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SA to modify GATS commitments?

Today Business Day reported that the Minister of Police reportedly stated on Thursday that South Africa will withdraw from its commitments to the World Trade Organization's (WTO) General Agreement on Trade in Services (GATS).

The Minister of Police made this statement as the Private Security Industry Regulation Amendment Bill requires that 51% of all private security entities is to be owned and controlled by South African citizens. Should President Zuma sign the bill in its current format into law, apart from the potential violation of South Africa's Constitution, it will also be a violation of South Africa's international obligations under the GATS. This is due to the fact that South Africa committed under GATS that no trade restrictions will be implemented in the private security industry. As a consequence South Africa is bound by these commitments and cannot unilaterally impose a local ownership and control requirement.

However it seems that South Africa will in fact consider its international obligations under GATS as the Minister of Police stated that South Africa will utilise article 21 of the GATS which allows South Africa to modify its international commitments. Interestingly it seems that South Africa does not want to rely on article 14, which allows for general exceptions to a member's commitments, or article 14 bis, which allows for the possibility to take any action which is necessary for the protection of South Africa's security interests. , Indeed article 21 of the GATS does provide for a procedure to be followed in order to modify a member of the WTO's commitments under the GATS. However, this procedure is by no means a mere procedural formality. , It requires, amongst others, a formal notification to the WTO's Council for Trade in Services where any affected WTO member may claim compensation for the loss to be suffered if South Africa modifies its GATS commitments. This involves negotiations between South Africa and any such WTO members that may have claimed compensation. If any agreement is reached, such compensation will not only be afforded to the member states that negotiated with South Africa, but South Africa will have to extend the compensation to all other WTO members. , It could potentially take a very long time to negotiate and has only ever been successfully done once by the US and twice by the EU which in each instance took many years to conclude.

In reaching any agreement under article 21 of the GATS, the problem faced by South Africa is that its services sectors are already exceptionally open to free trade. As such, South Africa does not have a lot of leeway in opening up more sectors in trying to offer compensation.

South Africa's private security industry is estimated to be worth around R50bn a year. However thus far no estimation can be given for the potential cost of the compensation to be granted to all WTO members under article 21 of the GATS. Furthermore, South Africa's trade relations do not operate in silos. Currently South Africa is lobbying the US government for its continued inclusion under the African Growth and Opportunity Act (AGOA). According to South Africa's Department of Trade and Industry, South Africa's exports under AGOA was worth $3.6bn in 2014. It has been reported that there are members of the US Congress opposed to including South Africa under AGOA if it proceeds with any modification of its GATS commitments. Thus not only will South Africa pay an as-yet-unknown-price in respect of its services sectors for all WTO member states, but it could very well lose out on roughly the value of the entire private security industry (whether 100% locally owned and controlled or not) in exports of goods under AGOA.

It remains to be seen what South Africa will do and indeed what the relevant Ministers in charge of South Africa's international trade relations' reactions to the Minister of Police's statements may be. Indeed the Minister of Police's statements not only negatively affects foreign investors' perception of South Africa, but also brings about great uncertainty for South African companies.

© Trade Law Chambers 2015

International Trade Law Firm 2015

Trade Law Chambers has been awarded an award in CorporateINTL 2015 Legal Awards. Trade Law Chambers has been voted as the Boutique International Trade Law Firm of the Year in ,South Africa.

© Trade Law Chambers 2015

SA may be offering foreigners better investment protection

Business Day reports that certain provisions of the draft Investment Promotion and Protection Bill have been strengthened during deliberations of the National Economic Development and Labour Council (Nedlac).

Although the updated draft bill has not yet been seen, it is understood that it will likely be introduced in Parliament next year,

To read Business Day's article please click here.

© Trade Law Chambers 2014

Leading practitioners in international trade

We are delighted to announce that one of our lawyers has been nominated as one of the best of the best.

Euromoney has been publishing expert guides for 20 years where the world's finest lawyers are chosen by their peers. After the successful completion of the nomination process for the International Trade and Shipping guide where a record number of people actively participated and endorsed the most talented and reputable lawyers, Rian Geldenhuys has been nominated by in-house counsel and lawyers to appear in the 9th edition as one of the leading practitioners in international trade.

© Trade Law Chambers 2014

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© Trade Law Chambers 2014

New codes requiring BEE in small businesses

On Friday 10 October 2014 the South African Government published new codes of good practice. The new codes set out the proposed black economic empowerment requirements for small businesses (being businesses with an annual turnover between R10m to R15m).

Interested parties have until 14 November 2014 to comment. Please do contact us if you require ,a copy of the new codes.

© Trade Law Chambers 2014

Export control measures on scrap metal

In September of 2013 the International Trade Administration Commission of South Africa ("ITAC") introduced export control measures on the export of scrap metal. In terms hereof scrap metal could not be exported if the scrap metal was not previously offered to the local market at 20% below the international benchmark price.

On 19 September 2014 ITAC published a notice in terms whereof it seeks comments on the current preference pricing system with a view to review the actual preference pricing system currently in place. The proposal is that the discount should either stay the same or be increased to as much as 30% of the international benchmark price, depending on the type of scrap metal.

