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Published online by Cambridge University Press: 20 January 2025
Rules of origin under the African Continental Free Trade Area (AfCFTA) Agreement constitute a vital trade instrument that forestalls freeriding by ensuring that only originating products and services benefit from preferential treatment within the free trade area. Functional rules of origin in design and implementation foster the sourcing of value content by producers, manufacturers and enterprises within Africa in accordance with the governing treaty. The sourcing of value content by producers, manufacturers and enterprises within Africa promotes economic activities, measured industrialization and socio-economic development. While the AfCFTA Agreement recognizes the capacities of both rules of origin and regional value chains, each standing alone or acting in a complementary manner to promote African development, a successful outcome will be determined by a critical adjustment that improves capacity and capability. Arguably, state parties to the AfCFTA Agreement should implement strategies for upscaling preference utilization and value chain growth, infrastructural investment and interventions that stimulate value chain trade.
PhD, LLM (Manchester); Georg Forster Research Fellow, Institute of African Legal Studies, University of Bayreuth, Germany.
Chair of the Institute of African Legal Studies, University of Bayreuth, Germany.
This research is funded by the Alexander von Humboldt Foundation, Germany, as part of the Georg Forster Research Fellowship for Experienced Researchers. The authors are grateful to the foundation for the funding and are solely responsible for the opinions expressed here.
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8 UN Commission for Africa “African Continental Free Trade Area”, above at note 4.
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11 GVCs originally emerged as RVCs in East Asia, led by the Japanese clusters of investments and trade. The Japanese investors set up “production bases in a large number of countries in East Asia and later in South-East Asia to access locational advantages and develop export platforms for the components. The final assembly took place in a third country from where the finished products were exported either back to the home country or to the global markets under the Japanese brand. This fragmentation of production improved the cost competitiveness of the final products, which were then able to compete with the products from Western countries.” Over time, Western multinationals adopted similar patterns in Asia and other regions to improve cost competitiveness, leading to emergence of GVCs. See UN Trade and Development (UNCTAD) Identifying and Promoting Regional Value Chains in Leather and Leather Products in Africa (2018, United Nations) at 13.
12 See art 1 of the WTO Agreement on Rules of Origin, available at: <https://www.wto.org/english/docs_e/legal_e/22-roo_e.htm> (last accessed 6 November 2024).
13 UNCTAD “Economic development in Africa report 2019: Made in Africa – Rules of origin for enhanced intra-African trade” (2019) at 46, available at: <https://unctad.org/news/rules-origin-key-success-african-continental-free-trade-area> (last accessed 25 January 2024).
14 In WTO United States – Rules of Origin for Textiles and Apparel Products – Panel Report, WT/DS243/8/, 28 July 2003, paras 6.43 and 6.84, the panel stated that the rules of origin should not be applied “to substitute for, or to supplement, the intended effect of trade policy instruments”.
15 By mandating firms to source inputs and materials from Africa, the rules of origin ensure that industrial sectors rely on the supply chains in the region except where an exception applies. Although it is possible for industrial fractures to occur for non-originating goods because of discrimination, it is undeniable that originating inputs and goods benefit maximally from industrial absorption and links.
16 They do this by mandating exporters to attach documentary evidence that proves the origin of the goods being exported. Hence only the goods authenticated as originating within the region benefit from preferential treatment (ie a low or zero tariff).
17 World Customs Organization “Rules of origin handbook” (2012), available at: <http://www.wcoomd.org/en/topics/origin/overview/origin-handbook.aspx> (last accessed 25 January 2024).
18 F de Soyres, J Maire and G Sublet “Regional trade agreements with global value chains” (2021), available at: <https://www.federalreserve.gov/econres/notes/feds-notes/regional-trade-agreements-with-global-value-chains-20210204.htm> (last accessed 25 January 2024).
19 P Conconi et al “From final goods to inputs: The protectionist effect of rules of origin” (2018) 108 American Economic Review 2336.
20 AfCFTA Agreement, art 3; Protocol on Trade in Goods, art 2; Protocol on Trade in Services, art 2.
21 K Fernandez-Stark and G Gereffi “Global value chain analysis: A primer” in S Ponte, G Gereffi and G Raj-Reichert (eds) Handbook on Global Value Chains (2019, Edward Elgar Publishing) 54 at 55.
22 IA Zeidy “Global value chains as a vehicle for African development: Implication of COVID 19 in the future of global value chain” (2020, COMESA) at 1, available at: <https://www.comesa.int/wp-content/uploads/2020/06/Value-Chain-as-a-Vehicle-for-Development-in-Africa.pdf> (last accessed 19 February 2024).
23 Ibid.
24 AfCFTA Rules of Origin, annex 2, arts 5 and 6. See also Protocol on Trade in Services, art 24.
25 AfCFTA Agreement, art 5.
26 Trade Policy Trading Centre in Africa “AfCFTA negotiations: Provisions affecting agricultural trade” (2019), available at: <https://trapca.org/atppn/afcfta-negotiations-provisions-affecting-agricultural-trade-2/> (last accessed 30 January 2024); Gourdon et al “Rules of origin”, above at note 10 at 101.
27 Id at 107.
28 AfCFTA Rules of Origin, annex 2, art 6(2) provides that goods listed in Appendix IV qualify as originating goods if they satisfy the specific rules set out therein.
