The implementation of the Economic Partnership Agreement (EPA) with the European Union (EU) from October 10 marks the beginning of a new trade regime between Southern African Customs Union (Sacu) member States and the EU.
With the exception of South Africa, all Sacu member States have 100% access to the EU market. This means that they can export anything besides arms and ammunition to the EU duty free. However, in some cases, duty-free access applies up to an agreed quota, while, in a few cases, duties are in place, but at lower levels.
South African products’ access into the EU market has improved, compared with what was provided for under the Trade, Development and Cooperation Agreement. Under the EPA, 96.2% of the products in the EU tariff book will attract no duty, while access for 2.5% of the products has been partially liberalised, which means that duties will still be applicable, but at low levels. Less than 2% of the products in the tariff book were excluded from liberalisation, as they are sensitive to import competition. The increased access into the EU market will continue to strengthen South Africa’s exports and provide a platform to drive much-needed investment and employment growth. The good news is that new and improved market access was granted on products such as wine, sugar, ethanol, fruit and fruit juices, citrus jams, butter and yeast, among others.
South Africa and the rest of the Sacu member States also granted improved market access on products originating from the EU. A total of 74.1% of the products in the Sacu tariff book will enter the customs union duty free. Import duties remain on 12.1% of the products in the tariff book, while nearly 14% of the products remain protected, owing to their sensitivity to import competition. Under the EPA, duties on liberalised products can be increased should local producers come under pressure from EU imports. Several remedies to increase duties are provided for in the agreement. It is important for companies to understand these remedies and to make use of them when necessary.
Local importers and EU exporters will benefit from new or improved market access for wheat, fish, pig meat, butter, cheese, barley, cereal preparations and ice creams. Notable beneficiaries are importers of wheat, whose duty increased significantly in the past few weeks – from R911.17/t to R1 591.40/t. Importers now have the option to import 300 000 t of wheat from the EU duty free.
Mercosur-Sacu Preferential Trade Agreement
The implementation of the little known Mercosur-Sacu preferential trade agreement (PTA) is imminent, or the agreement may already have been implemented by the time you read this article. Mercosur comprises Argentina, Brazil, Paraguay, Uruguay and Venezuela. It should be noted that Venezuela was not a member when the PTA was negotiated and, therefore, does not benefit from the agreement. An additional protocol will have to be negotiated for Venezuela to be party to the PTA.
As far as the implementation of the PTA is concerned, Parliamentary processes have been completed and the South African Revenue Service has set in motion the necessary processes to implement the agreement. The PTA was scheduled to be implemented on October 20, with retrospective effect from April 1.
Local exporters and their Mercosur importers have already been benefiting from reduced-duty, or duty-free, access on the products covered in the agreement following Mercosur’s implementation of the PTA on April 1. For local importers, the retrospective implementation means that they will be able to apply for refunds on import duties paid (if any, or if the duty is more than that provided for in the agreement) from April 1. The Mercosur PTA provides Sacu exporters with the opportunity to tap into this market of over 280-million people.