Import duty, a non-refundable, mandatory tax levied on imported goods, is the costly black cloud in many of our import-export dreams. Yet, the general duty charged on most goods is significantly reduced or completely waived by Customs if the import adheres to a trade agreement. i.e. the silver lining in trade costs.
The first step in benefitting from trade agreements is understanding how they work:
First off, what is a trade agreement?
Trade agreements are agreements between two or more member nations on how they will work together to ensure mutual trade benefit. These agreements determine the import duties, that countries impose one another’s goods.
Generally, when countries have a trade agreement in place goods move more easily between those countries, and less duty taxes are imposed on the goods.
Importers benefit from trade agreements because they can spend less on their imports and therefore offer their wares at a more competitive price within the local market.
Exporters benefit because their goods (by incurring reduced or no duty) cost foreign importers less and are therefore more attractive in the international market, compared to goods bought from a non-member country.
Exciting right!? Let’s look at the trade agreements your business can benefit from.
South Africa’s trade agreement portfolio
Our main trade agreements are:
- SADC-FTA – A free trade agreement between 16 nations in Africa. Imports from these countries are generally duty free.
- SADC-EU EPA – An economic partnership agreement between the members of SADC and the European Union. Most imports from Europe under this agreement have a reduced or waived tariff.
These are just 2 of 7 trade agreements currently benefitting South African traders. Read about more trade agreements we have with Europe, South America, Asia, and the USA in this online guide.
What’s the snag?
Before calling your supplier up with a celebratory order, it’s crucial to note that there are prerequisites, or conditions, to benefitting from a trade agreement:.
Condition number 1: The Rules of Origin
Trade agreements exist for countries to boost one-another’s economies on every level. It therefore only applies to commodities that are manufactured or produced in a country which is intended to benefit from the agreement.
This is simple to achieve with a single-component product, like fruit grown in South Africa. It becomes more complicated with manufactured goods where components are sourced internationally, but assembly happens in the member country.
To establish the acceptable value (work and raw materials) that must go into a product for it to be considered a product of that country, each trade agreement has its own rules of origin.
The traded product only qualifies for preferential duty rates if it adheres to these rules.
Condition number 2: The Certificate of Origin
Even if the product in question adheres to the rules of origin, the customs authority in the country of import may only grant a preferential duty rate on the grounds that the appropriate certificate of origin accompanies the shipment. By nature, the responsibility of supplying the certificate lies with the exporter (seller).
In the case of the SADC-FTA, this would be a SADC certificate. In the case of the SADC-EU EPA, this would be a EUR.1 certificate (pronounced Euro-One).
Exporters take note: Certificates of origin are issued per shipment, so you need to stock up. Use this guide to determine what certificate of origin apply to your exports and click here to quire the appropriate certification.
Condition number 3: The appropriate registration
In order to obtain certificates of origin, South African exporters must be registered under the relevant trade agreement. This would be a SARS registration linked to their import export license.
Interested in getting registered under a South African trade agreement? No problem.
At Import Export License we’ll get you registered in no time. Here are your options:
1. Register your import export license and trade agreement registration at the same time.
2. Update your existing import export license to include a trade agreement registration.
3. Get your import export license, trade agreement registration and 10 certificates of origin at the same time.
Want to know more about how you can benefit from trade agreements and certificates of origin? Simply give us a call and speak to one of our knowledgeable Customs consultants.