Customs Union

TRADE, CUSTOMS AND MONETARY AFFAIRS

CUSTOMS UNION

Article 45 of the COMESA Treaty requires the member States to establish a Customs Union over a transitional period of ten years from the entry into force of the Treaty. The Customs Union is the next step in COMESA's integration agenda.

A Customs Union may be defined as a merger of two or more customs territories into a single customs territory, in which customs duties and other measures that restrict trade are eliminated for substantially all trade between the merged territories. Those territories, in turn, apply the same duties and measures in their trade with third parties, that is, territories not included in the Union.

The key elements of a Customs Union are as follows:

In preparation for the Customs Union, the Eleventh Meeting of the Council of Ministers held in Cairo, Egypt, adopted a Road Map that outlined programmes and activities whose implementation was necessary before the launching of the Union. A significant amount of work has been undertaken to date, as follows:

A CTN, based on Harmonised System 2002, has been developed and adopted. Some member States have already aligned their national nomenclatures to the CTN.

15 member States have adopted the WTO Valuation Agreement as their customs valuation system, whilst an additional four are making preparations to implement the system

The COMESA Customs Management Act sets the customs rules and procedures to be implemented by customs administrations and has been adopted by Directors of Customs.

In addition to the adoption of a programme for relaxation and elimination of non-tariff barriers and other obstacles to intra-COMESA trade, the Sixteenth Meeting of the Council of Ministers adopted a tool for reporting non-tariff barriers to National Enquiry Points.

The CET of the Customs Union

The CET is applied to imports from third countries subject to the Most Favoured Nation (MFN) rates. Initial work on the CET started in 1997; a whole range of structures has been analysed in terms of their implications for government revenue and industrial competitiveness. Whereas the broadest range was set in 1999, finalisation is subject to negotiation. The rates will apply to four main categories of goods, as follows:

At its Eighteenth Meeting in Lusaka, Zambia in December, 2004, the Council of Ministers decided that member States should work towards harmonising their external tariffs as a transition strategy towards realising the COMESA CET, as follows:

Whilst there is agreement on the CET target rates for capital and raw materials, work is ongoing on rates for intermediate and finished products. With regard to the rates for intermediate products, many of which are direct inputs for industry, there is a need to define a rate that will ensure industrial competitiveness. In that regard, an exercise is ongoing that will provide for exceptions, exclusions and derogations. This exercise will also take into account goods used as inputs in production, goods under a rebate system, merit goods, goods of social significance and goods covered by international agreements. With regard to the rates for finished products, there is agreement to harmonise tariffs in the range of 25-40 per cent.

The Cairo Road Map for the Customs Union has been revised in view of new issues that have arisen during negotiations and consultations. The Revised Road Map will include the following elements: