Trade Facilitation and Regional Integration in Africa – Summary Report

TRADE FACILITATION AND REGIONAL INTEGRATION IN AFRICA

2022 Cape Town

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Design: Mandy Darling, Magenta Media

On 31 August 2022, the Nelson Mandela School of Public Governance at the University of Cape Town hosted a virtual webinar titled Trade Facilitation, Climate Finance, and the Strengthening of Africa’s Development Finance Institutions. This webinar was part of the African Continental Free Trade Area (AfCFTA) and Transformative Industrialisation Webinar Series. This report summarises the first session of the event, focusing specifically on trade facilitation in the context of regional integration in Africa.

1. Brief Background

Trade facilitation aims to reduce the financial cost, time, and effort it takes to move goods across borders. Additionally, it plays a critical role in lowering overall trade costs leading to increased trade flows and improved prospects for economic development, particularly for developing countries. A full spectrum of border procedures, including (but not limited to), the electronic exchange of data, the simplification and harmonisation of trade documents, and administrative decisions by border agencies, all play a significant role in facilitating the mobility of goods and services. Essentially, improved customs and border management practices enhance border processes, irrespective of the trade partner.

When the AfCFTA came into force in 2019, it underscored the urgent need for trade facilitation measures to be devised and implemented to increase intra-African trade. The AfCFTA Protocol on Trade in Goods contains provisions and annexes that are related to trade facilitation. It stresses that member states are to pursue harmonisation in the interests of

continental trade facilitation. Additionally, the emergence and operationalisation of the AfCFTA highlights the urgency for expansive infrastructural development and integration to be fast-tracked. If the AfCFTA aims of accelerating intra-African trade and improving manufacturing capacity and industrial development across the continent are to be realised, infrastructural integration must be prioritised.

The first session of the webinar was split into two parts. A plenary session, focused on the rules of trade facilitation, specifically outlining Annex 4 of the Protocol on Trade in Goods and the implementation of the World Trade Organization’s trade facilitation agreement. Session 1, titled Trade Facilitation and Hard Infrastructure, explored what soft and hard infrastructure must be developed to prevent the AfCFTA from becoming a paper tiger. Additionally, the status of policy frameworks, practices, and initiatives relevant to trade facilitation in Africa was also discussed.

2. Speaker Biographies

Demitta Gyang is a Senior Adviser to the Secretary-General of the African Continental Free Trade Area (AfCFTA) and the Head of Customs Cooperation, Trade Facilitation and Transit at the AfCFTA Secretariat. She also serves on several Nigerian national committees, including the National Food Safety Management Committee, Task Force on Trade Facilitation, and the Technical Committee on Review of Nigeria’s Trade Policy. Demitta holds a master’s degree in International Law and Economics from the World Trade Institute, University of Bern, Switzerland (2012-2013).

Dolores Halloran is an Acting Secretary of the Trade Facilitation Committee in the World Trade Organisation (WTO). She is also an Economic Affairs Officer in the WTO’s Market Access Division.

Lazzat Daniyarova is a Technical Officer at the World Customs Organisation (WCO). Her work mainly explores the SAFE Framework of Standards, the Revised Kyoto Convention, and Multilateral Trade Facilitation frameworks. Lazzat holds a master’s degree in public finance from the National Graduate Institute for Policy Studies in Japan.

Christian Knebel is an Economic Affairs Officer in the Division on International Trade and Commodities at the United Nations Conference on Trade and Development (UNCTAD). Christian leads UNCTAD’s support programme to the African Union on implementing the AfCFTA Non-Tariff Barriers mechanism. Previously, he worked at the International Trade Centre from 2008- 2009.

Taeko Nyesemane is a Deputy Commissioner in the Frontier Services Division (Customs) of the Client Services Division in the Revenue Services Lesotho (RSL), formerly the Lesotho Revenue Authority (LRA). Dr Nysemane is a member of the LRA Senior Management Team. In addition to having over 20 years of experience in trade facilitation and customs, he also holds a PhD in Business Administration from North-West University (2021).