Interested parties have four weeks from 19 September 2014 to submit comments to ITAC. A copy of the notice may be downloaded here. For any assistance, kindly contact Rian Geldenhuys.

© Trade Law Chambers 2014

ITAC initiates sunset review on anti dumping duties of stainless steel kitchen sinks

On 19 September 2014 the International Trade Administration of South Africa (ITAC) initiated a sunset review investigation on the anti-dumping duties applicable to stainless steel kitchen sinks imported from the Malaysia and the People's Republic of China.


The initiation notice may be downloaded here. Interested parties have 40 days as from 19 September 2014 to reply in full to the investigation unless they have received notification from ITAC directly, in which case they will have 30 days from the date of that notification. For any assistance, kindly contact Rian Geldenhuys.


© Trade Law Chambers 2014

Better trade with the EU

After 10 years of negotiating the Economic Partnership Agreement (EPA) with the European Union (EU), the South African Development Community (SADC) has finally initialled the EPA. , South Africa, Botswana, Lesotho, Swaziland, Namibia, Angola and Mozambique form part of the SADC grouping that initialled the EPA with the EU.

Once the EPA comes into force, it will provide South Africa with improved access to the EU market. As such it holds benefits to exporters over and above those benefits currently contained in the Trade Development and Co-operation Agreement (TDCA) between South Africa and the EU. Agricultural products have particularly gained greater access to the EU market as well as safeguard protection from surges in imports from the EU. It is expected that the various countries would now ratify the EPA in order for the EPA to become effective.

For more information on the full extent of the impact of the EPA, please do contact us.

Rian Geldenhuys
© Trade Law Chambers 2014

Investing in South Africa Expert Guide

Trade Law Chambers has been included in the Expert Guide ? Opportunities and Developments Africa Focus 2014. The Expert Guide consists of articles authored by numerous legal experts from around the world. , Rian Geldenhuys contributed an article on the legal considerations for investing in South Africa. The article may be viewed by clicking here. To download the entire Expert Guide, please click here.

© Trade Law Chambers 2014

SAs Customs and Trade Law Firm

Worldwide Financial Advisors Magazine appreciates that the world's leading professionals are called upon to assist with transactional matters throughout the deal process. As such it recognises a select number of leading professionals and professional firms across the globe for their individual areas of specialisation. Trade Law Chambers is delighted to announce that we have been recognised as the South African Customs and Trade Law Firm of the Year.

© Trade Law Chambers 2014

Global Award Winner : Commercial Law

Finance Monthly recently announced their Global Awards winners. We are delighted that Rian Geldenhuys has been recognised as the Commercial Lawyer of the Year in South Africa.

© Trade Law Chambers 2014

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Proposed GI protection for Wines Spirits

Proposals have been made for the protection in South Africa of European Union geographical indications for wines and spirits.

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On 7 March 2014, the Wine and Spirit Board gave notice of the exact geographical indications. The Wine and Spirit Board invite interested persons to submit written represeantions within 30 days from 7 March. To download the notice, kindly click here.

© Trade Law Chambers 2014

World Processed Deciduous Fruit Conference

The 12th World Processed Deciduous Fruit Conference ("Cancon12") ,will be held in South Africa from 09 to 12 March 2014. Cancon12 is the world conference fo the deciduous fruit processing and allied industries and is one of the most acclaimed events in the international diary as it offers parties the opportunity to participate and share knoledge at the highest level.

Rian Geldenhuys has been invited to present at Cancon on 11 March 2014 . He will be presenting his trade perspectives on trade remedies (anti-dumping, subsidies and safeguards) as well as tariffs.

© Trade Law Chambers 2014

WTO agrees on new global trade deal

Rian Geldenhuys writes a guest editorial for export &, import SA magazine's January 2014 edition.

To read the guest editorial, please click here.

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© Trade Law Chambers 2014

Success in opposing the imposition of safeguard measures and anti dumping duties

Trade Law Chambers has been in the news recently following on the successful opposition of the Australian safeguard investigation on processed fruit and tomatoes and the Australian anti-dumping investigation against canned peaches originating from South Africa. Both investigations were terminated subsequent to written and oral submissions by Trade Law Chambers on behalf of South African producers and exporters and as such no safeguard measures were imposed against South African processed fruit and tomato products and no anti-dumping duties were levied against South African canned peaches.

To read the news article as it appeared in Business Day, kindly click here.
To read the news article as it appeared in Farmers Weekly, kindly click here.

Rian Geldenhuys
© Trade Law Chambers 2014

Double award winners

The publishers of Acquisition International Magazine have announced the winners of their 2013 Legal Awards. We are proud to announce that Trade Law Chambers has been recognised as the Trade Law Practitioners of the Year whilst Geldenhuys Joubert Attorneys has been recognised as the International Trade Law Firm of the Year.

The awards recognise the outstanding achievements of individuals and companies within the legal sector, encompassing everything from barristers and boutique firms to global players. Specialities range from energy and immigration to antitrust and intellectual property. Acquisition International's Legal Awards identify and honour success, innovation and ethics across international legal and business communities.

