South African (SA) exporters in recent months have been hit hard from all angles, with increased uncertainty and unpredictability in world markets resulting from the ongoing international conflicts and trade wars, making it very hard to do business as usual.
One of the solutions for exporters is to diversify their exports to alternative markets and to consider increasing exports to existing markets and/or exploring new markets. Europe, specifically the European Union (EU) has traditionally been one of SA’s biggest trading partners and remains one of the biggest export markets for SA products.
Unlike the US’s African Growth and Opportunity Act (AGOA) which is a unilateral trade agreement, SA exporters are guaranteed future market access to the EU by way of the SADC-EU Economic Partnership Agreement (EPA), a binding and enforceable Free Trade Agreement (FTA) that provides guaranteed duty-free access in accordance with clear and transparent rules.
SA has had a bilateral FTA in place with the EU for over 20 years. The SA-EU Trade, Development and Cooperation Agreement (TDCA) entered into force on 1 January 2000 and provided for the removal of tariffs and non-tariff barriers on substantially all trade between SA and the EU, covering approximately 90% of all products.
The TDCA was replaced by the SADC-EU EPA to also include the Southern African Customs Union (SACU) countries, being Botswana, Eswatini, Lesotho and Namibia, in the FTA together with neighbouring Mozambique. The SADC-EU EPA provides SA exporters with duty-free market access to the EU market for almost all exports with the exception of certain sensitive products covering mostly agricultural products.
The EU market currently consists of 27 countries with over 450 million people, forming a single market in which goods can be freely traded without border checks. This clearly presents many opportunities to SA exporters that need to diversify their exports. For non-EU European countries, SA is also a party to the SACU-EFTA FTA that provides similar duty-free access to the non-EU European countries, including Switzerland, Norway, Liechtenstein and Iceland.
While the UK is no longer part of the EU, SA exporters also still enjoy duty-free access to the UK market through the SACUM-UK EPA that ensures similar and, in some cases, even better access to the UK market than what was in place while the UK was still a party to the SADC-EU EPA. As with the SADC-EU EPA, this FTA provides duty-free access to the UK market for products from all SACU countries plus Mozambique. With all of these FTAs, the first step would be for SA exporters to check whether their products are covered under the duty-free treatment in terms of the relevant schedules to the specific FTA. Thereafter, exporters will have to ensure that their products comply with the specific Rule of Origin (RoO) applicable to their product, which basically operates like a “passport” for products to determine or to deem their source of origin. These RoO can be straightforward, for example, simply requiring a certain percentage of value addition to have been undertaken within the country of origin, while in other cases they can be very detailed and complex.
Simple “screwdriver operations” such as adding the wheels to a bicycle or simply changing packaging and labelling do not change the origin of goods, and attempts to transship products by concealing their true origin in such a way will amount to Customs fraud. This can have serious consequences for exporters, including the seizure of their goods, penalties and possible criminal charges.
Exporters furthermore have to ensure that they comply with all other regulations in the relevant export market, including Customs regulations, Sanitary and Phytosanitary (SPS) measures regulating human, animal and plant life and health, product standards, labelling requirements and consumer protection legislation to name a few. While this clearly entails a lot of homework, European markets promise a lot of opportunities for SA exporters to diversify their export markets and offer long-term predictability and stability that are crucial for building a successful export business.
ABOUT TRADE LAW CHAMBERS
The author: Niel Joubert, Director at Trade Law Chambers, niel@tradelawchambers.co.za
Trade Law Chambers is rated as the leading international trade law firm in South Africa. We specialise in international trade, corporate, commercial and investment law as well as international commercial dispute resolution. Our professionals at Trade Law Chambers are international trade lawyers, practising South African attorneys with Geldenhuys Joubert Incorporated Attorneys as well as qualified solicitors of England and Wales. This allows us to deliver unparalleled legal advice on international and domestic legal issues and to pursue trade and transactional disputes before international tribunals and South African courts.
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