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LEVERAGING MAURITIUS TO EFFICIENTLY NAVIGATE THE SADC AND COMESA FREE TRADE AREAS

The Southern African Development Community (SADC) and Common Market for Eastern and Southern Africa (COMESA) are regional economic communities with the primary goal of establishing a free trade relationship among member States within the southern and eastern African region. The main advantage of trading between countries having signed bi-lateral agreements within the SADC and COMESA is the absence of customs duties and trade barriers such as quotas levied on product consignments. While customs duties, or taxes imposed on imports and exports, are an important tool for States to raises their revenues, safeguard domestic industries and regulate movement of goods, they also provide a means which, by efficient planning, reduction or outright elimination, help foster amicable international relationships and trade facilitation between agreeing States. The SADC counts 16 member States whereas the COMESA counts 21 members.

The Free Trade Areas created by international protocols such as the SADC and COMESA constitute a sizable incentive for freeport operators and exporters looking to grow into the African market. As an example, import customs duty in Mauritius stands at a flat rate of 10% (in the absence of any bi-lateral agreement) whilst the same duty can range up to 40% in South Africa depending on the type of goods being imported into the country. On the other hand, where such goods originate from fellow member States and subject to satisfying established “Rules of Origin”, the applicable customs duties have been gradually brought down to zero. In addition to the deletion of customs duty within the Free Trade Areas, member States such as Mauritius offer conducive advantages such as an eight-year corporate income tax holiday for newly incorporated freeport operators or developers establishing their business on the island through its constantly innovating International Financial Center.

However, in order to benefit from the trade protocols of the SADC and COMESA, strict Rules of Origin must be respected. For instance, The COMESA Rules of Origin have five independent criteria, and goods are considered as originating in a member State if they meet any of the five. The criteria are as follows:

  • The goods should be wholly produced in a member State; or
  • The goods should be produced in the member States and the c.i.f. value of any foreign materials should not exceed 60% of the total cost of all materials used in their production; or
  • The goods should be produced in the member States and attain a value added of at least 35% of the ex-factory cost of the goods; or
  • The goods should be produced in the member States and should be classifiable under a tariff heading other than the tariff heading of the non-originating materials used in their production; or
  • The goods should be designated by the Council of Ministers of the COMESA as “goods of particular importance to the economic development of the member States” and should contain not less than 25% value added.

In a similar vein, the Rules of Origin of the SADC Free Trade Area provide for the following requirements to be met:

  • The goods must be wholly produced or obtained within a member State; or
  • Produced in a member State using non-originated materials, but have been substantially processed within one member State; or
  • Changed tariff headings due to the processing that occurred in a member State.

While such Rules of Origin may seem daunting to navigate, they are an essential tool for the protection of the economic and production growth of member States of both the SADC and COMESA. At Centurion Law Group, we are fully equipped to assist exporters and freeport operators operating within the SADC and COMESA as well as through freeport hubs such as Mauritius, to assist our clients in navigating the requirements of applicable international protocols and rules such as the strict Rules of Origin and to take full advantage of the incentives offered by the SADC and COMESA.

We are also constantly updating our knowledge and understanding of the recent and planned developments in the SADC and COMESA region and are ready to embark on a better streamlined and prosperous future for the African continent with both the SADC and COMESA incidentally urging for an African customs union and the establishment of fixed Common External Tariff (CET) covering goods imported from non-member States into the region.

Reach out to our team of lawyers and business advisors at Centurion Law Group. We seamlessly guide our clients through Africa’s abundant investment opportunities.

Keseena Chengadu – [email protected]

Ashiv Parianen – [email protected]