Acquisition International prides itself on the validity of its awards and its winners. The awards are given solely on merit and are awarded to commend those most deserving for outstanding work over the last 12 months. Our awards recognise leaders in their respective fields and, crucially, are nominated by their clients and their peers.

Trade Law Chambers
2013

Foreign ownership of private security industry still uncertain

When the draft Private Security Industry Regulation Amendment Bill was published in 2012 we commented that the proposed limitation on foreign ownership may violate South Africa's GATS (General Agreement on Trade in services) commitments at the WTO (World Trade Organisation). To read that story please click here.

It has now transpired that the Bill was in fact adopted by the Parliamentary Portfolio Committee on Police. As such the National Assembly had to finally approve the Bill. The National Assembly however did not approve the Bill and sent it back to the relevant Portfolio Committee for reconsideration in 2014. We therefore wait to see whether the Portfolio Committee will take into consideration South Africa's GATS commitments. The private sector is encouraged to participate in this process.

Rian Geldenhuys
© Trade Law Chambers 2013

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Trade & Customs Law Firm of the Year 2013

Trade Law Chambers has again won an award recognising our expertise in international trade law.The latest award has been achieved in the Lawyers World Annual Awards for 2013. Trade Law Chambers has been ,voted as ,the Trade &, Customs Law Firm of the Year 2013 - South Africa.

© Trade Law Chambers 2013

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WTO Members to meet in Bali to finalise trade deal

Trade ministers and World trade Organization (WTO) ambassadors of all WTO Member States are meeting in Bali from the 3rd to the 6th of December to finalise the negotiations for a possible new trade reform package. This will be the WTO's 9th Ministerial Conference since its establishment in 1995. It is hoped that this conference will see agreement from all WTO Members on a number of outstanding issues, which should reinforce confidence in the international trading system that has been fizzling out due to the lack of progress to date on the Doha Development Agenda agreed on in 2002.

The main elements to be negotiated at the Conference are trade facilitation, agriculture and duty-free and quota-free access for least-developed countries. WTO Members have been involved in intensive consultations on these issues over the past few months, with the recently appointed Director-General of the WTO Roberto Azev?do from Brazil pushing Members hard to reach a deal in Bali. The Director-General has indicated that the negotiators are closing in on a trade reform deal.

It is estimated by the World Bank that a deal on trade facilitation alone, which focuses on removing customs formalities and other bottlenecks in international trade, could add hundreds of billions of dollars to the international economy through speeding up trade between WTO Members. Agreement on agricultural issues such as export subsidies and food security will be critical to developing countries, which continue to face competition from developed countries' subsidized exports. For the poorest WTO Members, the least-developed countries, the hope is that this round of negotiations will see agreement on duty-free and quota-free access for their exports in world markets as well as improved rules on special and differential treatment.

Niel Joubert, one of our directors will be in Bali for the WTO Conference and will be keeping us updated on progress in this round of negotiations.

© Trade Law Chambers 2013

EU to finalise trade deals

The EU has set a new deadline for concluding its free trade agreements with the African, Carribean and Pacific (ACP) countries. Some years ago the EU embarked on renegotiating its trade agreements with the ACP countries under the Economic Partnership Agreements (EPAs). These Economic Partnership Agreements where negotiated in regional groupings, for instance with SADC and Comesa. Most of these EPAs were signed with a view to concluding further negotiations at a later stage. Although South Africa falls under the SADC grouping, for various reasons it did not sign the interim EU-SADC EPA. ,

The EU ,has now set a deadline ,for concluding negotiations in the EPAs by October 2014 prior to the expiry of ,terms of the EU's trade chief Karel De Gucht. According to media reports the EU is said to offer increased market access for South African agricultural products, including wine and sugar. Under the current free trade agreeement, the Trade Development and Cooperation Agreements (or TDCA), the EU's agricultural products enjoy more preferential access to the South African market than the access enjoyed by South African agricultural products to the EU market.

As such the agriculutral sector should become involved in these negotiations. However it is not only agriculture that should take note, but also the services sector as the EU is keen on obtaining better access to the SADC market than what it currently enjoys.

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Rian Geldenhuys

© Trade Law Chambers 2013

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Trade Law Chambers wins another accolade

The InterContinental Finance 2013 End of Year Country Awards highlights the premier firms that have been nominated and voted as ?THE BEST? in 2013.

Trade Law Chambers has been voted as the best Trade and Customs Law Firm in South Africa for 2013.

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Trade Customs Law Firm 2013

The DealMakers 2013 End of Year Annual Awards celebrates the leading, most prolific firms, that have continually displayed a high degree of quality, tenacity and ability to punch above their weight within their area of specialization. Trade Law Chambers has been announced as the Trade and Customs Law Firm of the Year.

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Trade Law Chambers 2013.

Promotion and Protection of Investment Bill

On Friday the South African government released the draft Promotion and Protection of Investment Bill for public comment. This comes after the Department of Trade and Industry signalled in mid 2012 (click here to read that news item) that it would not be entering into any new bilateral investment protection treaties (BITs), ,that it would replace all existing BITs (click ,here to read that news item) ,thereafter commenced with the termination of certain BITs notably with the European Union, South Africa's biggest trade and investment partner. Most recently South Africa has cancelled its BITs with Germany and Switzerland.

