2.1. Rules of Origin: Conceptual Definition and Origin Criteria

Rules of origin are a set of laws, regulations, and administrative rules that determine the national source of a product. According to the World Customs Organization (WCO, 2012), “the basic role of rules of origin is the determination of the economic nationality as opposed to the geographical nationality of a given good.”¹ The simple case of determining RoOs is provided when production of a certain good occurs entirely in a given country: the product “originates” from that country. Determining the origin is more complex when more than one country is involved in the production process. For example, when cocoa beans are harvested in Côte d’Ivoire and ground in the same country, but the output (that is, cocoa powder) is exported to South Africa for further transformation into chocolate, determining the origin of the final product becomes more complex. In this example, RoOs help determine which country should be considered the “origin” of the processed chocolate.

There are risks associated with the transshipment of goods sourced from a third country at preferential costs as originating goods from an FTA. A Ghanaian cocoa butter manufacturer can source beans from non-AfCFTA markets (e.g., Indonesia) and use them to process its outputs without complying with AfCFTA value content requirements. Thereafter, the processed butter could be exported to the South African market under the AfCFTA tariff preferences. Similarly, wheat flour producers from Morocco can use a significantly high share of wheat sourced from the European Union to process flour shipped to Kenya under the AfCFTA RoOs. Such practices can lead to trade disputes. For example, smuggling goods and transshipments of non-originating merchandise from Economic Community of West African States (ECOWAS) as originating items, among other factors, led to a border closure between Nigeria and Benin from August 2019 to December 2020. During this period, Nigeria only allowed goods traded through formal channels and increased verification of compliance with prevailing ECOWAS trade rules (Abegunde and Fabiyi, 2020).

Two broad categories of RoOs exist: non-preferential trade RoOs and preferential RoOs. The former are generally applied for purposes other than granting preferential tariff treatment. Examples include the application of World Trade Organization (WTO) tariff rates or trade policy measures such as quotas, anti-dumping rules, or geographical indication² labeling requirements. Preferential RoOs, which are the main focus of this paper, relate to RoOs applied under preferential trade arrangements, including regional trade agreements, customs unions, or preferential schemes in favor of a target group of countries. Criteria for preferential RoOs are categorized into main origin criteria or product-specific rules of origin and regime-wide rules of origin, each with a set of sub-criteria (Figure 1).

Figure 1

Criteria to determine preferential Rules of Origin. Source: Authors, based on UNCTAD Economic Development in Africa Report 2019 (UNCTAD, 2019) and Estevadeordal et al. (2009).

2.2. Prevailing Rules of Origin Across Africa

The various rules discussed so far have been established by countries under Preferential Trade Arrangements (PTA), a prerequisite to conferring originating status to goods. Most existing PTAs in Africa and beyond use a combination of these rules to frame their RoOs. Table 1 lists some RoO elements prevailing in the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC), Economic Community of Central African States (ECCAS), ECOWAS, Southern African Development Community (SADC), Tripartite Free Trade Area (TFTA), and AfCFTA.

Rules of origin provisions vary throughout African PTAs. COMESA for example provides three options for calculating value content. The change in tariff classification criterion is established and consist mostly of specifications at the chapter and heading levels. COMESA does not have a tolerance rule but permits diagonal cumulation and has made provisions for the absorption rule. The common market also provides simplified procedures for small-scale traders subject to validation by the relevant authorities. The EAC does not have a general value content percentage criterion applicable to all products but is rather product-specific based. The community applies a change in tariff classification criterion with most of the specifications at the chapter and heading levels. It also allows for diagonal cumulation and tolerance and absorption rules while permitting exporter declarations for small consignments. The ECCAS applies a uniform percentage across all products—a minimum of 30% of the regional value content. The community allows for diagonal cumulation and absorption, but has not made provisions for a tolerance rule. ECOWAS member states also uniformly established a minimum of 30% of the regional value content across all products. It does not make explicit reference to cumulation in the legal text but seems to apply it under Article 2 of its Trade Liberalization Scheme. ECOWAS does not have provisions for tolerance and absorption rules. The SADC and TFTA do not apply a general ad valorem percentage criterion. Self-certification is not allowed in any regional economic communities. The AfCFTA uses a hybrid approach that combines the wholly obtained and ad valorem percentage as the product-specific criterion along with a range of regime-wide rules (see Section 3.2 for a fuller discussion of the scope of AfCFTA RoOs).

The discussion here highlights the degree of heterogeneity in the RoOs applied through various trade agreements across Africa (at REC levels). Harmonization is thus difficult, if not impossible, at sub-continental or continental levels. However, there is a degree of convergence among existing RoO schemes: they have similar wholly obtained rules; they allow for some form of cumulation, and the alignment of general RoOs; product-specific RoOs are usually based on a change in tariff headings and value-added concepts; while thresholds may vary, the methods of calculation are similar; processing rules in certain industries are well accepted; and inter-agency cooperation (customs, ministries, chambers of commerce and industry, customs agents, and customs brokers) is standardized in several RECs, albeit only in basic ways.

2.3. Economic Justification of Rules of Origin and Empirical Evidence

Rules of origin are aimed at preventing trade deflection within an FTA by permitting products that have been sufficiently processed in the area to enjoy preferential treatment. The main argument is that RoOs should confer products originating from the FTA with a cost-competitive advantage, at least for those induced by tariff preferences. This also implies that if prevailing import tariffs or MFN tariffs are marginal or zero for certain products imported from any extra-FTA member states, the FTA does not confer any preferential tariff treatment to its member states on those items. Under these circumstances, the decisions of manufacturers within the FTA to source their intermediate goods from either FTA or non-FTA members will be driven mainly by other cost factors that are not associated with tariffs. Wherever they confer a cost-competitive advantage, RoOs can favor the development of Regional Value Chains (RVCs), with manufacturers sourcing relatively cheaper inputs from FTA-based producers rather than extra-FTA competitors (Conconi et al., 2018; Cadot and Ing, 2016). However, stringent and costly RoOs—induced by high production or administrative costs of compliance—can push intra-FTA manufacturers to source low-cost extra-FTA inputs or to simply pay prevailing duties. In that case, RoOs cannot fully reach their goal of boosting intra-FTA trade (Angeli et al., 2020). Survey-based evidence from 23 developing countries (including 13 African countries) over the period from 2010 to 2013 suggests that 35% of the most difficult non-tariff measures applied by partner countries to manufactured products concern RoOs and their related documentation requirements (International Trade Center, 2015).

Empirical evidence on the contribution of RoOs to boosting trade under preferential trade agreements is scarce due to data gaps. In Africa, no RECs currently collect data on preference utilization. The literature relies mainly on qualitative indicators, such as restrictiveness indices of the RoOs. These indices are mainly based on features and observations from the legal text of the RoOs rather than their actual effects (Estevadeordal et al., 2011; Harris, 2007; Cadot et al., 2006; Estevadeordal, 2000). The calculation of these indices is questionable, since the underlying methodology varies from one author to another. By construction, the indices can also diverge significantly between products and sectors. Despite their weaknesses, restrictiveness indices remain valuable analytical tools for empirical studies. They reveal the extent to which RoOs facilitate or impede trade while allowing comparisons between preferential trade schemes (UNCTAD, 2019).

These notwithstanding, studies analyzing the trade impacts of RoOs have had mixed results so far. Estevadeordal and Suominem (2003) used a gravity model to investigate the impact of RoOs on aggregate trade flows for 156 countries in 2001. The authors considered nearly 100 PTA around the world. They found that restrictive RoOs undermine trade flows and counteract the liberalizing effects of PTAs. The authors also found that some regime-wide RoO provisions, such as cumulation and drawback, can boost trade and have the potential to outweigh negative RoO effects. Furthermore, at the sectoral level, the results of the study suggest that RoOs encourage greater use of intra-FTA inputs compared to extra-FTA inputs. Kim et al. (2013) used a gravity model to assess the trade effects of regime-wide RoOs with a panel dataset of 36,238 country-pairs of 151 countries for a period spanning from 1990 to 2005. Their results suggest that trade impacts from RoOs vary with the types of rules applied. Regime-wide rules, such as cumulation and de minimis, boost trade flows between members of FTAs, unlike certification requirements, which do not seem to produce positive trade effects. de Melo and Portugal-Perez (2014) assessed the impacts of restrictive RoOs on textile exports from 22 African countries under the United States’ Africa Growth Opportunity Act (AGOA) and European Union (EU) preferential regimes. The authors found that simpler RoOs under AGOA (as compared to EU trade regimes) contributed to a faster increase in exports of apparel to the United States than those traded with the European Union.

In the absence of RoO-related data within African RECs, UNCTAD (2019) investigated utilization rates within Africa and the EU under existing preference schemes (viz., the Generalized System of Preferences of the EU, the Everything but Arms initiative, and economic partnership agreements). The analysis drew on descriptive statistics and trade trends considering EU imports from Africa that are eligible for preferences. The findings suggest a positive association between simplified RoOs in these schemes and high preference-utilization rates by African exporters. From 2009 to 2016, the rate fluctuated but stood above 90% every year, and it steadily increased from 92.2% in 2011 to 94.9% in 2014. The steady increase followed the reform of the Generalized System of Preferences of the EU, which simplified its RoOs, in particular for textiles and apparel, and became effective in 2011. However, the report also noted that many African countries have not been able to use preferences under trade schemes with their various partners, comprising Australia, Canada, Chile, the EU, India, Japan, Republic of Korea, Norway, Switzerland, Taiwan, and the US, based on 2016 data. In some instances, this was because they used their possibilities to export to their partner countries under MFN tariffs of zero. Unused preferences were found to be highest for African exports to India, the US, and the EU for products ranging from minerals, precious metals, vegetables, machinery, prepared foodstuffs, and chemicals. The situation might be easily understandable for manufactured items characterized by more complex rules. The list of products also includes primary commodities with less stringent RoOs. However, the analysis was inconclusive as to the underlying reasons for unused preferences, due mainly to data gaps at the most disaggregated levels. Preference underutilization could also be explained by the fact that African economies depend heavily on the export of unprocessed goods, which face marginal tariffs or MFN equivalent to zero in the importing markets (Bouët et al., 2020).

These outcomes notwithstanding, the consensus in the literature is that very restrictive and costly RoOs undermine their contribution to trade. As pointed out by Estevadeordal and Suominen (2003), complex and stringent RoOs may result in diversionary effects on trade and investments flows. This then raises a key question about the conditions under which RoOs create trade and boost welfare within an FTA. RoO-related costs can result from both production and administrative matters. While the former cost elements can result from various technical criteria including those emanating from souring inputs in the FTA, the latter may arise from procedures required for ascertaining compliance with the rules, which can also be exacerbated by the weak capacity of regulatory bodies, including customs authorities, especially in LDCs (Angeli et al., 2020; UNCTAD, 2019; Estevadeordal and Suominen, 2003). To minimize those costs and maximize RoO benefits, the rules should not be too complex or rigid and their implementation simplistic (UNCTAD, 2019).

3.1. Cost-Effective and Well-Functioning AfCFTA Rules of Origin: Why Does It Matter?

The AfCFTA RoOs are imperative to the success of the Agreement, as with many other preferential trade schemes. AfCFTA tariff schedules shape the structure of preference margins for goods. RoOs will determine the features of those goods that will be eligible for such treatment. The RoOs will be instrumental for preference utilization under the Agreement and will determine its outcomes with regards to trade in intermediate goods, shaping the space in which regional value chains operate and grow. Evidence from the North American Free Trade Agreement (NAFTA), for example, suggests that its RoOs played a significant role in lowering the imports of intermediate goods and inputs from non-NAFTA countries (Conconi et al., 2018). However, the full impact of NAFTA outcomes is mixed. Studies such as Sánchez (2018) and Mold and Rozo (2006) suggested that such a diversion of imports under NAFTA undermined the competitiveness of some North American industries, and led subsequently to poor welfare results, particularly for Mexico. Other authors (Hernandez-Trillo, 2018; Wisner and Epstein, 2005) found that Mexico gained from NAFTA in terms of intra-bloc trade, welfare, and real wages. These studies suggest that FTA opportunities are best harnessed with cost-effective rules and RoOs that are less harmful to trade and production.

