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AfCFTA Guide
Trade in Goods
The African Continental Free Trade Area (AfCFTA) represents a historic milestone in Africa's aspirations towards achieving economic integration. With the ambitious objective of creating a single market for goods and services across the continent, the AfCFTA is expected to help unlock Africa's trade potential and encourage sustainable development for a prosperous future.
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The Protocol on Trade in Goods includes the gradual elimination of tariffs and non-tariff barriers, enhanced customs procedures, and cooperation on technical barriers to trade. By promoting regional and continental value chains, the Protocol strives to boost competitiveness, increase trade and investment opportunities, and create economies of scale for businesses across the State Parties.
The Protocol acknowledges the diverse levels of development among Member States and provides flexibility and special and differential treatment to Member States with special needs.
Liberalisation of Trade
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The provisions relating to the liberalisation of trade, contained in the Protocol on Trade in Goods, play a crucial role in ensuring the smooth flow of goods among Member States. It covers import and export duties, elimination of quantitative restrictions, tariff concessions, non-tariff barriers, and rules of origin. By understanding and implementing these provisions, State Parties can promote a more integrated, fair, and prosperous trading environment within the AfCFTA.
Elimination of Import Duties: Member States have committed to progressively eliminating import duties or charges with equivalent effects on goods originating from other Member States.
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An import duty is a fee or charge imposed on goods imported from one country to another. However, certain charges, including internal taxes on similar goods within the country, antidumping or countervailing duties, and duties related to safeguards, do not fall under the category of import duties.
Under the AfCFTA, the following modalities will apply to the elimination of import duties:
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Tariff lines will be phased out completely over a period of 10 years for LDCs and 5 years for non-LDCs for non-sensitive goods, representing 90% of tariff lines.
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All Members can retain tariffs for a period of 5 years on sensitive goods, representing 7% of tariff lines, with the phasing out of tariffs occurring as from the 6th year.
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All Members can exclude the remaining 3% of tariff lines from liberalisation, although this will be subject to review every five years.
90%
Tariff lines on non-sensitive products
7%
Tariff lines on sensitive products
3%
Tariff lines excluded
Member States will apply preferential tariffs to imports from other Member States based on their Schedule of Tariff Concessions. As of February 2023, 46 Provisional Schedules of Tariff Concession have been submitted by member states, including the schedules from four Customs Unions, namely CEMAC, EAC, ECOWAS, and SACU.
To identify the tariffs applicable for any product being traded on the continent, the AfCFTA Secretariat has developed the AfCFTA e-Tariff Book.
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While its primary use is intended for Trade and Customs Authorities, the e-Tariff Book also serves as a valuable resource for the private sector, empowering traders with information and knowledge on tariffs, and commodity classification.
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The E-Tariff Book is accessible through this link: https://au-afcfta.org/etariff/
We have also developed an intuitive dashboard that allows users to easily view tariff offers made by different countries for different products. Access here.
Quantitative Restrictions: Quantitative Restrictions are not allowed under the AfCFTA.
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Quantitative restrictions are instruments that limit the quantity or volume of goods that can be imported or exported between countries. Some examples of quantitative restrictions include import and export quotas, embargoes, and import and export licences.
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While quantitative restrictions cannot be applied by members of the AfCFTA, there are some exceptional circumstances in which quantitative restrictions can be applied. This is in accordance with Article XI of GATT 1994. Some restrictions that can be maintained include:
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restrictions to safeguard the balance of payments;
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import or export restrictions made effective through State-trading operations;
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assistance for economic development through protective or other measures;
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safeguard actions; and
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security exceptions
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Export Duties: State Parties may regulate export duties but must apply them on a non-discriminatory basis for goods exported to all destinations.
Non Discrimination
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Non-discrimination is a key principle in free trade agreements (FTAs), including the AfCFTA. The aim is to foster equitable trade relations among Member States while promoting economic growth and cooperation.
Most-Favoured-Nation Treatment: According to Article 4 of the Protocol, Member States are required to accord Most-Favoured-Nation (MFN) treatment to each other. MFN treatment means that Member States must provide the same benefits and advantages to all other Parties without discrimination.
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Nonetheless, the AfCFTA still allows Member States to establish preferential trade arrangements with third parties, as long as such arrangements do not hinder the objectives of the Protocol. However, if any advantage or concession is granted to a third party, it must be extended on a reciprocal basis to all other Parties of the AfCFTA. However, this does not apply to any advantage or concession granted prior to the entry into force of the AfCFTA.
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Suppose Kenya grants a tariff reduction of 10% on a specific product to the European Union through an FTA. According to the MFN Treatment clause, Kenya must extend the same 10% tariff reduction to all other contracting Parties of the AfCFTA.