In response to concerns raised by interested parties, the South African government responded by stating that the Promotion and Protection of Investment Bill is not a reversal of government's protection of foreign investors but rather an attempt to modernise and improve on the current regulatory framework. Having finally had sight of the draft bill, it seems that there are indeed some unfavourable changes to the protection of foreign investment.

The first such change is that investors no longer have recourse to international arbitration. Typically under the BITs investors are allowed to have arbitration proceedings brought against a government at international institutions such as the World Bank's International Centre for Settlement of Investment Disputes. International arbitration, for obvious reasons, is preferred by investors. Unless the draft bill is amended, investors will only be able to rely on international arbitration under BITs currently in force or where a BIT has been cancelled, until the protection runs out (typically ranging from 10 to 20 years depending on the actual BIT that was cancelled).

A second change relates to the compensation paid in the event of expropriation. True to what the government has been hinting at since 2012, this is aligned with the Constitution, in that an investment may not be expropriated save in accordance with the Constitution and law of general application for public purposes or in the public interest. The change however lies in the compensation payable. In terms of the draft bill the compensation must be just and equitable. This is arguably less compensation than that offered under most BITs, being typically the genuine full market value of the investment expropriated (to read a news item on the lesser compensation click here). , ,

Lastly the draft bill does not allow for investors to rely on protection or seek compensation if the conditions (regulations) change under which they invested in South Africa. The new bill excludes the affirmation that investors will enjoy fair and equitable treatment and full protection and security which is generally contained in BITs. In fact it contains provisions specifically allowing for such measures or a series of measure to be put in place by government which would not amount to expropriation.

As such the draft bill does not treat foreigners as favourably as the BITs did and allows for scope to exercise expropriation if the government so decides. Investors and interested parties are encouraged to make submissions within three months from 1 November 2013. Submissions should be addressed to the Director-General at the Department of Trade and Industry and can be sent via email for the attention of Ms V Gilbert to This email address is being protected from spambots. You need JavaScript enabled to view it.

Rian Geldenhuys

© Trade Law Chambers 2013

Service providers access to the SADC market

Negotiations on the liberalisation of the Southern African Development Community (?SADC?) services market are progressing. Negotiations started in April 2012 and in August of the same year the negotiators agreed on an agreement, the SADC Protocol on Trade in Services. ,

The SADC Protocol on Trade in Services provides the framework for allowing service providers from any SADC member state to provide their services within the territories of other SADC member states. To be more precise, it will allow service providers from SADC member states better access to the services markets of other SADC members states than compared to the access (if at all) that service providers from non-SADC member states may have. , The SADC Protocol on Trade in Services does not fully regulate the manner in which the service providers may access the SADC market. Such regulation lies within the specific commitments made by each member state of SADC.

SADC member states have made very few commitments on services liberalisation. As such foreign service providers in currently operating within SADC markets may be open to expropriation of their investments or subject to discrimination as SADC member states may indeed resort to expropriation or discrimination if they have not made a commitment to the contrary. The specific commitments currently being negotiated amongst member states are aimed at allowing SADC service providers access to the SADC market and protect against expropriate or discrimination (or indeed define the limitations of expropriation or discrimination). This allows service providers access to the SADC market and allows service providers the opportunity to properly evaluate the potential risk involved in providing a service in another SADC member state.

The current negotiations on these specific commitments to be undertaken by SADC member states are limited to six priority sectors, being the communication, construction, energy, financial, tourism and transport sectors. It thus presents an opportunity for service providers in these sectors to become active in other SADC member states territories. From a South African perspective, South Africa has requested better access and treatment in all of the abovementioned sectors save for the energy sector. In contrast South Africa has only received requests for better access and treatment from other SADC member states in three sectors, namely the communication, transport and financial services sectors. These requests have been made by Lesotho, Swaziland and Mauritius.

Currently these requests are being evaluated by each of the SADC member states and offers are being finalised. Service providers are encouraged to keep an eye on any developments on this front and better yet, participate in the process so that their government may negotiate with the private sector's best interest in mind.

Rian Geldenhuys

© Trade Law Chambers 2013

Trade Law Glossary

GLOSSARY OF TRADE LAW TERMS

ACCESSION A government joining the WTO. , , As part of the accession to the WTO pursuant to Article XII, , the acceding government , negotiates , concessions , and commitments relating to Market Access for Goods and Services with WTO Members.

ACPs Countries in Africa, the Caribbeans and the Pacific which benefit from preferential tariff treatment in the E.C. These tariff preferences were introduced under the Lom? Conventions (Lom? I ? Lom? IV), which were later replaced by the Cotonou Agreement. In terms of the Cotonou Agreement these tariff preferences had to be replaced with reciprocal, WTO compliant free trade agreements (Economic Partnership Agreements or ?EPAs') between the ACPs and the EC by 1 January 2008.

AD VALOREM DUTY An ad valorem duty is a customs tariff duty expressed as a percentage of the value of the imported goods (e.g. 10% of value). , In the case of specific duties (i.e. $2.00 per KG) it is necessary to calculate an ad valorem equivalent (AVE) which gives the equivalent level of the duty in percentage terms.

