WORLD TRADE  
ORGANIZATION  WT/REG231/3 
12 December 2008 
 
 (08-6113) 
Committee on Regional Trade Agreements Original:   English 
  
 
SOUTHERN AFRICAN CUSTOMS UNION  
(GOODS) 
 
Questions and Replies
 
 
 
 The following communication, dated 24 October and 10 December 2008, is being circulated at the request of the Southern African Customs Union.   This document reproduces the questions addressed to the Parties and the responses submitted. 
 
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Question from the Delegation of Canada
 
 
Import duties and charges, and quantitative restrictions  
 1. The report notes that "goods grown, produced or manufactured within the area of 
SACU are free of customs duties and quantitative restrictions when imported from one SACU Party to another, unless provided elsewhere in the Agreement." Could SACU indicate whether 
such exceptions to duty free treatment are found in  the Agreement and, if so, for which goods? 
 The question above refers to  Article 18 of the 2002 Agreement which provides for the 
elimination of customs duties and quantitative restri ctions on goods imported from partner countries. 
Whilst no specific list of products exempted from this  provision is contained in the Agreement, the 
latter provides for circumstances in which exceptions to duty free, quota free treatment may apply. These are contained in Article 18(2), which allows for the imposition of restrictions in accordance 
with national laws for the protection of inter alia :  health, environment, security IPRS, etc.  In 
addition, Articles 25 and 26 of the Agreement pr ovide for import and expor t prohibitions and the 
protection of infant industries respectively.  Article  29 allows for specific arrangements relating to the 
marketing of agricultural products.  Article 34 deals with bilatera l preferential trade agreements 
between individual SACU Members with third parties and allows that duties could be levied on goods 
imported under such preferential agreements.  
 
Questions from the Delegation of Chinese Taipei
 
 Trade Environment 
 
2. According to paragraph 1 of the WTO Secretariat’s Factual Presentation 
(WT/REG231/2), the South African Customs Union (SACU) was established in 1910 and is the world's oldest customs union.  We would like to  request SACU to further explain:  Are there 
any plans for advancing the SACU toward a common market? 
 At this stage, there are no formalized plans to advance SACU to a Common Market. WT/REG231/3 
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   However, in simple terms, a common market is a deeper integrated version of a Customs 
Union in which Member States agree to have common policy measures affecting the internal 
operations of the market in order to promote th e free movement of the goods, capital, services and 
people.  SACU is in the process of building out the provisions of the 2002 SACU Agreement through 
the development of common policies and national st ructures to compliment the SACU institutions 
established under Article 7, as a first step to possible deeper economic integration. 
 
General Provisions of the Agreement 
 
3. According to paragraph 37 of the WTO Secre tariat’s Factual Presentation, “when goods 
imported by a Party from outside the Common  Customs Area under a preferential agreement 
are exported to another Party, the normal impo rt duty applicable to such goods when imported 
into the rest of the Common Customs Area is ch arged.  Any difference between the normal duty 
and the duty originally charged on such goods is paid into the Common Revenue Pool.” 
(i) We would like to request the SACU to fu rther explain the ideas for the establishment of 
the Common Revenue Pool. 
 
 The idea for establishment of Common Revenue  Pool (CRP) dates back to the 1969 
SACU Agreement, in which all SACU Member St ates were mandated to pool customs and excise 
duty collections and share the receipts in acco rdance to the agreed formula.  The 2002 SACU 
Agreement does not change the modalities of collec ting customs and excise duties and still requires 
Member States to pool these collections.  Currently, S outh Africa plays a central role in collecting her 
own customs and excise duties, which constitute  the bulk of the Common Revenue Pool.  South 
Africa also receives remittances of customs and ex cise duties from Botswana, Lesotho, Namibia and 
Swaziland (BLNS).  Payments to SACU Member States from the Common Revenue Pool are made based on the calculation of revenue shares using the new revenue formula as contained in Annex 1 of 
the Agreement. 
 
(ii) Could the Parties share their experiences about operating the Common Revenue Pool 
with other members? For example, the cu rrent situation regarding management and 
operation of the Common Revenue Pool. 
  Article (33) of the 2002 SACU Agreement de fines the operational modalities of the CRP and 
calls for South Africa to manage the CRP on a trans itional basis for two years from entry into force of 
the Agreement.  However, South Africa is still managing the CRP pending the finalization of an 
on-going study on the options for the permanent arrangement for the management of the CRP.  
 South Africa is the current manager of CRP, which is a virtual pool operated within the 
South African Consolidated National Revenue Fund.  South Africa remits duties daily into the CRP 
whilst the BLNS remit duties quarterly into the CR P.  South Africa also collects some customs and 
excise duties on behalf of the BNLS and remits into the CRP.   The 2002 SACU Agreement provides for a revenue sharing formula that has three 
components;  namely a Customs Component, Excise Component and Development Component.  The 
customs share is allocated on the basis of each country’s share of intra-SACU imports.  The excise 
component is allocated on the basis of each country ’s share of Gross Domestic Product (GDP).  The 
development component, which is fixed at 15% of to tal excise revenue, is distributed according to the 
inverse of each country’s GDP per capita. 
 