National Treatment: According to Article 5 of the Protocol, a Member State is obligated to treat products imported from other Member States no less favourably than domestic products, once the imported products have been cleared by customs. This treatment applies to all aspects affecting the sale and conditions for the sale of these products. In other words, State Parties must not discriminate against foreign products and must treat them on par with domestically produced goods in terms of market access and trading conditions. This ensures that imported products receive equal treatment as domestic products and promotes a level playing field.
Suppose Madagascar imposes certain sanitary requirements on domestically produced canned fish to ensure product safety. When importing the same canned fish from Mauritius, Madagascar must apply the same regulations to the imported goods after customs clearance.
Special and Differential Treatment: One of the core objectives of the AfCFTA is to ensure mutually beneficial trade. In order to achieve this objective, Member States are expected to provide flexibility to other Member States based on their different levels of economic development or individual specificities.
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These flexibilities may include special considerations and an additional transition period for the implementation of the Agreement, offered on a case-by-case basis. This provision acknowledges the diverse economic conditions among the participating countries and seeks to foster inclusive and sustainable trade within the AfCFTA. Special and Differential treatment allows countries to integrate into the AfCFTA at a suitable pace, fostering inclusive trade growth and facilitating economic development.
Suppose Rwanda, which is a less developed economy, faces challenges in implementing certain trade-related measures due to limited resources. South Africa, a more developed economy, offers technical assistance and additional transition periods to Rwanda for the gradual implementation of certain trade obligations.
Trade Remedies
Trade remedies can be applied by Member States under the AfCFTA, in order to protect certain industries and ensure fair competition. Trade remedies comprise actions taken in response to subsidies, imports at low and unfair values and import surges. If a Member State identifies a strategic industry facing any of these challenges, it can impose temporary protective measures, such as countervailing duties, anti-dumping measures, and safeguards. However, such measures must be applied fairly and for a reasonable time.
Moreover, the AfCFTA also includes measures aimed at protecting infant industries if countries consider them to have strategic importance for growth and development. However, before implementing any protective measures, the Member State must demonstrate that it has made reasonable efforts to overcome the challenges faced by these industries. Any measures being applied must not discriminate between countries and can only be applied for a specified period.
Non-Tariff Barriers
Non-tariff barriers (NTBs) refer to any measures, other than tariffs, that can act as a barrier to international trade between countries. These can include a range of measures such as government subsidies, customs procedures, and rules of origin, among others. For example, in Kenya, weighbridges are a common feature between the port of Mombasa and other border towns. Kenya imposes restrictions requiring that vehicles only carry the weight mentioned in their tare and gross weight specifications. Before crossing any weighbridges, vehicles are weighed and are either fined or need to pay charges in instances of overload. While such restrictions are crucial for ensuring road safety and the preservation of infrastructure, they also impact businesses, causing delays and representing a challenge to smooth trade flows.
NTBs under the AfCFTA have been classified into seven broad categories based on their nature.
NTBs can be more restrictive for trade than tariffs. They are estimated to have severe trade-dampening effects on imports. Inefficient customs and entry requirements increase compliance costs for businesses engaged in cross-border trade. In the context of the AfCFTA, the elimination of NTBs unlocks new trade opportunities by reducing the costs of trade. The creation of a common set of rules for participating countries in areas such as competition policy, health standards and technical barriers to trade increases cooperation and reduces grounds for overlapping of laws and regimes.
Further, the reduction of NTBs can boost the effectiveness of tariff liberalisation by raising consumption levels and income. UNCTAD estimates that a reduction in NTBs alone has the potential to bring in an estimated US $20 billion to the African economy as a whole. The IMF estimates that a 35% reduction in NTBs alone has the potential to increase welfare in Africa by 1.7% and when combined with tariff elimination it can bring in a 2.1% increase in welfare in Africa.
Reporting and Monitoring Tools: The AfCFTA adopts an institutionalised approach to reducing and monitoring the process of NTB reduction. Through a hierarchical system of committees, it can extend the participation of public and private stakeholders and capture their recommendations in the process of policy formulation.
At each National level, a National Monitoring Committee and National Focal points will be set up through which businesses can receive clear guidelines on monitoring and evaluation mechanisms. The National Focal points are the first point of contact through which businesses or economic operators can register a complaint or trade concern.
Businesses can report any obstacle encountered when trading goods across intra-African borders through an online platform developed by the AfCFTA. The website can be accessed here: https://www.tradebarriers.africa/
Soon, businesses will also have the option to report NTBs via SMS. The website is available in 4 different languages, namely Arabic, English, French, and Portuguese.