AD VALOREM EQUIVALENT (AVE) An ad valorem equivalent is the equivalent in percentage of a specific duty, mixed, compound or other duty containing a specific element. , An ad valorem equivalent is calculated for each customs duty that is not ad valorem. The AVE is calculated from the actual duty collection or from the unit value of imports. , For example, the AVE of a specific duty of $1.00 per KG levied on a product with a unit value of $10.00 per KG is equal to 10% ($1.00/$10.00).

AFRICAN GROWTH AND OPPORTUNITY ACT (AGOA) The African Growth and Opportunity Act (AGOA) was signed into law on May 18, 2000. It is a US Trade Act that provides unilateral tariff preferences into the US market to 39 Sub-Saharan African countries. AGOA is an expansion of the existing (duty-free) benefits previously available only under the Generalised System of Preferences (GSP) programme. Together AGOA and the GSP programme provides duty-free access to the U.S. market for approximately 7,000 product tariff lines, including around 1,800 product tariff lines that were added to the GSP by the AGOA legislation.

AIRCRAFT AGREEMENT (ATCA) A Tokyo Round plurilateral agreement formally known as the "Agreement on Trade in Civil Aircraft". , This MTN agreement establishes an international framework governing the conduct of trade in civil aircraft. The agreement applies to all civil aircraft, civil aircraft engines and their parts and components and to ground flight simulators and their parts and components. , Signatories to the agreement agreed to eliminate customs duties and other charges levied on the importation of products for use in a civil aircraft in the course of its manufacture, repair, maintenance, rebuilding, modification or conversion. , Zero duties for all products covered by the agreement are incorporated by signatories in their respective GATT schedules. , The signatories established the Committee on Trade in Civil Aircraft composed of representatives of all signatories, for surveillance, review, consultation and dispute settlement.

ANTI DUMPING DUTIES Article VI of the GATT 1994 permits the use of anti dumping measures. , Such measures can be imposed on imports of a product with an export price below its "normal value" (usually the comparable price of the domestic market of the exporting country) if such dumped imports cause injury to a domestic industry in the importing country. , These anti-dumping measures take the form either of duties or undertakings on pricing by the exporter. , The duties levied on any dumped product should not be greater in amount than the margin of dumping (price difference).

APEC , see Asian-Pacific Economic Cooperation

ARTICLE XXVIII Article XXVIII refers to the Article of the General Agreement which deals with the procedure to be followed when a contracting party intends to modify its Schedule. , In broad terms, Article XXVIII stipulates that a contracting party can withdraw or modify a concession in its GATT Schedule after negotiation and agreement with any contracting party with which the concession was originally negotiated and any contracting party which is recognized to have a principal or a substantial supplying interest with a view to offering compensation. Notifications of changes in GATT Schedules should include a list of items to be modified or withdrawn, accompanied by statistics of imports of the products involved, by country of origin, for the last three years for which statistics are available. , If specific, mixed or compound duties are affected, both values and quantities should be provided, if possible.

ASEAN , See Association of South East Asian Nations.

ASIAN-PACIFIC ECONOMIC COOPERATION (APEC) A Forum formed to achieve regional free trade and investment. , Member countries are Australia, Brunei Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Republic of Korea, Chinese Taipei, Thailand, the United States and Vietnam.

ASSOCIATION OF SOUTH EAST ASIAN NATIONS (ASEAN) An Association establishing an interim agreement for the formation of the ASEAN Free Trade Area (AFTA). Member countries are Brunei Darussalam, Cambodai, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

ATCA , See AIRCRAFT AGREEMENT (Agreement on Trade in Civil Aircraft)

AUTONOMOUS DUTY , See Statutory Duty

AVE , See Ad Valorem Equivalent

BARTER TRADE Contract by which an exporter accepts goods or services from the importer as payment for its exported products.

BILATERAL AVE An ad valorem equivalent of a specific duty calculated from the unit value of imports from an individual country. An AVE can be global (applying to all countries entitled to the duty) or bilateral.

BILATERAL QUOTA Limits on the value or quantity of a good which can be imported from or exported to a given partner or group of partners.

BINDING GATT Article II provides that signatories may "bind" tariff rates by including them in schedules annexed to the General Agreement. Once a duty is bound, it may not be raised above that bound level without compensating affected parties. If the actually applied rate is lower than the bound rate, the bound level of the duty rate is called a "ceiling" binding (see Ceiling Binding). , , If the binding does not cover all products in the tariff item the binding is "partial" and identified by "ex" in the GATT Schedules.

BOUND RATE , See BINDING

CEILING BINDING A binding is "ceiling" if the applied duty is lower than the bound duty. , The following example illustrates the difference between "ceiling" bindings and bindings at "prevailing" level.

CHAPTER The CCCN and the HS are structured nomenclatures. , The first two digits of CCCN and HS numbers represent the chapter level. The CCCN comprises 99 chapters and the HS 97 chapters. HS chapter 77 is not used at present.