The AfCFTA provides countries and firms with preferential tariffs. The Agreement also provides businesses with non-tariff preferences: manufacturers will have the choice of sourcing inputs from the rest of the world. Producing and trading under the AfCFTA will then depend partly on the costs and benefits associated with its preferential tariff utilization, in which RoOs are critical determinants. As discussed in Section 2.2, costly and restrictive RoOs undermine trade, especially for intermediate products, and therefore may become technical barriers. Within the TFTA, RoOs are among the most frequent complaints registered on the non-tariff barriers’ reporting, monitoring, and eliminating mechanism (UNCTAD, 2019). RoO compliance costs in preferential trade agreements could represent between 3% and 5% of final product prices (Cadot and de Melo, 2008). Keck and Lendle (2012) suggest that the fixed-cost element of compliance could range between US$14 and US$1500.

According to Cadot and Ing (2016) despite being relatively simple, flexible, and transparent, the Association of Southeast Asian Nations (ASEAN) RoOs inhibit regional trade by roughly one-quarter of its MFN tariffs. In other words, the ASEAN RoOs nullify one-quarter of the effect of tariff preference margins. No matter how low tariffs could be under the AfCFTA, if RoO compliance costs are excessively high, manufacturers are likely to imports inputs from non-AfCFTA markets. These costs are often amplified by the high trade-facilitation burdens that prevail across Africa. There is a need to keep compliance costs associated with AfCFTA RoOs at a minimum for businesses. This is critical for SMEs which make up the bulk of Africa’s business sector but have limited capacity to comply with stringent RoOs (Draper et al., 2016).

Africa is relatively well endowed with natural resources from agricultural products, minerals, and energy resources. If they are cost efficient, AfCFTA RoOs and tariff preferences will contribute to incentivizing producers to source much of their inputs across the continent. The RoOs are also important for addressing tariff-related issues emanating from the overlapping memberships of RECs. For example, tea exports from EAC members to Egypt, a leading tea importer in Africa, are subject to varying tariffs. If the tea originates from Kenya—a COMESA member, like Egypt—it is subject to the preferential tariffs of this REC. Yet, tea sourced from Tanzania—a member of EAC, like Kenya, and SADC, but not a member of COMESA—is subject to MFN. Such disparity may disrupt the functioning of EAC trade integration (UNCTAD, 2019). The AfCFTA should address such challenges if it is to be cost-effectively implemented. The same analysis by UNCTAD (2019) provided evidence through cases studies on the potential of integrated and harmonized RoOs under the AfCFTA to support the development of RVCs in the following sectors: tea, cocoa and chocolate products, cotton textiles and apparel, beverages, cement, and the automotive industry. The study recommended the adoption of cost-effective AfCFTA RoOs, that is, rules that are simple (in the sense of being clear and understandable), transparent, predictable, and trade facilitating for businesses and trade operators. These are key features of cost-effective AfCFTA RoOs.

3.2. Scope of AfCFTA Rules of Origin: An Overview⁵

The modalities of tariff liberalization under the AfCFTA require that 90% of tariff lines (the so-called non-sensitive products) will be fully liberalized over a 10-year period for LDCs and over a 5-year period for non-LDCs. Up to 7% of tariff lines that qualify as sensitive products will be fully liberalized over a 13-year period for LDCs and over 10 years for non-LDCs. The remaining 3% of tariff lines, not accounting for more than 10% of total trade, can be excluded from tariff liberalization. The AfCFTA RoOs provide a set of laws, regulations, and procedures for the minimal level of processing that should take place in the area for any manufactured product to qualify as an originating good, and therefore benefit from preferential tariffs under the Agreement.

