1. INTRODUCTION TO THE ECOWAS COMMON EXTERNAL TARIFF ALBERT AKURUGU SENIOR REVENUE OFFICER GRA CUSTOMS DIVISION

2. Brief History of The ECOWAS  The Economic Community Of West African States (ECOWAS) is a regional group of fifteen countries, founded in 1975. Its mission is to promote economic integration in "all fields of economic activity, particularly industry, transport, telecommunications, energy, agriculture, natural resources, commerce, monetary and financial questions, social and cultural matters....."

3. Brief History of The ECOWAS ctnd  Originally, sixteen members formed the Union but in December, 2000 Mauritania officially withdrew from the Union.  ECOWAS has over the years played the important role of conflict resolution and prevention.

4. Brief History of The ECOWAS ctnd.  In 2007 ECOWAS changed its institutional setting from Executive Secretariat into a Commission thus changing the designation of the Executive Secretary to that of a President. Today the organization provides an important forum for cooperation among its member states and the Commission plays the role of a moderator and facilitator that offers initiatives for harmonization and integration in the region.

5. The Institutions of The (ECOWAS)  The Institutions of the Economic Community of West African States (ECOWAS) are as follows:  The Commission The Community Parliament The Community Court of Justice ECOWAS Bank for Investment and Development (EBID)

6. Organizations formed to assist the Commission  West African Health Organization(WAHO)  West African Monetary Agency (WAMA)  West African Monetary Institute (WAMI)  ECOWAS Youth & Sports Development Centre (EYSDC)  ECOWAS Gender Development Centre (EGDC)  Water Resources Coordination Unit (WRCU)  ECOWAS Conflict Prevention Framework(ECPF)

7. Organizations formed to assist the Commission ctnd.  West African Power Pool (WAPP)  The Inter-Governmental Action Group against Money Laundering and terrorism financing in West Africa (GIABA)  West African Regional Health Programme (PRSAO)  ECOWAS Centre for Renewable Energy and Energy Efficiency (ECREEE)  ECOWAS Regional Electricity Regulatory Authority (ERERA)  Regional Agency for Agriculture and Food (RAAF)

8. The Two Institutions Designed to Implement Policies  The ECOWAS Commission and the ECOWAS Bank for Investment and Development, more often called The Fund are its two main institutions designed to implement policies, pursue a number of programmes and carry out development projects in Member States. Such projects include intra-community road construction and telecommunications; and agricultural, energy and water resources development.

9. Associated Private Sector Organizations  ECOBANK  ECOMARINE

10. Stages of Regional Economic Integration  Free Trade Area  Customs Union  Common Market  Economic Union and,  Political Union

11. Free Trade Area  “Free Trade Area”: Tariffs (a tax imposed on imported goods) between member countries are abolished or significantly reduced. Each member country keeps its own tariffs in regard to third countries. The general goal is to develop economies of scale and comparative advantages, which promotes economic efficiency.economic efficiency

12. Custom Union  “Customs Union”: Sets common external tariffs among member countries, implying that the same tariffs are applied to third countries. Custom unions are particularly useful to level the competitiveness playing field and address the problem of re-exports (using preferential tariffs in one country to enter another country).

13. Common Market  “Common Market”: Factors of production, such as labour and capital, are free to move within member countries, expanding scale economies and comparative advantages. Thus, a worker in a member country is able to move and work in another member country.

14. Economic Union  “Economic Union”: Monetary and fiscal policies between member countries are harmonized, which implies a level of political integration. A further step concerns a monetary union where a common currency is used, such as with the European Union (Euro).

15. Political Union  “Political Union”: Represents the potentially most advanced form of integration with a common government and where the sovereignty of member country is significantly reduced. Only found within nation states, such as federations where there is a central government and regions having a level of autonomy”

16. Levels of Economic Integration

17. Some regional groupings with similar features  The European Union  The East African Economic Union  The Common Market for Eastern and Southern Africa (COMESA)  The Association of South East Asian Nations (ASEAN)

18. The ECOWAS Trade Liberalization Scheme (ETLS)  The ECOWAS Trade Liberalization Scheme was introduced in 1990 and was adopted by Member States as an instrument for the establishment of a “free trade area” for ECOWAS by the year 2000.  The Scheme (ETLS) is covered by the provisions of Article. 3 of the ECOWAS revised treaty.

19. The ECOWAS Trade Liberalization Scheme (ETLS)  The Community shall establish a common market through “the liberalization of trade by the abolition, among Member States, of customs duties levied on imports and exports, and the abolition among Member States, of non-tariff barriers in order to establish a free trade area at the Community level”

20. Aims of the ETLS  to promote co-operation and integration, leading to the establishment of an economic union in West Africa (ECOWAS) in order to raise the living standards of its people;  to maintain and enhance economic stability;  to foster relationship among member states; and  to contribute to the progress and development of the African continent.