COMMON EXTERNAL TARIFF A uniform tariff adopted by a customs union (e.g. the European Communities) to be assessed on imports entering a region from countries outside the union.

COMPOUND DUTY A compound duty is a tariff duty comprising an ad valorem duty to which is added or subtracted a specific duty: , , 10% plus $2.00/KG, , , 20% less $2.00/KG.

CONCESSION A tariff reduction, tariff binding or other agreement to reduce import restrictions: usually accorded pursuant to negotiation in return for concessions by other parties.

CONTRACTING PARTIES (CPs) , Those governments which were signatory to the GATT 1947 were known as contracting parties. Upon signing the new WTO agreements (which include the updated GATT, known as GATT 1994), they officially became known as ?WTO members?.

COUNTERVAILING DUTIES Article VI of the GATT 1994 permits the use of countervailing measures which are duties imposed by the importing country to offset the effect of the subsidy on the product in question.

COUNTRY OF ORIGIN Individual supplying countries from which goods are imported are called "countries of origin".

CPs , See Contracting Parties.

C.U. , See Customs Union.

CUSTOMS UNION (C.U.) Substitution of a single customs territory for two or more customs territories, so that duties and other restrictive regulations of commerce are eliminated on substantially all the trade between the constituent territories of the union. The same duties and other regulations of commerce are applied by each member of the union to the trade of territories not included in the union.

DRAWBACK Repayment of import duties on a product re exported or used in the manufacture of goods to be exported.

DUTY (CUSTOMS) Tax levied at the border on imported goods. , Customs duties can be ad valorem, specific, mixed, compound, etc.

EAC see Eastern African Community

EASTERN AFRICAN COMMUNITY A regional intergovernmental organisation comprising of the Republics of Kenya, Uganda, the United Republic of Tanzania, Republic of Rwanda and Republic of Burundi

ECONOMIC COMMUNITY OF WEST AFRICAN STATES (ECOWAS) A preferential trading arrangement between Benin, Burkina Faso, Cape Verde, C?te d'Ivoire, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.

ECOWAS , See Economic Community of West African States.

EFFECTIVELY APPLIED DUTY A customs duty which is lower than the statutory or bound duty. , The effectively applied duty can be for an undetermined period of time or for a limited period of time (temporary duty). , Effectively applied duties are sometimes passed by Parliament or decided on and put into effect by a government for economic reasons.

EFTA , See European Free Trade Association.

ESCALATION (TARIFF) Tariff escalation refers to the fact that, as a rule, tariffs on raw materials are lower than tariffs on semi manufactures, which in turn are lower than tariffs on finished products. Tariffs escalate with the stage of processing. In theory, a reduction of the tariff escalation entails a reduction of the effective protection.  , EUROPEAN FREE TRADE ASSOCIATION (EFTA) A free trade area between Iceland, Liechtenstein, Norway and Switzerland. ,

EUROPEAN UNION A customs union between Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.

EXCISE DUTY (also known as fiscal tax or revenue duty) , See Fiscal Tax.

EXPORT QUOTA Restraint imposed by an exporting country on the value or quantity of a product which can be exported.

EXPORT RESTRAINT A restriction by an exporting country of the quantity of exports to a specific importing country, established usually at the request of the importing country.

FISCAL TAX A tax which is levied on imported products as well as on domestically produced goods to generate revenue. , A fiscal tax is therefore not equivalent to a customs tariff duty since it has no protective effects. , Fiscal taxes are sometimes included in the customs tariff duties. ,

FORMULA APPROACH A tariff reduction negotiating method by which tariffs are reduced across the board using a mathematical formula agreed upon by participants.

FREE TRADE AREA (FTA) A group of two or more customs territories in which the duties and other restrictive regulations of commerce are eliminated on substantially all the trade between the constituent territories in products originating in such territories.

FTA , See Free trade area.

GATT ROUNDS Multilateral Trade Negotiations conducted under the GATT. , Eight rounds took place under the GATT 1947:

1947 Geneva, creation of the GATT 1949 Annecy, negotiations with countries wishing to accede to GATT. During this , round the focus was on tariff reductions. 1951 Torquay, new accessions and tariff reductions. 1956 Geneva, similar to previous rounds. 1960 1962 Geneva, the "Dillon Round". , Revision of the GATT and new accessions. 1964 1967 Geneva, the "Kennedy Round". , First time the formula approach was adopted , , (50% reduction, with exceptions) in addition to the traditional product by product approach. 1973 1979 Geneva, the "Tokyo Round". , Formula tariff reductions with a view to "harmonize" the levels of tariffs. , Agreements on the use of selected non tariff measures. 1986 1994 Geneva, the "UruguayRound". , Product by product approach by all participants, especially reciprocal offers and sectorial negotiations by a number of participants, to eliminate or harmonize duties in certain sectors ("zero for zero" approach). , Strengthening of the GATT and its expansion to new areas (services, counterfeit goods, etc.). , Active participation of developing countries offering extensively new bindings at "ceiling rates". , Use of the new concept of "credit for bindings" and "recognition of autonomous liberalization measures" for developing country participants. , New accessions to WTO. , Creation of the World Trade Organization (WTO).