The AfCFTA RoOs, as per Annex II of the Agreement,⁶ aim to deepen market integration at both regional and continental levels, boost intra-Africa trade while promoting regional and continent-wide value chains, and foster economic transformation through industrialization. The rules are therefore expected to serve as an instrument that contributes to boosting trade among African economies. The AfCFTA RoOs adopt a hybrid approach combining main origin criteria—that is, wholly obtained and substantial transformation (Articles 4–7 of the AfCFTA Annex on RoOs)—and provisions anchored in the regime-based RoOs, such as the minimal operations rule (Article 7), cumulation (Articles 8 and 31), principle of territoriality (Article 6), certification (Articles 17 and 21), and direct transportation (Article 30), among others.⁷

Annex II on RoOs also makes provisions in Article 40 for dispute settlement, stating that issues among AfCFTA members arising from RoO implementation shall be settled in accordance with the AfCFTA Protocols on Rules and Procedures on the Settlement of Disputes. The Annex further requests the drafting of a number of additional RoO-related documents, including product-specific RoOs and regulations for goods produced under Special Economic Zones. By the 13th Extra Ordinary Session of the Assembly of the Union on the AfCFTA (held virtually in December 2020), AfCFTA RoOs were agreed on a significant share of tariff lines. For example, live animals (HS code Chapter 01), meat and edible meat offal (HS code Chapter 02), and dairy products (HS code Chapter 04) will be considered originating only when they are fully obtained in the AfCFTA state parties. For some other products, specific RoOs have yet to be decided: e.g., thresholds for originating or non-originating value content, changes in tariff classification, and specific manufacturing or processing operations requirements. For example, refined petroleum oils can be considered as originating when they are processed in the AfCFTA state parties from originating crude oil, or when the foreign value content does not exceed a certain threshold. At the time this paper was prepared,⁸ most of the remaining provisions were drafted, but outstanding issues included RoOs for some textile items and vehicles, as well as the treatment of goods produced in Special Economic Zones.

AfCFTA product-specific RoOs adopt a hybrid approach that includes product-based rules. That is, they do not follow a general approach, for example, of applying a uniform percentage to the value content criterion, as this would make them restrictive. However, this might pose compliance challenges for the private sector, due to the complexities of navigating product-specific rules. From the perspective of public authorities, capacities—in terms of human and financial resources—will be required to enforce the rules and monitor compliance. These potential challenges can however be counterbalanced through some flexibility in the provisions provided by AfCFTA regime-wide rules, such as cumulation, absorption, tolerance, e-certification, and others.

3.3. Enforcing Rules of Origin in Africa: Key Challenges

4.1. Promoting Efficient Administrative Procedures Through Digitalization of Trade and e-Certification of Origin

As discussed throughout the paper, trade practices partly determine the administrative costs associated with RoO compliance. Efficiency in these practices can be increased through the application of technologies, which range from paperless trading to digitalization of supply chains and the adoption of e-certificates of origin in the particular case of RoOs. Therefore, the trade performance of African economies, including under the AfCFTA, will increasingly be determined by the extent to which digitalization is mainstreamed in their trade facilitation reforms. The AfCFTA online non-tariff barrier reporting, monitoring, and eliminating mechanism,¹⁰ for example, is a practical online tool available to traders and businesses moving goods across the continent to report any challenges including those related to the RoOs they encounter.¹¹ The adoption of such an online mechanism within the AfCFTA framework reflects the deliberate efforts of African trade officials to mainstream digitalization within trade practices.

According to the UN Global Survey on Digital and Sustainable Trade Facilitation 2019,¹² the group of sub-Saharan African countries implemented 21.5% and 44.4% of cross-border paperless trade¹³ and paperless trade¹⁴ measures, respectively, under the WTO TFA, which entered into force in 2017. These figures were however well below the respective global implementation rates of 36.2% and 62.8%. Digitalization of trade processes should be accelerated across African economies, to increase their trade performance. Digitalizing intra-African trade has the potential to streamline administrative procedures and improve security while reducing the delays and costs often induced by physical procedures (Parshotam, 2020).