29 TFTA Agreement, art 5 does not admit non-cumulative satisfaction.
30 Asian Development Bank “An analysis of the product-specific rules of origin of the Regional Comprehensive Economic Partnership” (2022) at 1, available at: <https://www.adb.org/sites/default/files/publication/792391/product-specific-rules-origin-rcep.pdf> (last accessed 30 January 2024).
31 The determination of the content of regional value can be undertaken through the net cost, transaction value, build-down and build-up.
32 Regime-wide rules may be classified as the origin process (other subsets come under this, eg cumulation rule, etc) and certification provisions analysed in the form of transparency, flexibility and costs.
33 Gourdon et al “Rules of origin”, above at note 10 at 107.
34 O Cadot and LY Ing “How restrictive are ASEAN's rules of origins?” (2017, Economic Research Institute for ASEAN and East Asia) at 2, available at: <https://www.eria.org/ERIA-PB-2017-04.pdf> (last accessed 25 January 2024).
35 Ibid.
36 Additional rules include specific operations, absorption or roll-up and the principle of territoriality.
37 C Fink and D Nikomborirak “Rules of origin in services: A case study of five ASEAN countries” (2007, World Bank Policy Research Working Paper) at 7.
38 Protocol on Trade in Services, art 1.
39 J de Melo and A Twum “Prospects and challenges for supply chain trade under the Africa Continental Free Trade Area” (2021) Journal of African Trade 1.
40 E Siba “Africa, building resilience. Value chains in Africa: What role for regional trade?” (2022, OECD), available at: <https://oecd-development-matters.org/2022/02/22/value-chains-in-africa-what-role-for-regional-trade/> (last accessed 25 January 2024).
41 de Melo and Twum “Prospects and challenges”, above at note 39 at 1–2.
42 Ibid.
43 Zeidy “Global value chains”, above at note 22 at 1.
44 AUC/OECD “Africa's development dynamics 2022: Regional value chains for a sustainable recovery” (2022, AUC, Addis Ababa/OECD Publishing) at 72–73.
45 Zeidy “Global value chains”, above at note 22 at 1–5.
46 AfCFTA Agreement, art 3.
47 Fernandez-Stark and Gereffi “Global value chain analysis”, above at note 21 at 55–56.
48 International Monetary Fund (IMF) “Trade integration and global value chains in sub-Saharan Africa: In pursuit of the missing link” (2016) at 24, available at: <https://www.imf.org/external/pubs/ft/dp/2016/afr1602.pdf> (last accessed 6 November 2024).
49 Ibid.
50 Zeidy “Global value chains”, above at note 22 at 6–7.
51 de Melo and Twum “Low-cost inputs trade”, above at note 10.
52 AUC/OECD “Africa's development dynamics 2022”, above at note 44 at 76–96.
53 IMF “Trade integration”, above at note 48 at 29.
54 AUDA-NEPAD “Empowering MSMEs to build back better Africa's economy post-COVID-19” (2021), available at: <https://www.nepad.org/news/empowering-msmes-build-back-better-africas-economy-post-covid-19> (last accessed 25 January 2024).
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56 Blended finance provides an additional financing solution to MSMEs’ financing needs, building on existing financing options, but it is usually not predictable.
57 World Bank “Jumpstarting small and medium-sized businesses in West Africa” (2021), available at: <https://www.worldbank.org/en/news/feature/2021/07/07/jumpstarting-small-and-medium-sized-businesses-in-west-africa> (last accessed 25 January 2024).
58 CC Ajibo “Micro, small and medium-sized enterprises and non-tariff barriers in African trade” (2023, AfronomicsLaw Blog), available at: <https://www.afronomicslaw.org/category/analysis/micro-small-and-medium-sized-enterprises-and-non-tariff-barriers-african-trade> (last accessed 25 January 2024).
59 ASEAN Trade in Services Agreement, art 25.
60 The preamble to the TFTA Agreement equally makes reference to MSMEs.
61 There is a perceptible drive to add a protocol on women and youth in trade and digital trade to the AfCFTA.
62 AfCFTA Agreement on NTBs, annex 5, art 2.
63 These include (a) government participation in trade and restrictive practices tolerated by governments; (b) customs and administrative entry procedures; (c) technical barriers to trade; (d) sanitary and phytosanitary measures; (e) specific limitations; and (f) charges on imports and others (eg transport, clearing and forwarding).
64 Supply Chain Africa “Sustainable supply chain for Africa” (2022), available at: <https://supplychainafrica.org/sustainable-supply-chain-for-africa/> (last accessed 25 January 2024).
65 Ibid.
66 CC Ajibo “Belt and Road Initiative meets Africa: Exploring the state of play, the implications and the imperative for complementarities of interests” (2021) 8/2 Journal of Comparative Law in Africa 1; CC Ajibo et al “Africa–China investment partnership for development: The downside, the promises and the roadmap for future” (2020) 15/1 Asian Journal of WTO & International Health Law & Policy 285.
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69 Ibid.
70 Ibid.
71 Zhou “Cooperation between China and Africa”, above at note 67 at 28–30.
72 Ibid.
73 Ajibo, CC et al “Technology transfer for development in Nigeria: Patterns, problems and prospects” (2019) 45/1 Commonwealth Law Bulletin 70CrossRefGoogle Scholar.