GATT SCHEDULES OF CONCESSIONS All concessions negotiated in GATT negotiations are reported in the GATT legal instruments containing Schedules of concessions. , Each WTO Member incorporates its concessions in its own schedule. , (See also Loose-leaf Schedule)

GENERAL TARIFF General tariffs are the customs duties which apply in some countries to partners which are not members of the WTO. , The general duties are generally higher than the MFN duties.

GENERALIZED SYSTEM OF PREFERENCES (GSP) Generalized system of preferences offered unilaterally by developed/transition economies to developing countries. , GSP is accorded to developing countries by the following countries: Australia, Belarus, Bulgaria, Canada, Estonia, the European Union, Japan, New Zealand, Norway, the Russian Federation, Switzerland, Turkey and the United States.

GSP , See Generalized System of Preferences.

HARMONIZED SYSTEM (HS) The Harmonized Commodity Description and Coding System (known as the Harmonized System), instituted by the World Customs Organization in 1988, is an international product classification for customs tariffs and trade statistics. HS , See Harmonized System.

IMPORT LICENSING A procedure which must be followed by importers before they can import goods.

IMPORT SURCHARGE , A charge on imports, in addition to the customs duty.

INSTRUMENTS (WTO LEGAL) The results of tariff negotiations are published in the "WTO Legal Instruments" which contain all the Uruguay Round schedules.

ISO , International Organization for Standardization.  , LDC , See Least Developed Countries.

LEAST DEVELOPED COUNTRIES (LDCs) The WTO recognizes as least-developed countries (LDCs) those countries which have been designated as such by the United Nations. There are currently 49 least-developed countries on the UN list, 32 of which to date have become WTO members.

LEGAL DUTY , See Statutory Duty

MARGIN OF PREFERENCE The difference between the duty paid on an MFN basis and the duty paid under a preferential system.

MARKET ACCESS The extent to which a market is accessible to foreign exporters depends on the existence and extent of trade barriers (tariff and non tariff). , In the Uruguay Round, a Group of Negotiations on Market Access was established to deal with: tariffs, non tariff measures, tropical products and natural resource based products. , Under the WTO, a Committee on Market Access has been established to deal with these issues.

MERCOSUR , See Southern Common Market.

MFA , See Multi Fibre Arrangement.

MFN , See Most Favoured Nation.

MIXED DUTY A mixed duty is a duty where a minimum or a maximum tariff protection is ensured by the choice between, in general, an ad valorem duty and a specific duty as in the following examples: 10% minimum $2.00/KG, 10% or $2.00/KG whichever is less, 10% maximum $2.00/KG, etc.

MOST FAVOURED NATION (MFN) With respect to customs duties, any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country are accorded immediately and unconditionally to the like product originating from or destined for the territories of all other contracting parties, under the principle of MFN treatment. , GSP, FTA and other preferential trading arrangements are exceptions to the MFN treatment.

MTN , See Multilateral Trade Negotiations.

MULTI FIBRE ARRANGEMENT (MFA) The Arrangement Regarding International Trade in Textiles (known as the Multi Fibre Arrangement), which allowed countries to maintain discriminatory quantitative restrictions on imports of textiles and clothing, was terminated in 1994 with the entry into force of the World Trade Organization. , The WTO Agreement on Textiles and Clothing provided for a transitional period for integrating the textiles and clothing sector into the GATT 1994. , The Agreement on Textiles and Clothing and all restrictions thereunder terminated on January 1, 2005. The expiry of the ten-year transition period of ATC implementation means that trade in textile and clothing products is no longer subject to quotas under a special regime outside normal WTO/GATT rules but is now governed by the general rules and disciplines embodied in the multilateral trading system.

MULTILATERAL TRADE NEGOTIATIONS (MTN) Trade negotiations between GATT Members aiming at eliminating or reducing tariff and non tariff barriers. , The Uruguay Round was the eighth round of MTN under the GATT. The current WTO trade round, the Doha Round, was launched by WTO members in 2001.

NAFTA , See North America Free Trade Agreement

NATURE OF DUTIES Nature of duties or the duty nature refer to the different kinds of customs duty. , The duty nature can be an ad valorem, specific, compound, mixed, variable, "tariffied" or unclassified duty.

NOMENCLATURE A nomenclature is an agreed system for classifying goods according to defined criteria, and in given detail and order, by associating to product groups a number which is used by all parties which adopt the nomenclature.

NOMINAL PROTECTION The measurement of the nominal tariff protection relates the duty to the value of the imported product as opposed to the effective protection which relates the duty to the value added in manufacturing the product. ,

NON TARIFF MEASURES (NTM) , Measures other than tariffs which restrict imports or exports, such as quotas, import licensing systems, sanitary regulations, prohibitions, etc. Also known as non-tariff barriers.

NORTH AMERICA FREE TRADE AGREEMENT (NAFTA) Free-trade area agreement between Canada, Mexico and the United States.  , NTB , Non Tariff Barrier.

NTM , Non Tariff Measure.

PARALLEL IMPORTS The importation of products produced legally (i.e. not pirated) abroad without the permission of the intellectual property right-holder (e.g. the trademark or patent owner). Some countries do not allow parallel importation.