RoO administrative requirements can be costly if the process is not efficient. In exporting countries, businesses must prove the originating status of their goods through a set of documents, including certificates of origin, to enjoy AfCFTA preferential tariffs. In the partner importing country, customs authorities or any competent agency might request further verification upon the importation of goods in case they have doubt on the exporting country, or if they do not trust the process of issuance of the certificate. To keep the process between both countries efficient, integrated electronic systems shall be encouraged among AfCFTA members. This could be even more efficient if countries adopt Electronic Certification of Origin (e-certification of origin), which can increase efficiency and reduce administrative costs. E-certification of origin allows manufacturers and exporters to use a dedicated web-based platform to electronically submit all relevant documents for the issuance of a certificate of origin. The process allows for security and traceability, in addition to the efficiency of electronically-based systems. It also permits the private sector to avoid shipping or carrying heavy physical paper documents, which can increase the administrative costs of RoO compliance. In addition, e-certification of origin, by lowering compliance costs and delays, can help small businesses level the playing field to better integrate regional value chains (Parshotam, 2020).

In the SADC for example, it is argued that up to 1600 documents can accompany a truck across a SADC border as part of the administrative requirements to comply with trade rules, including RoOs (Gillson, 2010). In 2014, The COMESA adopted e-Certificate of Origin (eCO) to replace manual certificates. In June 2020, during the COVID-19 pandemic and its supply-chain disruptions, all the member states of the region agreed to start implementing eCO under their regional trade agreements.¹⁵ The eCO consists of the following: (i) end-to-end procedures for trader registration and renewal; (ii) application, issuance checking, and verification of the certificate of origin; and (iii) identification of designated issuing authorities and their signatories. Similar systems have proven to be efficient across the European Union (UNCTAD, 2019) and are being set up in SADC, WAEMU, and ECCAS regions. The AfCFTA secretariat could develop a platform for AfCFTA e-certification of origin that will serve the continental area when it comes to RoO administrative procedures. Alternatively, RECs could develop and integrate such AfCFTA-related e-certification systems to facilitate the verification of AfCFTA RoOs among their members. These platforms will allow authorities in importing country to first consult the e-system before submitting a verification request to the exporting country if doubt persists. Such a system will serve as a major trade-facilitating instrument and permit time-efficient management of RoO administrative procedures.

Fortunately, the AfCFTA Agreement has provisions for the use of e-certificate of origin¹⁶ to be issued and accepted according to each country’s national legislation. Although the adoption of e-certificates is not compulsory within the Agreement, existing initiatives across RECs, as well as the move to digitalizing trade processes and the cost-saving advantages of such procedures, call for adoption of eCOs across the continent. This entails building capacity and consensus around e-certification, adopting new technologies, and investing in the implementation of such a system. Capacity building also includes preventing fraud around the originating status in countries through clearance and inspections. Educating the private sector in preventing fraud through the benefits and administrative aspects of operating within the AfCFTA and complying with its RoOs is a prerequisite in addition to enhancing cooperation and trust between the private sector and government agencies in charge of the RoOs.

4.2. Establishing an Integrated Institutional Mechanism to Enforce the Implementation and Monitoring of AfCFTA RoOs

The implementation of RoOs requires strong institutional capacity, in terms of technical competence and the quantity of human resources, which are often limited in Africa, especially in the LDCs (Draper et al., 2016). AfCFTA RoOs are multidimensional and cut across various sectors and ministries. While the AfCFTA RoO process is mainly led at national levels by ministries in charge of trade and customs authorities, the scope of RoOs clearly involves several stakeholders. For example, at the government level, rules related to agro-food products might involve ministries in charge of trade and agriculture. Ministries of mining should play a role in the implementation of RoOs related to mineral-based industrial products. From the perspective of the private sector, RoO matters affect manufacturers, exporters, and importers from almost all sectors. Therefore, national-level institutional arrangements for implementing and monitoring AfCFTA RoOs should include representatives of the relevant public and private entities as much as possible.