   WT/REG231/3 
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   Member States shares are based on the forecasted size of the CRP and South Africa provides 
the revenue forecasts for year (t).  The SACU C ouncil of Ministers approves shares for year (t) in 
December of every financial year and South Africa,  as manager, makes quarterly payments to the all 
Member States accordingly.   
 The 2002 SACU Agreement provides for payment of  adjustment in years (t+1) and (t+2) to 
account for differences between the fo recast and actual revenue collected.  
  Cognizant that South Africa is the transiti onal manager of CRP, the SACU Secretariat 
commissioned a study on the management of the CRP .  The study provides options for the permanent 
arrangement for the management of the CRP,  and operational modalities of the CRP intended to 
improve transparency and a low-cost revenue manageme nt system. It is anticipated that the permanent 
arrangement for managing the CRP would be implemented in the next financial year. 
  South Africa provides quarterly status reports on duty collections and proof of payment to the 
SACU Secretariat.  The Secretariat in turn, prep ares an analytical paper which is presented to the 
Finance Technical Liaison Committee each quarter.   
(iii) Could the Parties provide further information about their application of rules of origin 
in this case? 
  No rules of origin apply and no mechanism is in  place to administer the system of monitoring 
whether goods have incurred the normal duties once re -exported to other SACU Member States.  The 
onus is on the exporting state to ensure that re -exported goods that were  initially imported under a 
preferential arrangement pay the normal duty if re -exported to SACU Countries.  The incentive to 
ensure this is the revenue pooling arrangement.  In practice, this has only occurred in respect of the 
SA-EU TDCA and bilateral between some SACU Memb er States and Zimbabwe.  With regard to the 
TDCA, Member States have given concurrence to South Africa that the EU imports under the TDCA, 
which are subsequently re-exported to the rest of SACU are not accompanied by a rules of origin certificate. It is envisaged that this issue will be  resolved under the current EPA negotiations.  With 
regard to the bilateral with Zimbabwe, this issue ha s been resolved by virtue of the coming into force 
of the SADC FTA.   
 
(iv) According to footnote 5 of the Factual Presentation, “rules of origin apply on imported 
goods:  once a good enters the customs union there is free movement of goods among SACU members”.  Therefore, is such a duty collection consistent with the purpose for 
establishing the customs union? 
 
 Duty collection at the first point of entry into the customs union is consistent with the 
application of a Common External Tariff and facilita tes the pooling of revenues.  A duty collected at 
the time of importing is consistent with the cust oms union as any difference in the duty between an 
importing SACU member and the final SACU destin ation is deposited into  the common revenue pool 
which is shared amongst the Member States.  This provision was imported from the 1969 SACU 
agreement, which allowed Member States to have bi lateral trade agreements with third parties.  
 
Infant Industry Safeguards 
 4. Regarding the protection of the infant industry,  according to paragraph 23, footnote 8 of 
the Factual Presentation and Article 26 of this  SACU Agreement, we would appreciate further 
clarification about the following: 
 WT/REG231/3 
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  (i) Is levying additional duties on imports to protect infant industries consistent with the 
relevant provisions contained in Article 24 of GATT 1994?  For instance, Article 24.5 (a) provides that “ … in respect of trade with contracting parties not parties to such union or agreement shall not on the whole be hi gher or more restrictive than the general 
incidence of the duties and regulations of commerce applicable in the constituent 
territories prior to the formation of such union …”. 
 
 SACU was established long before the GATT.  SACU’s CET existed since 1910.  In addition, 
no Infant Industry Duty levied by any SACU Memb er State exceeds that specific Member State’s 
WTO Bound Duty rate.  The infant industry prot ection clause as contained in the 2002 SACU 
Agreement is consistent with the provisions  of Article XVIII of the GATT 1947 (2) “...those 
contracting parties should enjoy additional faciliti es to enable them (a) to maintain sufficient 
flexibility in their tariff structure to be able to grant the tariff protection required for the establishment 
of a particular industry to enable contracting pa rties to meet the requirements of their economic 
development.” 
 
(ii) Is this protection period of 8 years a “temporary” measure? 
 
 Yes, it is a temporary measure.  Protection is for a period of 8 years; however the SACU Council of Ministers may shorten this period if the indu stry at stake is able to achieve “maturity” in a 
period less than 8 years.  If an Industry after 8 year s is still an “infant”, Council may decide to extend 
the period of protection until such time that the Industry achieves “maturity”.  
 
(iii) Has the Council of Ministers ever extended the 8-year period for any specific infant 
industry? 
  Yes.  Extension was granted to Namibia for its UHT Milk Production Industry in light of the 
fact that establishment of dairy farming and processing facilities requires a period longer than 8 years.  An extension was also granted to Namibia for her Pasta Manufacturing Industry.  
Accession 
 
5. According to paragraph 32 of the WTO Secretariat’s Factual Presentation 
(WT/REG231/2) and Article 32 of this SACU Ag reement, we know that  this SACU Agreement 
is open to accession by any state upon unanimous  approval by the Council of Ministers which 
determines the procedures and criteria for th e admission of new members.  We would 
appreciate further clarification about the following: 
(i) Are there any specific procedures and criteri a for the admission of new members in the 
SACU Agreement? 
 