Sanitary and Phytosanitary Measures
SPS measures under the AfCFTA are based on the WTO Agreement on the Application of Sanitary and Phytosanitary Measures. The primary objective of these measures is to facilitate trade while ensuring the safety of human, animal or plant life and health. The AfCFTA ensures additional cooperation in this area by promoting transparency in implementing SPS measures and improving the technical capacity of AfCFTA states to monitor and implement these measures. Cooperation in SPS measures is based on the following principles:
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Risk Assessment: SPS measures developed by Member States should be based on assessments that analyse the level of risk to human, animal and plant health and life using scientific evidence, sampling and testing methods and relevant inspection. Relevant economic factors and potential damages to production and sales in the event of a disease must also be taken into account. The AfCFTA also allows for SPS measures to be based on those developed by international organisations, should states feel they do not have the scientific capacity to indigenously develop their SPS measures.
Equivalence: The SPS measures developed by state parties must be recognised equally by both importing and exporting states. Equivalence allows for mutual recognition of measures on both bilateral and multilateral levels.
Harmonisation: To promote further cooperation in SPS measures, States are encouraged to cooperate and work towards harmonising their rules at the regional level. State parties shall do so by basing their measures on international standards, relevant guidelines, and recommendations. These guidelines are issued by organisations such as the International Plant Protection Convention (IPPC), the World Organisation for Animal Health (OIE) and the Codex Alimentarius Commission (CAC).
Inspections, Verifications and Fees: State Parties can conduct audits and verification checks to ensure that SPS measures under the AfCFTA are being implemented and monitored based on the set guidelines. The costs of the same are to be borne by the State Parties themselves. Further, Member States can also carry out inspections for imports and exports based on guidelines established by international standard bodies.
Transparency: To ensure clarity, trust and predictability, Parties while formulating, implementing, and monitoring their SPS measures must comply with the obligations of the SPS Sub-Committee under the AfCFTA. State parties must also identify and designate a national focal point that acts as an intermediary between coordination procedures at the regional and national levels. Mutual exchange of information on SPS measures must also be promoted between states on matters such as quarantine restrictions, pests or diseases and food safety issues.
Technical Consultations: State Parties can request technical consultations with other Parties in the event of significant concerns concerning food safety, plant health or animal health. The responding party has 30 days to decide on the requesting Parties concerns and information will be provided to avoid disruption to trade.
Emergency: There are also provisions for emergency SPS measures in the event of an unforeseen disease outbreak. In such a case, State Parties must notify emergency SPS measures within 48 hours of the decision to implement the emergency measure.
To monitor the progress of SPS measures, a sub-committee on Sanitary and Phytosanitary measures will be established. The sub-committee will be composed of representatives from State Parties who will monitor, review, and provide direction to the implementation of SPS measures listed under the AfCFTA. The sub-committee will also facilitate understanding between state parties and collaborate with other sub-committees to facilitate intra-African trade. Implementing capacity-building measures and identifying opportunities to encourage the bilateral exchange of information will be additional responsibilities of the sub-committee.
Technical Barriers to Trade
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Technical barriers to trade (TBT) refer to non-tariff measures that hinder or restrict international trade through the imposition of technical regulations, standards, conformity assessments and other procedures. If States can improve cooperation on TBTs, unnecessary and unjustifiable technical barriers to trade can be eliminated. This can be done through promoting the use of international standards, and reinforcing international best practices in regulation and standards setting.
Standardisation: To facilitate trade, Member States must cooperate with each other’s respective standardisation bodies. States must develop and promote the adoption of standards developed by the African Organisation for Standardisation (ARSO) and the African Electrotechnical Standardisation Commission (AFSEC). National focal points must be identified to ensure that exporters and importers in Member States are aware of the standards developed by these organisations. Membership in additional regional and international standardisation organisations is also encouraged through the AfCFTA.
Technical Regulations: Compliance with technical regulations is based on the WTO TBT Agreement and the use of international standards as a basis for technical regulations.
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Conformity Assessments: To promote further cooperation and harmonisation, conformity assessments must be used as a tool to facilitate trade between states. The results of conformity assessments must be mutually accepted by state parties and recognised under appropriate multilateral agreements.
Accreditation: The AfCFTA encourages its Member States to support and use African accreditation bodies to help them gain international recognition. The AfCFTA also encourages Member States’ increased participation and recognition of the African Accreditation Cooperation (AFRAC) and use it as a tool to facilitate intra-African trade.
Technical Assistance and Capacity Building: Member States must cooperate in seeking and providing technical assistance and capacity building in areas about standards, technical regulations, conformity assessment, accreditation, metrology, and other related matters that are of mutual interest. The AfCFTA Secretariat will establish a joint work programme to enhance Member States’ capacities to effectively meet their obligations relating to TBT.
To monitor the progress of TBT measures, a sub-committee on the Technical Barriers to Trade will be established that will be composed of representatives from State Parties. The sub-committee will be responsible for developing procedures to implement cooperation in TBT measures, implement capacity-building programmes and promote cooperation to use existing human, scientific and technical resources. It is also tasked with identifying areas for collaboration in developing infrastructure that supports standards, technical regulations, accreditation, metrology, and conformity assessments.