Josephine Manyasi has been a Customs and Tax officer for more than 16 years at the Kenya Revenue Authority (KRA). She joined as a graduate trainee and rose through the ranks to become the Deputy Commissioner of Trade Facilitation. Josephine currently serves in the KRAs trade facilitation division, implementing trade facilitation agreement initiatives and fostering customs business relationships.

3. Plenary: Rules of Trade Facilitation

3.1 State of Play: The AfCFTA Trade Facilitation Measures

Demitta Gyang discussed the state of play of the trade facilitation annexes to the AfCFTA’s Protocol on Trade in Goods (“the Protocol”). The Protocol has nine annexes, three of which (noted below) cover the legal framework for trade facilitation:

• Annex 3: Customs Co-operation and Mutual Administrative Assistance;

• Annex 4: Trade Facilitation; and,

• Annex 8: Transit.

Annex 4 deals exclusively with trade facilitation measures and has two broad objectives. Firstly, it aims to simplify and harmonise international trade procedures and logistics. Secondly, it seeks to expedite the movement, clearance and release of goods (imports, exports, and goods in transit) across borders. Accordingly, the AfCFTA is prioritising the development and implementation of ICT infrastructure to transform, scale up, and expedite trade facilitation procedures and processes. The legal framework covering trade facilitation in the Protocol does not reinvent the wheel but instead mirrors and integrates existing measures from the WTO and the WCO.

A Sub-Committee in the Committee on Trade in Goods (the Committee) meets annually to review developments and follows up on progress on all trade facilitation annexes. This Sub-Committees has devised strategies to upscale the implementation of trade facilitation measures across Africa. However, accountability on commitments is placed on Member States, and The Secretariat only plays a facilitatory role. For example, the AfCFTA facilitates consultative meetings with corridor members to aid in developing trade corridors. One of the Sub-Committee on Trade Facilitation’s biggest priorities is implementing a corridor approach. Accordingly, it has provisioned a mandate to outline the roles and responsibilities in

operationalising this corridor approach. The Abidjan-Lagos Corridor is the first transport corridor being developed and monitored by the AfCFTA.

The AfCFTA makes provision for the establishment of National Trade Facilitation Committees (NTFC). Their role is to oversee the implementation of applicable trade facilitation reforms. NFTCs are not mandatory, but countries are encouraged to use them, even if by utilising already existing trade facilitation and customs bodies within their jurisdictions.

Taking a bilateral approach to enhancing crossborder trade facilitation is necessary. One of the most significant issues is that custom administration at borders is not harmonised. Data is required to transport goods across borders. However, the process is severely delayed as different countries have varying administrative systems. Language barriers also present an issue when the various countries’ customs operating systems use different languages; this further delays the speed of transit. Therefore, bilateral cooperation is essential in addressing these obstacles.

3.2 State of play: The WTO Trade Facilitation Mechanisms

Dolores Halloran outlined the state of play of the WTO’s Trade Facilitation Agreement (TFA) which came into force in 2017. The primary objectives of the TFA are:

• To expedite the clearance, movement and release of goods, including goods in transit;

• To facilitate “effective cooperation among Members on trade facilitation and customs compliance issues;” and

• To enhance “assistance and support for capacity building” for developing and least developed country members.

2022 was the deadline for developing and Least Developed Countries (LDCs) to submit

their notifications on how and when they intend to implement the TFA, as well as the technical assistance they will require. The first review of the implementation of the agreement was conducted in November 2021. It revealed that, globally, there is currently a 74% implementation rate of the agreed commitments. This figure is based on submitted notifications. In Africa, 46% of the parties to the agreement have implemented TFA commitments. Besides this global-African dichotomy, there is further differentiation between developing countries and LDCs. Implementation rates are far lower in LDCs, at just 37%. Consequently, the TFA provides flexibility for developing country members. This includes delaying the implementation of commitments, depending on their capacity to implement the agreement successfully. Furthermore, LDCs can request technical assistance to address identified implementation gaps. The current position is that Category A and B commitments are due by the end of 2023.1 However, some members, including a few African countries, have requested extensions to their deadlines. Other requests include shifting the categorisation of measures. Out of 21 members that have lodged such requests, of which 18 are from African countries.