21. Aims of the ETLS  The Community adopted a protocol with the primary aim of establishing the ECOWAS Trade Liberalization Scheme (ETLS).  The Scheme was to promote trade in goods originating from Member States as well as the collective economic development of the Community.

22. The “Rules of Origin” of Community Goods  a) Goods shall be considered to have originated from Member States if: i. they have been wholly produced in Member States in accordance with the Protocol; and ii. they have been produced in Member States but contain raw materials which were not wholly obtained from Member States provided that such materials have undergone operations and processes that confer Community origin, as defined in the Protocol.

23. The “Rules of Origin” of Community Goods, ctnd  b) Originating products consisting of materials wholly produced or sufficiently transformed in one or several Member States shall be considered as products originating from the Member State in which the last processing or transformation took place, inasmuch as the processing or transformation carried out there exceeds the processing and transformation defined in the Protocol.  For industrial products, the criteria for conferring origin are a change in tariff heading or 30% value addition.

24. Goods Wholly Produced in Member States  The following products shall be regarded as wholly produced in the Member States: i. live animals born and raised within the Member States; ii. mineral products extracted from the ground, sub- soil or sea bed of Member States; iii. vegetable products harvested within Member States;

25. Goods Wholly Produced in Member States  The following products shall be regarded as wholly produced in the Member States: iv. products obtained from animals living or raised in Member States; v. products obtained by hunting or fishing within Member States;

26. Goods Wholly Produced in Member States, ctnd. vi. products obtained from the sea, river and lakes within Member States by vessels belonging to the Member States; vii. products manufactured aboard ship factories belonging to Member States exclusively from products referred to in paragraph (vi) above; viii. used articles fit only for the recovery of raw materials, provided that such articles have been collected from users within Member States;

27. Goods Wholly Produced in Member States, ctnd. ix. scraps and waste resulting from manufacturing operations within Member States; x. goods produced from the materials listed in paragraphs (ii) to (ix) above, used alone or mixed with other materials, provided that they represent at least 60% of the total quantity of raw materials used; and xi. electrical energy produced in the Member States.

28. Treatment of Free Zones Goods under the Scheme  Goods transformed within the framework of economic or suspense Customs regimes or certain special regimes involving the suspension, or partial or total exemption from Customs duties on inputs, shall in no case be considered as originating products.

29. Proof of Origin  A Certificate of Origin, stating the conditions set out in the Protocol and issued by the accredited authorities in the Member States, shall be deemed to be Proof of Origin  Certificate of Origin shall not be required for agricultural and livestock products, as well as hand-made articles or articles produced with or without the use of tools, instruments or implements directly operated by the craftsman

30. Proof of Origin ctnd.  The certificate of Origin shall be issued by the competent authority designated for that purpose by the Member States of origin and countersigned by the Customs administration of that Member State.

31. Identification on Originating Industrial Products  Originating industrial products shall, where it is technically possible, carry an identification mark on them or on their packaging.

32. Composition of the National Approval Committee (NAC)  The members of the National Approvals Committee shall be the representatives of the following Ministries, agencies and organizations:  The Ministry of Trade  The Ministry of Industry  The Ministry of Finance (Department of Customs)  The ECOWAS National Unit (or Ministry Integration)  The National Chamber of Commerce and industry  All such structures or institutions as may be deemed appropriate.  The Committee shall be presided over the by the representative of the national authority designated to grant such approvals.

33. Application for Approval of Products  Industrial enterprises desiring to benefit under the Trade Liberalization Scheme shall complete an application form and submit it to the Chairperson of the National Approvals Committee (NAC) an authority designated by each Member State established for that purpose.

34. Registration of Enterprise  Enterprises whose products have been approved shall be issued a seven-digit registration number. The first three digits shall represent the country’s geographical code as defined by the United Nations; the four subsequent digit represent the position of the enterprise within the Member State according to numerical order.

35. ECOWAS regulations on Customs valuation  ECOWAS regulations on Customs valuation Regulation C/REG.2/06/13 covers the determination of the Customs value of products in ECOWAS.  A critical examination of the Regulations will reveal that the concept and principles are based on WTO concept of valuation with the necessary modifications.

36. Transaction Value Method for goods in the ECOWAS  Article 3 (1) provides among other things that the Customs value shall be the “price actually paid or payable” which is the total payment made or to be made by buyer to or for the benefit of the seller for the imported goods. The Article therefore establishes the Transaction Value for goods imported into the Community.

37. Transaction Value Method for goods in the ECOWAS  The Article further provides that where the buyer and the seller are related, the circumstances surrounding the sale shall be examined and the transaction value shall be accepted as the customs value provided that relationship did not influence the price.