Rules of Origin
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Rules of Origin (RoO) determine the national origin of a product by establishing the specific criteria that must be met for the product to be considered originating from a country and to benefit from tariff preferences. These criteria are based on several factors, including the sourcing of inputs, any manufacturing process involved and the value addition. Like other free trade agreements, under the AfCFTA, goods qualify for preferential tariff treatment if they originate in the Member States. Goods not originating from the Member States are subject to MFN tariff rates.
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Criteria for Determining Origin under the AfCFTA:
Annex 2 of the AfCFTA agreement (also referred to as Annex on RoO) details the criteria for determining eligibility for preferential treatment. Article 4 of Annex 2 states that a product will be considered originating from a country if it has been wholly obtained or has undergone substantial transformation in that country:
Wholly Obtained:
Wholly Obtained (WO): Products are regarded as WO in a Member State if only that Member State has been involved in the production of these products. Materials from outside the AfCFTA cannot be used in their production and any use of such materials disqualifies the products from being WO.
Example: Hides obtained from cattle that are born, raised, and slaughtered in Ethiopia.
Sufficiently worked or Processed Products:
Value-Addition: A product is considered originating if the value of manufacturing increases the value of the final product to a specified minimum threshold of domestic content required (expressed as an ad-valorem percentage).
Example: Pasta is subject to a value addition rule of 40% where the materials used exceed 40% of the ex-works price of the product.
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Non-Originating Material Content: This rule confers origin to a product if the amount of non-originating raw materials allowed is below a specific limit.
Example: Pharmaceutical products are subject to the Non-Originating Material Content rule where manufacture in which the value of the materials used does not exceed 60% of the ex-works price of the product grants originating status to the product.
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Change in Tariff Heading: This rule is fulfilled if a product is manufactured from raw materials with a tariff code that is different from the final product.
Change in Tariff Heading (CTH): The finished goods are considered to be sufficiently worked or processed when the non-originating materials used in production are classified within a tariff Heading that is different from that of the finished Product.
Example: Soap bars (HS 3401) that are manufactured from animal fat (HS 1506) and perfume (HS 3302).
Change in Tariff Sub-Heading (CTSH): Finished goods are considered to be sufficiently worked or processed when the non-originating materials used in production are classified within a tariff Sub-heading that is different from that of the finished Product.
Example: Razors (HS 8212.10) that include safety razor blades (HS 8212.20)
Specific Processing: A product is considered as originating under this rule if it undergoes the manufacturing operations detailed in Annex 2 of the Agreement.
Example: Diamonds (HS 7102) must undergo polishing to transform rough and unworked diamonds.
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It should be noted that Article 7(2) of the Annex on RoO states that agricultural products partially or fully obtained from food aid, monetisation or other assistance measures, including arrangements on non-commercial terms, will not be considered originating in a Member State.
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Cumulation of Origin: The AfCFTA also allows for cumulation of origin, i.e. raw materials or semi-finished goods originating in one AfCFTA Member State that undergo sufficient working or processing in another AfCFTA Member State, can be considered as originating in the Member State where the final processing or manufacturing occurs.
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Example: Suppose Mauritius imports fibre from Spain and makes yarn which is exported to South Africa where it is turned into fabric. This fabric is then shipped to Kenya where it is processed into women’s clothing. The cumulation rules allow for the women’s clothing produced in Kenya to be considered as originating in Kenya.
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Working or Processing not Conferring Origin: Article 7(1) of the Annex on RoO describes a list of operations that are insufficient to confer origin on a product irrespective of whether the requirements of Article 4 on origin conferring criteria are satisfied. These operations include, amongst others, disassembly or assembly; washing or cleaning; basic pressing or ironing; painting; and packaging among others.
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Example: Suppose Ghana imports automotive parts from Japan to assemble pick-up trucks at a site on the outskirts of Accra. The pick-up trucks retain their Japanese origin because assembly is insufficient to confer origin.
Documentation for Proof of Origin
Regarding the documentation required to show proof of origin, Member States can submit a Certificate of Origin issued per the Member State’s national legislation. Alternatively, an Origin Declaration may be submitted by:
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An exporter who frequently exports products covered by the Annex on RoO and complies with all requirements and who is designated as an Approved Exporter by the Member State’s competent authority; and
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An exporter of consignments consisting of one or more packages of originating products valued at less than USD 5,000.
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Example: An exporter in Rwanda, wishing to benefit from tariff preferences under the AfCFTA for the exports of coffee to Ghana, should submit an application for a certificate of origin along with the invoice and packing list to the Customs Service Department. The latter will evaluate the application before issuing the Certificate of Origin.
The AfCFTA Secretariat’s Manual on Rules of Origin is an excellent resource for more detailed information on the AfCFTA Rules of Origin. It can be accessed here.