Exporters should take advantage of trade agreements

09 May, 2021 - 00:05 0 Views
Exporters should take advantage of trade agreements

The Sunday Mail

Trade Focus
Allan Majuru

MRS Agnes Chimuti (not her real name) is a small business owner, who sells products that have been finding a market in a small neighbourhood in Gaborone, Botswana, thanks to her friends who have been helping find customers.

Demand for Mrs Chimuti’s leather products is growing and a buyer from a popular retail shop in the area indicates interest to list some of her products.

Having her products in a formal setting in Gaborone will be a major breakthrough for Mrs Chimuti, who has been trying to increase her export revenue so that she earns more foreign currency in order to import machinery to help improve the quality of her products.

The Gaborone retailer has several shops around the country and getting things right with the first order will open up an opportunity for her to supply the entire chain.

For the first order, Mrs Chimuti is asked to supply belts and sandals worth around US$950 and with the option of increasing subsequent orders in months to come.

Here is where the problem starts.

For a long time, Mrs Chimuti has assumed that formal exports were a preserve of established companies and for small businesses like hers, smuggling would get the job done.

Previously, Mrs Chimuti often asked travellers crossing into Botswana to deliver a few of her products to customers in the neighbouring country.

As per tradition, she packs her products into huge bags and goes to the main highway to find a cross border truck driver who will help smuggle her goods into Botswana.

They agree on a fee, exchange contact details and once the truck leaves, she goes back to her shop hoping that in a day or two, the buyer in Gaborone will confirm receipt of the order.

Five days later, Mrs Chimuti gets a call from the agitated retailer who wants to know when the products will be delivered.

She is in shock.

She imagined that by now the goods would have been delivered and the retailer would be updating her on actual sales.

Mrs Chimuti tries to call the truck driver, but his number is unreachable.

Both the driver and her leather products have vanished without a trace.

Reality slowly sinks in; she realises that she has lost much more than just her products.

She has lost a lucrative customer who could have set her off on a successful export journey.

Mrs Chimuti’s story is not unfamiliar for many small business owners looking to enter into the formal export market.

Many have faced challenges associated with failure to leverage on bi-lateral and multi-lateral trade agreements that Zimbabwe is part of.

Trade agreements are designed to stimulate and encourage trade between countries or a group of countries that are signatories to the agreement, by giving one another preferential treatment in the reduction or elimination of customs duties as well as removal or relaxation of quantitative restrictions.

For example, duty and import-related taxes often constitute a large percentage of the final price of a product secured through a cross border transaction.

As a result, a reduction or elimination of the duty can give the exporter a substantial advantage in terms of cost over competitors from countries that do not have similar trade agreements.

It is important therefore for businesses to note that, as part of the economic diplomacy drive being steered by President Mnangagwa, Government is pursuing approaches to simplify the landing of Zimbabwean products in export markets and at competitive prices.

The President has for a long time indicated that mutually beneficial trade with external parties will stimulate economic growth and help address some of the challenges faced by local industry.

To help local enterprises, the Government has signed several agreements targeted at improving the ease of doing export business, which in most cases offer preferential and relaxed conditions for Zimbabwean-produced products and services.

For example, the COMESA Simplified Trade Regime, operational in Malawi, Zambia and Zimbabwe, was introduced to make exporting easier for small-scale cross-border traders by simplifying and harmonising customs and border procedures as well as improving efficiency of border clearance processes.

This is one of the many examples of measures that have been put in place to integrate small businesses into export markets.

To help understand some of these agreements and what they offer, ZimTrade – the national trade development and promotion organisation – has put in place a Guide to Zimbabwe’s Trade Agreements whose purpose is to provide exporters and importers with an overview of the trade agreements that Zimbabwe has entered with other countries.

Using the document, local companies can develop export strategies based on which agreement offers best options for their businesses.

Existing preferential Bilateral Trade Agreements

Zimbabwe currently has four operational preferential bilateral trade agreements under which exporters can benefit.

These agreements are with Botswana, Malawi, Mozambique, and Namibia.