Covid-19 also significantly hampered the level of progress made in implementing the TFA. As the WTO looks ahead, there is a need to understand how the pandemic impacted international trade and customs to inform future planning. Looking ahead, one of the priority elements for trade facilitation is to push for digitalisation, inclusivity, and sound coordination between member countries to effectively operationalise the TFA.

1 “Category A contains provisions that a developing country will implement upon entry into force of the TFA […] Category B contains provisions that developing or least-developed countries designate for implementation on a date

4. Trade Facilitation and Hard Infrastructure

4.1 Customs Practices: WCO

Lazzat Daniyarova outlined the trade facilitation measures and initiatives of the World Customs Organization (WCO). The WCO is an intergovernmental organisation. Its mission is to enhance the effectiveness and efficiency of customs procedures and administration. It has 184 members who, collectively, are responsible for 98% of international trade; 66 members are from Africa.

The WCO has over 60 instruments and tools for trade facilitation, allowing the organisation to provide capacity-building and technical assistance. The WCO’s support also extends to that needed under the provisions in the WTO’s TFA.2 The WCO’s Revised Kyoto Convention (the Convention) entered into force in 2006, contracting 133 countries. The protocols of the Convention have been under review for the last four years. The review was undertaken to provide standards and recommended practices for modernising customs procedures. One of the primary revisions is focused on setting international customs standards in each country and facilitating increased revenue collection. Of these contracting bodies, 44 are African; this showcases the importance of the Convention for the continent. In 2014, the WCO launched the Mercator Programme to facilitate complimentary customs facilitations agreements that operate harmoniously with its provisions.

The WCO takes a two-track approach to provide technical assistance to member countries. First, there is the “overall track”, which raises awareness of provisions among

2 Chidede, T. (2018, Nov 19). WTO Trade Facilitation Agreement: An African perspective. Tralac. https://www. tralac.org/blog/article/13680-wto-trade-facilitation-agreement-an-african-perspective.html#:~:text=Summary%20 of%20the%20TFA,goods%2C%20including%20goods%20 in%20transit

members, allowing for experiences to be shared. The second approach is the “tailormade track,” which provides bespoke support for each country’s specific needs in customs administration. In addition, there is a multi-year agreement to take a step-by-step approach towards enhancing and harmonising customs bodies and operations.

The WCO Strategic Plan 2022-25 has three focus areas: green customs; governance and accountability, and technology data.3 As these are relatively new initiatives, discussions remain underway on how the focus programmes will be developed. The programme on green customs is the latest of the initiatives. So far, discussions about it have focused on the circular economy, carbon emissions and, most importantly, how customs can contribute to greening the economy. Additionally, a series of symposiums are held that explore greening Harmonised System (HS) Codes to support environmentally-sustainable trade. Finally, transforming

the WCO into a data-driven organisation is the last strategic plan that prioritises initiatives to enhance data analytics in customs.

4.2 Non-Tariff Measures and Barriers: UNCTAD

Christian Knebel provided insights on non-tariff measures (NTMs) and non-tariff barriers (NTBs) in the context of the AfCFTA.