38. Transaction Value for Similar Goods in the ECOWAS  Article 5 provides that the customs administration shall wherever possible, use a sale of similar goods as the same commercial level and in the same commercial level and in substantially the same quantities as the goods being valued. Where no such sale is found, a sale of similar goods that takes place any one of the following three conditions may be used

39. Transaction Value for Similar Goods in the ECOWAS  a sale at the same commercial level but in different quantities;  a sale at a different commercial level but in substantially the same quantities; or

40. Transaction Value for Similar Goods in the ECOWAS  a sale at a different commercial level and in different quantities  Article 5 further provides that the Transaction Value of similar goods means a Customs value, adjusted as provided for in paragraph 1 (b) and 2 which has already been accepted under Article 3.

41. Transaction Value for Computed Goods in the ECOWAS  Article 9 provides for the application of the Computed Value method. As a general rule, customs value is determined under this Agreement on the basis of information readily available in the country of importation. In order to determine a computed value, however, it may be necessary to examine the cost of producing the goods being valued and other information which has to be obtained from outside the country of importation.

42. The Objectives of a Customs Union  (a) further liberalize intra-regional trade in goods on the basis of mutually beneficial trade arrangements among the Member States;  (b) promote efficiency in production within the Community;  (c) enhance domestic, cross border and foreign investment in the Community; and  (d) promote economic development and diversification in industrialization in the Community.

43. The ECOWAS Tariff and Statistical Nomenclature  ECOWAS is now approaching the next step of regional economic integration by finalizing its Common External Tariff (CET).

44. Introduction of the Common External Tariff (CET) Background:  The ECOWAS Revised Treaty (like the European Union Treaty which provides for a Common Market and a Customs Common Tariff as part of the process for Economic integration) indicates that one of the main objectives for the creation of the Community is the establishment of a common market through trade liberalization and the adoption of a Common External Tariff. Consequently, the Authority of Heads of State and Government, at its 29 th session on 12 th January 2006 adopted the ECOWAS CET for ECOWAS Member States.

45. The ECOWAS CET  The ECOWAS CET which was originally based on the Union ẻconomique et monẻtaire ouest- africane (UEMOA) or in other words, The West African Economic and Monetary Union (WAEMU) CET as a four (4) band tariff of 0%, 5%, 10%, and 20% now has a 5 th band of 35% to satisfy all member states is as follows:

46. The ECOWAS CET ctnd  0% - essential social commodities; eg. Pharmaceutical prods, Chp 30; Fertilizers, Chp 31; Condoms, Ch 40  5% - basic raw materials, capital goods and specific inputs Eg. agro chems (herbicides, pesticides), Chp 38 Machinery and equipment, Chp 84  10% - intermediate products Eg. Tomato paste concentrate, Chp 20;  20% - final consumer goods Eg. Articles of apparel and clothing accessories – Ch 62; electric domestic applainces, Chp85  35% - specific goods for economic development Eg. Mineral water, 2201; Meat and edible offals – Chp 2

47. Structure of the ECOWAS CET  The structure of the ECOWAS CET as adopted by the ECOWAS Council of Ministers at its 70 th ordinary session in June 2013 is as follows

48. Comparison of Ghana and ECOWAS CET Tariff lines

49. The ECOWAS CET comprises the following  A Tariff and Statistical Nomenclature (TSN) based on the Harmonised Commodity Description and Coding System (HS) of the World Customs Organisation (WCO) adopted by the Community.  A table of taxes and duties applicable to imported products and which include: Customs duty (ID); Statistical Tax (ST); ECOWAS Community Levy (ECL).

50. Application of the CET  When goods are declared to Customs in the Community, they must generally be classified according to the CET. Imported and exported goods have to be declared stating under which subheading of the nomenclature they fall. This determines which rate of customs duty applies and how the goods are treated for statistical purposes.

51. Application of the CET  The CET which is a Combined Nomenclature is based on the Harmonized System (HS) nomenclature with further Community subdivisions.  The Harmonized system is run by the World Customs Organization (WCO). This systematic list of commodities forms the basis for international trade negotiations, and is applied by most trading nations.World Customs Organization  The CET also includes preliminary provisions, additional section or chapter notes and footnotes relating to CET subdivisions. Each CET subdivision has a ten digit code number, followed by a description, and the applicable duty rate.

52. Application of the CET What yet to be done:  Harmonized Community Customs procedure code  Exemption regimes harmonized  Free circulation

53. Harmonized Customs Exemption Regime  The Community is yet to prepare a Harmonized Exemption Regime  The Member States should agree to harmonize their exemption regimes in respect of goods that are excluded from payment of import duties. Exemptions are to be distinguished from duty relief regimes for temporarily imported goods pending their re-exportation.