The Zimbabwe-Botswana trade agreement, ratified in 1988, offers reciprocal duty-free trade on all products grown, wholly produced, or manufactured wholly or partly from imported inputs subject to a 25 percent local content requirement.

With Malawi, there is a reciprocal trade agreement that has been in place since 1995, with 25 percent domestic value-added requirements.

In the case of Mozambique, the focus of the agreement that has been in place since 2005 is to eliminate tariff and non-tariff barriers and to co-operate in customs and trade promotion.

The agreement provides for duty-free trade between the two countries with the rules of origin specifying a 25 percent domestic value added.  Excluded from the agreement are refined and unrefined sugar, Coca-Cola/Schweppes soft drinks, firearms, ammunition and explosives, motor vehicles and cigarettes.

With regards to Zimbabwe and Namibia, there is a reciprocal agreement in effect since 1992, subject to rules of origin that require at least 25 percent local content for manufactured products.

Multilateral Trade Agreements

Zimbabwe has been implementing the SADC Trade Protocol since 2001.

The protocol is an agreement between SADC member states to reduce customs duties and other barriers to trade on products from member countries.

By lowering customs duties and removing other barriers to trade, the SADC member states intend to promote economic growth and regional integration.

Exporters within SADC enjoy preferential tariff rates granted to products that meet the SADC Rules of Origin and are accompanied by a SADC Certificate of Origin.

In addition to this, Zimbabwean exporters also enjoy trading under the COMESA Free Trade Area, designed to promote regional integration through trade development and to develop their natural and human resources for the mutual benefit of all their peoples.

COMESA also has a Simplified Trade Regime (STR), which helps small traders benefit from preferential rates enjoyed by commercial traders when importing or exporting goods within the COMESA bloc.

The regime is operational between Zimbabwe and Zambia, as well as Zimbabwe and Malawi; and is used for goods that have been grown or wholly produced in the COMESA region.

The trader will complete a simplified customs document (declaration form) and a simplified COMESA certificate of origin.

These documents are filled in at the border post by the trader and are stamped and certified by a customs official.

Agreements with European Union and United Kingdom

Zimbabwe has signed agreements with European Union (EU) and the United Kingdom (UK), which offer duty free and quota-free market access to local exporters.

The basic approach used in these agreements for determining a qualifying product is that it must be wholly produced locally from local materials, or at least have been substantially transformed locally, based on the respective qualifying criteria that are specified at the product, category or sector level as applicable.

Africa’s free trade area

The African Continental Free Trade Area (AfCFTA), which came into effect in January, deepens the economic integration of the African continent by creating a single market for goods and services and facilitating easy movement of persons.

The agreement offers Zimbabwean companies access to a market of more than 1,2 billion customers.

 

For local companies such an agreement will help them diversify their exports as well as open better access to raw materials from the rest of Africa.

With access to more raw materials, technologies, and a larger market, the AfCFTA will enable Zimbabwe to expand its export basket, currently dominated by commodities and low-value-added products, to include higher-value-added products that yield higher returns.

As these opportunities opens, it is important for businesses to note that only companies that have registered under the agreements will enjoy the benefits thereof.

Register for trade agreements

In order to qualify under most of the bilateral and multi-lateral trade agreements it is necessary for the company or exporter to register with the Zimbabwe Revenue Authority (ZIMRA).

To enable the ZIMRA officials to verify the eligibility of the products, the company or exporter is required to submit supporting documents such as an application letter, CR14, list of products intended for export, valid tax clearance certificate, and a factual cost analysis of the products intended for export.

A sample of the application letter to ZIMRA is available in the ZimTrade’s Guide to Zimbabwe’s Trade Agreements that can be downloaded on its website www.tradezimbabwe.com <http://www.tradezimbabwe.com>.

Certificates of origins must also be completed and submitted to ZIMRA.

Obtaining certificates of origins

For all trade agreements except the EU-ESA, exporters are required to submit Certificate of Origin to ZIMRA as part of the documentation and declaration process.

This is documentary proof that goods or products meet the rules of origin requirements as specified by the trade agreement.

The certificates of origins can be obtained at ZimTrade offices in Harare, Bulawayo and Mutare.

Allan Majuru is ZimTrade’s chief executive.

 

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