There is no universal definition of non-tariff barriers, and there are different approaches to addressing them. However, a multi-agency definition of NTMs exists. Institutions such as the World Bank, the WTO, the United Nations Industrial Development Organisation (UNIDO), the International Trade Centre (ITC), the Organisation for Economic Cooperation and Development (OECD) and the Food and Agricultural Organisation (FAO) have developed an aligned definition. Generally, NTMs can be defined as “policy measures, other than ordi-

3 Strategic Plan and Goals. (n.d.). World Customs Organisation. https://www.wcoomd.org/en/about-us/what-is-the-wco/ strategic-plan.aspx

nary customs tariffs, that can potentially have an economic effect on international trade in goods, change in quantities traded, or prices, or both.” The AfCFTA has its own definition, broadly including “barriers that impede trade through mechanisms other than the imposition of tariffs.”

The multi-agency definition of NTM further regards sanitary and phytosanitary measures as well as technical regulations. Many NTMs, for example, sanitary and phytosanitary measures (SPS), are needed and beneficial.4 However, they do have cost implications as these measures need to be met to access international markets. Exporters incur costs to comply with various regulatory measures and standards set by public institutions and private organizations. Unlike tariffs which are generally published in national schedules and thus easily identified and quantified, NTMs can be more challenging to navigate. As a result, they can have much higher cost implications for exporters. This is why the policy position of UNCTAD is not to eliminate all NTMs, such as SPS, but to encourage measures that can lower the cost of trade and/or traded goods and services. For instance, NTMs can increase the price of agricultural products by 21% and manufacturing by 40% across the globe. Currently, NTMs are three times more restrictive than they could be. According to Christian, UNCTAD used a computable general equilibrium model for the AfCFTA and found various ways that NTMs can be implemented to allow for the benefits of the continental free trade area to be quadrupled if it is not restricted to a tariff-only agreement.

In the AfCFTA, non-tariff measures are addressed in a systematic way through regulatory cooperation and transparency of applied regulations, committees and initiatives to harmonise mutually recognised policies. Further, Annex 5 of the AfCFTA’s Goods Protocol deals specifically with NTBs by addressing the ad hoc elimination or reporting of the elimination of NTMs and NTBs. UNCTAD is also doing considerable work with the AfCFTA to share information and create a database on all the existing trade measures and barriers. This mechanism takes the form

of an online portal5 that allows for information exchange between UNCTAD and the AfCFTA Secretariat, as well as directly between African countries. However, one of the most significant challenges to making the tool effective is a lack of awareness of its availability, resulting in a low level of utilisation and data collection for the portal.

4 SPS measures are quarantine and biosecurity measures applied to protect human, animal or plant life or health from risks arising from pests and diseases. These measures include risks arising from additives, toxins and contaminants in food and animal feed.

5 See: https://www.tradebarriers.africa/

4.3 Case Studies

4.3.1 Revenue Services Lesotho

Tseko Nyesemane presented the policy obligations and initiatives of the Revenue Services Lesotho (RSL).

The RSL is a central conduit for trade facilitation instruments, which includes customs administration. The organisation is tasked with improving revenue collection, forming part of an obligation to enhance trade facilitation as per local legislation. The LRA Act’s (no.12 of 2022) Section 5(1)(3) states:

“To take such measures as may be required to improve the standards of service given to taxpayers with a view to improving efficiency and effectiveness and maximising revenue collection…”

Lesotho is a member of regional agreements such as the Southern African Customs Union (SACU) and the Southern African Development Community (SADC). The RSL is also a founding member of the Heads of Border Agencies (HOBA).

The RSL collaborated with the WCO under the Mercator Programme to produce a diagnostic report in March 2022, titled RSL TFA Maturity Model Assessment (The Assessment). It assesses the role and performance of the RSL under the articles of the WTO’s Trade Facilitation Agreement (TFA). The outcomes of each signatory country’s assessment place them on a level between 1 and 4 (see page 10).

Lesotho is ranked at Level 3, the “Emergent” stage, which places a low-income country at a good maturity level for its customs revenue collection services.