In several countries, AfCFTA national committees (an obligation of the AfCFTA Agreement) are being set up with a mandate to coordinate the implementation of the Agreement.¹⁷ The mandate of these committees shall cover matters related to AfCFTA RoOs, and their composition shall include members of various national agencies, customs authorities, and businesses. These institutional arrangements shall be aligned with national trade facilitation committees (under WTO FTA) to ensure cooperation. The institutional mechanism shall rely on regular consultations with businesses, through formal and informal public–private platforms. This will be instrumental to mitigating the challenges faced by businesses with a view to reducing any burdens caused by the rules. The dispute settlement mechanism under the AfCFTA shall also be binding, and countries must comply with the decisions emanating from it.

At the continental level, and per the AfCFTA Agreement, the AfCFTA secretariat based in Accra will oversee and coordinate the implementation of the Agreement. The designated committee on RoOs is expected to address issues related to the rules. The secretariat should also ensure transparency regarding the RoOs by making sure that countries adopt the relevant domestic procedures and promulgate and notify laws, regulations, and administrative procedures related to AfCFTA RoOs. The secretariat should collect relevant data to calculate and disseminate utilization rates under AfCFTA RoOs, which, at present, do not exist in the RECs. In this regard, a model developed by the WTO Technical Committee on RoOs (WTO, 2016) to calculate utilization rates could be used and adapted to the AfCFTA context. The dissemination of such statistics could help determine any cause of underutilization for corrective measures or to inform policymaking at continental, regional, or domestic levels.

The institutional mechanism for facilitating the implementation and monitoring of AfCFTA RoOs can also profit from the established expertise of the RECs, as private-sector operators already have the experience of how to comply with FTAs or regional agreements. REC secretariats should also be helpful in implementing the AfCFTA RoOs. For example, the AfCFTA secretariat could create a focal point in each REC secretariat which would help to ensure that the instruments of the AfCFTA RoOs come closer to the regions.

All the parties to the AfCFTA need to develop and implement an effective monitoring and evaluation system to track progress on the implementation and to ensure that the Agreement’s objectives are realized. This is obviously going beyond RoOs, but would allow all major commitments to be monitored and evaluated on a periodic basis. As previously highlighted in this paper, the AfCFTA Committee on RoOs should follow-up on the implementation of the RoOs and application modalities at least yearly.

4.3. Building the Capacity of Relevant Stakeholders on AfCFTA RoOs

Although countries have been dealing with RoO issues through existing regional agreements at the REC level and within the context of multilateral agreements with the rest of the world, capacity building on AfCFTA RoOs is necessary at both regional and domestic levels to ensure they are well implemented. For trade officials and customs authorities, this is a prerequisite to enable them to verify compliance and provide support to the private sector. Capacity building is also needed for businesses, the backbone of production and trade, to understand the implications of AfCFTA RoOs and their interplay with existing trade rules. In addition, for the private sector to understand the RoOs and use them cost-efficiently, translating the legal texts into different languages at regional and national levels could be desirable.

The capacity-building activities and their scope should be preceded by needs assessments (for the overall AfCFTA implementation, including RoOs) at national and regional levels. Dedicated programs, including online tools to raise awareness and build the capacity of various stakeholders (public and private) on matters related to the implementation of AfCFTA RoOs (their scope, requirements, and the application of law), are to be in place. Donor agencies have been active within Africa in the provision of trade and development co-operation projects and activities. For instance, the EU assists ACP countries through Tradecom I and II projects, but also deploys considerable effort into EPA implementation.

Capacity building will cover all sorts of available tools, from awareness raising to printed media and electronic tools (online toolboxes, trainings, materials, and information). UNCTAD (2019) proposes a digital toolbox for RoOs that can be easily developed under the AfCFTA framework. Such a toolbox will include online training materials, a web-based information repository of the provisions of AfCFTA RoOs, information sharing, and a help desk, among others. The digital platform could be translated in the main local languages to reach a wide range of users while ensuring they are business-friendly. Such a digital toolbox could be developed by the AfCFTA national implementation committees at the national level, by RECs at the regional level, and by the AfCFTA secretariat at the continental level.

