Automotive industry awaits decision on European Union FTA

ALAN PEAT, JOY ORLEK
THERE HAS been a delay in including automotive products under the SA-European Union (EU) free trade agreement (FTA) – which was planned to have been implemented from January 1. On November 5, 2005, SA and the EU reached an agreement to include most of the automotive products under the FTA – which has been in place since January 1, 2000. However, this agreement has not as yet been implemented. This is due to differing interpretations between the EU and SA on the implementation of the technical provisions, according to Nico Vermeulen, executive director of the National Association of Automobile Manufacturers of SA (Naamsa). “We hope they will be resolved in the immediate future.” The crucial meeting on this matter was due to be held today (February 10). Talking to FTW before this date, Vermeulen said: “It’s possible that if the EU and SA can resolve differing interpretations, duties that have been paid will be refunded to the January 1 date on which it was due to be implemented.” The area in which agreement is being sought relates to SA having been graduated out of the EU’s generalised system of preferences (GSP) on January 1. This, according to information released to FTW by the department of trade and industry (DTI), was applicable to section XVII of the tariff nomenclature - covering vehicles, aircraft, vessels and associated transport equipment. These are products that are classified under chapters 86, 87, 88 and 89. The most pertinent one, we were told, is chapter 87: “vehicles other than railway or tramway rolling-stock and parts and accessories thereof”. The practical implications
of this are: • That SA economic operators exporting under chapter 87 were, inter alia entitled to a 3.5% rebate on the normal customs tariff applicable to these products upon entering the EU. This GSP rebate has now been suspended; • To benefit from the rebate, consignments had to be accompanied by a certificate of origin Form A. The fact that the rebate has been suspended means that the Form A is no longer applicable to products classifiable under chapter 87; • Components classifiable under chapter 87 complying with the rules of origin are now subject to a rebate of 50% upon entering the EU - in terms of Article 11.5 of the FTA The departmental analysis expressed to FTW was that, although this is not as advantageous as the GSP rebate, it is a lot better than the normal duty. The rebate means that the applied duty on most components destined for industrial assembly is 1.5%, instead of 3% - whilst the one on components destined for the aftermarket is 2.2%, instead of 4.5%. To benefit from this lower duty, consignments have to be accompanied by a form EUR.1 issued by Sars (customs).