54. Free Circulation, Distribution of Revenues  The notion of free circulation implies unhindered circulation of goods imported from extra-regional sources which would require tax collection at the first point of entry into the region and the provision for sharing of collected Customs revenue. Thus the free circulation notion is based very much on the concept of a Customs Union and goes beyond a Free Trade Area (FTA) and abolishes trade restrictions for goods coming from one member State to another. Simply put, the member countries collectively become one Customs territory.

55. Free Circulation, Distribution of Revenues. ctnd  In a Free Trade Area, goods produced within the area that comply with the rules of origin (origin products) are the only goods that can circulate freely within thee area. All other goods that do not satisfy the rules of origin cannot circulate freely without paying duties. Therefore, a good imported from outside the area, which has already entered one of the member countries, but then crosses to another one within the area, is charged duty again. In a Customs Union, this would be tantamount to redundant collection of import tariffs on goods from outside the regional grouping.

56. Free Circulation, Distribution of Revenues, etc. ctnd  The cardinal aim of a Customs Union is free circulation and national treatment of third country imports, that is, a trade regime that guarantees the free circulation of regionally produced and third party imports through the Customs Union territory, once duties at the CET rate have been levied upon them.

57. Free Circulation, Distribution of Revenues, etc. ctnd.  The implementation of free circulation may bring into focus the need for revenue distribution mechanism in a Customs Union. The modalities of revenue collection and sharing are very crucial aspects that member countries will have to address themselves to in making a decision on the Customs Union. This is due to the fact that the maintenance of the status quo may impoverish landlocked countries who equally depend on Customs revenue for economic development. Several collective revenue distribution options exist to address this situation which might arise as a result of the application of free circulation.

58. Supplementary Protection Measures  After wider consultations in the region and drawing on the best practices elsewhere in the world, the Commisson found it necessary to introduce into the ECOWAS CET set of rules to provide some degree of flexibility and govern a transitional period for the implementation.  The latest regulation (Section 2 of Article 2) which was adopted on 30th September 2013 is the regulation on ECOWAS Supplementary Protection measures. This introduces additional protection in the initial application of the CET by allowing 3% of tariff deviation by member states for a period of 5 years.  The purpose is also to enable member states adjust to the CET in the event of loss of tariff protection due to the CET.

59. Supplementary Protection Measures ctnd  To further improve the level of flexibility in the application of these temporary safeguard measures, ECOWAS Commission has attached a list of commodities to the Annex1 of the ECOWAS Regulation (C/REG.1/09/13).  The CET has 5,899 tariff lines (products) which means Member States are required to protect a maximum tariff lines of 177 ( i.e. 3% of 5,899).  The Regulation also provides that member states who wish to avail themselves of this facility should notify the ECOWAS Commission with detailed list of affected products within 30 days.

60. Supplementary Protection Measures ctnd. Import adjustment tax and supplementary protection tax The regulation establishes: 1) an import adjustment tax (IAT) and; 2) a supplementary protection tax (SPT)  applicable to goods originating in third countries. It allows Member States to deviate from their tariffs set out in the CET.

61. Import Adjustment Tax It can be applied only when the MFN duty rate specified in the Member State is lower than the duty rate in the ECOWAS CET. It is applicable to third country goods for 5 years. The difference between the MFN applied by the Member and the CET is the maximum level of the import adjustment tax that can be imposed by a Member State.

62. Supplementary protection tax The tax can be applied to products from third countries on two conditions: Firstly, the increase in the volume of imports of a product entering the Customs territory of a Member State during any year equals or exceeds 25% of the average imports during the last three preceding years for which data are available. Secondly, the average cost, insurance and freight (C.I.F.) import price of shipment entering the Customs territory of a Member State during any month, falls below 80% of the average C.I.F. import price of the last three years for which are available.

63. Benefits and costs of regional integration  For both business within the market and consumers, a single market is a very competitive environment, making the existence of monopolies more difficult. This means that inefficient companies will suffer a loss of market share and may have to close down. However, efficient firms can benefit from economies of scale, increased competitiveness and lower costs, as well as expect profitability as a result.

64. Benefits and costs of regional integration, ctnd.  Consumers are benefited by the single market in the sense that the competitive environment brings them cheaper products, more efficient providers of products and also increased choice of products. What is more, businesses in competition will innovate to create new products; another benefit for consumers.

65. Benefits and costs of regional integration, ctnd  Transition to a single market can have short term negative impact on some sectors of a national economy due to increased international competition. Enterprises that previously enjoyed national market protection and national subsidy (and could therefore continue in business despite falling short of international performance benchmarks) may struggle to survive against their more efficient peers, even for its traditional markets. Ultimately, if the enterprise fails to improve its organization and methods, it will fail. The consequence may be unemployment or migration.”national market protectionsubsidy

66. ANY QUESTIONS