4.4. Providing Targeted Support to Vulnerable Groups of Countries (LDCs) and Businesses (SMEs)

The capacity to implement trade agreements and harness their benefits is usually limited in LDCs, at least compared to non-LDCs. Under the AfCFTA, LDCs have preferential treatment when it comes to the period of liberalization of goods. The scheme provides for a longer period of tariff dismantlement for LDCs in response to their legitimate concerns of suffering more from cost adjustments such as tariff revenue losses for governments and output contraction in less competitive sectors (Saygili et al., 2018). Key issues raised by LDCs when it comes to risks related to the implementation of the AfCFTA include a weaker manufacturing base and limited capacity to understand and apply trade instruments and rules, including RoOs. Also, landlocked LDCs (14 African countries among the 33 LDCs) face higher trade costs, which undermine their competitiveness within the AfCFTA. LDCs have not been provided with differentiated RoOs, which would have considered their relatively weak and less sophisticated productive capacities. In this context, technical assistance programs under the AfCFTA, especially on RoOs, should first and foremost target LDCs. At the global level, for example, the Enhanced Integrated Framework, a multi-donor fund based at the WTO, and the WTO’s Aid for Trade, support LDCs by addressing trade constraints with a view to better integrating Global Value Chains (GVCs). Such frameworks with similar objectives can be created under the scope of the AfCFTA and hosted by its secretariat: its ultimate objective would be to provide financial and technical support for African LDCs to help them cope with trade-related constraints and strengthen their integration to RVCs.

Whether in LDCs or non-LDCs, and no matter how minimal they are, compliance costs could impede the ability of SMEs to adhere to AfCFTA RoOs. Yet the AfCFTA is expected to expand or create new market opportunities at regional levels for SMEs and stimulate local entrepreneurship. Evidence from the EAC suggests that SMEs suffer most from issues related to administrative procedures and compliance to RoOs (Draper et al., 2016). Capacity building will be critical to this group in the form of direct financial support provided through group certification schemes, business communities such as chambers of commerce and industry, associations of traders and manufacturers, customs brokers, and governments-dedicated funds. Further, dedicated online tools for e-certification of RoOs can provide SMEs with the opportunity to minimize compliance costs.

4.5. Harmonizing Rules of Origin to Remain a Top Priority

As previously discussed, RoO regimes under various trade agreements among African countries are heterogeneous. This could undermine well-functioning AfCFTA RoOs. The AfCFTA agreement considers RECs as “building blocs,” which implicitly implies that existing trade rules at regional levels should be maintained. However, with regard to RoOs, this seems like a daunting if not impossible task. Diverging provisions of RoO criteria among RECs (for example, the regional value content in some RECs versus tariff classifications in others) might not be reconcilable. Such divergence will push the private sector to produce and trade in a specific region, which can then undermine AfCFTA objectives to promote more continental trade. In this context, RECs and customs unions across Africa should develop new sets of RoOs that will then be aligned with the AfCFTA RoO provisions. These will contribute to better harmonization and efficient use of trade rules and practices. Such a solution also helps address current issues around overlapping and the proliferation of RoOs.

4.6. Implementing Trade Facilitation Through Complementary Measures

Rules of origin and tariff preferences alone will be insufficient to deliver the potential gains of the AfCFTA. Not all RoO compliance costs stem from the rules; much of these costs arise from customs procedures and requirements upon importation or exportation. In this sense, the implementation of trade facilitation measures under the AfCFTA and other regional and multilateral trade agreements (including WTO trade facilitation commitments) will play a critical role in lowering the costs associated with NTBs, which undermine the competitiveness of African economies. No matter how easy or smooth RoO compliance may be, it will be necessary to enact complementary measures to address trade and production costs in Africa. Such measures include building productive capacities, facilitating trade, addressing other non-tariff barriers, and easing the business environment to increase the overall competitiveness of African economies.

Some countries already have comprehensive trade portals or “one-stop shops” for investment promotion (typically under investment promotion agencies), export promotion agencies, and ministries of commerce or economy. Customs authorities and competent import or export agencies also maintain good online tools and information. Botswana is a good example of a “one-stop shop.” Through an integrated online platform, the country’s Investment and Trade Promotion Authority plays a vital role promoting and attracting investment, exports, and development (see https://www.gobotswana.com/). These success stories and others shall be documented and shared across the continent.