EAC) & potentially with the BRICS nations, Brazil, Russia, India, & China.

Like my 1st sales manager @ Xerox used to say, “There are 2 sides to every business:  they’re either sales promotion or sales prevention.”  All of this paperwork to document the origins of products is clearly a bureaucratic, but necessary, exercise in sales prevention.  On the other hand, some of these sales would not even be possible without these agreements, so I guess it depends on how you look @ it.  Obviously minimizing the requirements makes it as smooth as possible.  I asked how automated these processes are & was told they are, but I’m a skeptic in that area.

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