Levels of maturity in the WCO Maturity Model Assessments

Maturity Level

Level 4

Overall Status Description

Sustained

Level 3

Emergent

Level 2

Augmented

Level 1 Commencement

Lesotho is a landlocked country surrounded by South Africa. However, it also has customs and trade agreements with other countries. The biggest implementation challenge for Lesotho is related to “Separation of Release from Final Determination of Duties, Taxes, Fees, Changes,” an article that allows goods to be released before the final determination of customs duties, taxes, and fees on the condition that the necessary regulatory requirements are met. Because of Lesotho’s geography, single declarations are unfeasible. The border posts are set up in a way that creates a sizeable distance between the border posts of each country, making single declarations unfeasible. In addition, declarations may get lost, increasing the cost of transiting goods.

“Heavy influence of the WCO in the decision-making process and work. Competencies and capacity for particular functions are very low.”6

“Still closely involved with WCO. Elements are undertaken by the administration with some guidance. Not ready to measure and implement processes.”7

“Member has prime responsibility for functions. Complex aspects managed. Targeted assistance only for new situations.”8

“Member fully competent for all functions. External advice only for highly technical work on an ad hoc basis.”9

The RSL is currently undertaking several initiatives to modernise and address customs service issues. For example, it is piloting a border agency cooperation model, and a “lead agency model” has been established to serve as one of the biggest border posts in Lesotho. The initiative builds on the “Single Window” provision, which alleviates the negative impacts of customs service issues (e.g. delays, lack of border agency cooperation) and serves as a single regulatory connectivity point. Unfortunately, due to Covid-19, the project has been unable to advance beyond the testing phase.

In June 2022, the RSL also launched an e-Customs Tariff 10, enabling online trade services and e-payment. This is especially useful for small traders as it allows them to bypass the formal declaration process.

6 World Customs Organisation. (n.d.). Mercator Programme: A Navigational Map for Trade Facilitation http://www. wcoomd.org/-/media/wco/public/global/pdf/topics/capacity-building/resources/mercator-programme-advisor-handbook. pdf?la=en, 15

7 Ibid.

8 Ibid.

9 Ibid.

10 See: http://ecustoms2.lra.org.ls:81/ASYCUDA/

4.3.2 Kenya Revenue Authority (KRA)

Josephine Manyasi provided a briefing on Kenya’s role and experiences in trade facilitation. She asserted that in East Africa, the KRA is leading the implementation of trade facilitation measures.

In collaboration with Kenya’s NTFC and other regional bodies, the KRA’s trade facilitation division has undertaken various initiatives, one of which is prioritising the development of hard infrastructure along the Northern Corridor and Lamu Port-Southern Sudan-Ethiopia Transport Corridor (LAPSSET).

The Northern Corridor (connecting East and Central Africa) is undergoing significant developments, which will turn it into a vital trade artery. It is estimated to be approximately 2000 kilometres long, extending from the Port of Mombasa in Kenya across Uganda, Rwanda, Burundi and the eastern Democratic Republic of Congo (DRC). The most critical developments on this corridor are the upgrading and expanding of transport networks to connect landlocked countries (such as Rwanda and Burundi) to the Kenyan Port of Mombasa, which is also being upgraded and expanded. The Port serves as a vital export gateway for landlocked regions.

The LAPSSET corridor connecting Kenya, South Sudan and Ethiopia, covers around 1800 kilometres. LAPSSET is currently also under development. Other corridors are similarly being developed or are in the pipeline. The KRA’s trade facilitation division is spearheading the development of transport corridors and is simultaneously working on simplifying procedures and developing technology to produce e-border crossing processes. At the same time, KRA prioritises capacity-building in partnership with various customs departments, businesses and government institutions in Kenya and wider East Africa. The adoption of technology to automate border and customs procedures has been a key focus of the KRA’s capacity and knowledge-building drive. In addition, integrating AfCFTA’s Rules of Origin requirements into the administrative architecture of the automated system is a priority. For harmonisation and digitalisation, national and regional policy mechanisms are also under review.