 The SACU Council has not yet determined pr ocedures and criteria for the admission of new 
members.  However, it is envisaged that this will be in the near future.  (ii) Have there ever been any States which showed intention to apply for accession to this  SACU Agreement? 
 
 None thus far.  (iii) On the other hand, has the SACU ever invited any States to accede to it? 
 
 None thus far.   WT/REG231/3 
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  (iv) Is accession to the SACU Agreement only limited to the states within South Africa? 
 
 The SACU Council has not yet determined pr ocedures and criteria for the admission of new 
members.  As such, no decision has yet been ma de on who would be able to accede and who would 
not be able to accede.  The SACU Agreement th erefore does not limit accession to only Southern 
African States. 
 
Questions from the Delegation of Turkey  
 
6. According to Paragraph 16 of the Factual P resentation, there are no rules of origin 
provisions in the Agreement of SACU;  however, in footnote 5 it is explained by the Parties that 
rules of origin apply on imported goods.  In this regard, we would appreciate clarification from the Parties whether SACU as a customs union did establish a common system for rules of origin 
against the third countries or not.
 
 There are no rules of origin provisions in the SACU Agreement.  Goods can therefore move 
freely without rules of origin certificates once it enters  the Customs Union.  At the point of entry into 
the Customs Union goods will however need to be acco mpanied by a Rule of Origin certificate.  This 
is because Customs Administrations in SACU Member States will have to administer both 
"preferential" and "non-preferential" rules of origin vis-à-vis  third countries.  In this context 
"preferential" rules of origin refers to tr ade under a specific bila teral arrangement whilst 
"non-preferential" refers to most favoured nation (MFN) trade.   SACU has agreement-specific (preferential) ru les of origin with third parties, which are 
agreed at the time of negotiating the Agreem ents.  By virtue of negotiating as a group, 
SACU countries negotiate a common set of rules of origin for every third party trade arrangement 
SACU enters into and hence a common system exists in respect of those trade partners. 
  With regard to countries with which SACU h as not yet negotiated an agreement (i.e. most 
favoured nation trade), non-preferential rules of orig in apply.  These non-preferential rules of origin 
are determined in terms of the WTO GATT agreemen t and are enacted in the customs legislation of 
the SACU Member States.  Therefore, although no common system has been developed at the SACU 
level, by virtue of all SACU Member States bei ng Members of the WTO and Members States having 
to apply similar customs legislation, a similar syst em for administering non-preferential rules of origin 
also exists. 
 
Question from the Delegation of the United States
 
 Import duties and charges, and quantitative restrictions  7. Paragraph 13 notes that “goods grown, produ ced or manufactured within the area of 
SACU are free of customs duties and quantitative restrictions when imported from one SACU 
party to another, unless provided for elsewhere in the Agreement.”  Could the Parties please 
clarify exactly what is provided for elsewhere in the Agreement?  Do these go beyond the exceptions and reservations noted in paragraphs 30 and 31? 
 Same as Response to Question 1.  
 Sanitary and phytosani tary (SPS) measures 
 8. Article 30 of the SACU Agreement does no t mention the WTO SPS Agreement.  Why 
have the members of SACU chosen not to reaffirm  the rights and obligations contained in the 
WTO SPS Agreement? WT/REG231/3 
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   This is covered under the preamble where SACU  Member States specifically refer to the 
outcome of the Uruguay Round.  
 
Infant industry safeguards   
9. Paragraph 23 of the Factual Presentation no tes that Botswana, Lesotho, Namibia and 
Swaziland may utilize infant industry safeguards and thus temporarily impose additional duties 
upon goods produced or manufactured within th e Common Customs Area or third parties.  
Since 2004, has any SACU member utilized infant industry safeguards?  If so, please provide information by country, including the HTS tariff line, new duty rate, and time period, for any 
cases of imposed infant industry safeguards. 
 Namibia currently utilises the Infa nt Industry mechanism for two infant industries:  on pasta 
products of tariff lines 1902.11 and 1902.19, at 40%; on certain UHT Milk, namely tariff lines 0401.10, 0401.20.10, 0401.30. 10 and 0401.30.90 at ra tes down-scaled from 40%.  Since these 
measures also apply against imports from other SACU Members, developmental and food security 
aspects were thoroughly deliberated upon.  It must be  mentioned however that the protection of these 
two Namibian industries have commenced during 2002  under the 1969 Agreement, thus before the 
2002 Agreement entered into force on 15 July 2004.   Botswana utilizes the infant industry prot ection mechanism since 2007 for one industry, 
namely UHT milk.  Participation in RTAs by SACU members  10. Table IV.1 lists for Botswana, Namibia and So uth Africa a total of six RTAs which have 
not yet been notified to the WTO.  Can these Memb ers please outline when they plan to notify 
each of these agreements, as required by the GATT, the Enabling Clause, as well as the 
Transparency Mechanism for Regional Trade Agreements? 
 Still consulting with SACU Member States on this question.  They will probably also 
communicate their answers directly to the WTO Secretariat.  
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