PARTIAL BINDING , See BINDING.

PEAKS (TARIFF) A customs tariff contains tariff peaks if it is relatively homogeneous but contains in selected sectors high tariffs compared to the overall average tariff. , During the Uruguay Round, tariff peaks were defined as duties over 15%.

PLURILATERAL (CONSULTATIONS OR NEGOTIATIONS) Several participants involved in consultations or negotiations among themselves.

POST-URUGUAY DUTY , See Pre-Uruguay and Post-Uruguay Duty

PREFERENCES Special trade advantages (e.g. tariff preferences) granted by a government to some of its trading partners to promote trade with them.

COMMON MARKET FOR EASTERN AND SOUTHERN AFRICA (COMESA) A preferential trade area between Burundi, Comoros, Democratic Republic of Congo (DRC), Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe. 13 of the COMESA members are part of the COMESA free trade area.

QR , See Quantitative Restriction.

QUANTITATIVE RESTRICTIONS (QRs) Restrictions which limit the value or quantity of goods which can be imported or exported during a given period.

ROUNDS of Multilateral Trade Negotiations , see GATT ROUNDS

RULES OF ORIGIN Regulations to define a country of origin of goods in international trade. , A country must satisfy the rules of origin to be considered as the country of origin of goods for the purpose of obtaining MFN treatment or preferential treatment.

SAFEGUARD A special safeguard may be invoked in specific cases to partly offset a significant decline in import prices or a surge in the volume of imports.

SANITARY AND PHYTOSANITARY MEASURES (SPS) Food safety and animal and plant health measures. These measures are regulated in the WTO in terms of the Agreement on Sanitary and Phytosanitary Measures and the Agreement on Technical Barriers to Trade.

SITC , See Standard International Trade Classification.

SCHEDULE OF CONCESSIONS , See GATT Schedule of concessions

SECTIONS HS chapters are logically grouped in sections representing groups of products. , There are 21 HS sections.

SOUTHERN AFRICAN CUSTOMS UNION (SACU) A customs union between South Africa, Botswana, Lesotho, Namibia and Swaziland. SACU is the oldest customs union in the world.

SOUTHERN AFRICAN DEVELOPMENT COMMUNITY (SADC) A preferential trading agreement between Angola, Botswana, the Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, United Republic of Tanzania, Zambia and Zimbabwe. Twelve of its members established a Free Trade Area in 2008 under the SADC Trade Protocol.

SOUTHERN COMMON MARKET (MERCOSUR) An interim agreement for the formation of a customs union between Argentina, Brazil, Paraguay and Uruguay.

SPECIFIC DUTY A specific duty is a customs duty which is not related to the value of the imported goods but to the weight, volume, surface, etc. of the goods. , The specific duty stipulates how many units of currency are to be levied per unit of quantity (e.g. 2.00 Swiss Francs per KG).

STANDARD INTERNATIONAL TRADE CLASSIFICATION (SITC) The SITC is a classification developed by the United Nations for statistical analysis of trade data. , In the SITC, articles are grouped by classes of goods such as food, raw materials, chemicals, machinery and transport equipment and also by stage of fabrication and by industrial origin. The SITC was first revised in 1960 (Revision 1) to match the Customs Co operation Council nomenclature (CCCN). A second revision was established to match the revised version of the CCCN, in 1972. , The third revision was established in 1985 to match the HS.

STATUTORY DUTY , A customs duty which is generally a Customs Tariff Law voted by Parliament. , The statutory duty is also referred to as the autonomous or legal duty. The published customs tariff generally report the statutory duty. , For WTO Members, the statutory duty cannot be higher than the GATT bound duty.

SUBSIDIES Any form of income or price support granted by a country, which serves to increase exports of any product from or reduce imports of any product into its territory.

TARIFF ESCALATION , See "ESCALATION".

TARIFFICATION Conversion of border measures, other than ordinary customs duties, to tariff equivalents of non-tariff measures. , As part of the Uruguay Round Market Access for agricultural products, all non-tariff border measures were "tariffied" by participants before a tariff reduction was made.

TARIFFIED , See Tariffication

TARIFF LINE National customs tariffs contain a list of all products which can be imported. , Within the tariff, products are grouped according to the material they are made of, or according to the industrial sector to which they pertain either as input or as output materials (HS six-digit headings). , Within those product groups customs tariffs contain as many tariff lines as there are different levels of customs duties. , In other words, each duty rate is attached to a tariff line.

TARIFF QUOTA A tariff applying to goods imported within a limit in value or quantity. , A higher tariff applies to goods imported above the quota.

TROPICAL PRODUCTS This trade area refers to agricultural and other products exported by developing countries in tropical climates. , In the Uruguay Round, tropical products included the following product sectors: tropical beverages, spices, flowers and plants, planting products, etc., certain oilseeds, vegetable oils and products thereof, tropical roots, rice and tobacco, tropical nuts and fruits, rubber and tropical wood, and jute and hard fibres.

 , UNBOUND DUTIES A customs duty rate is unbound if it was never subject to a tariff concession during any GATT round of tariff negotiations (see BINDING).

VARIABLE DUTY A variable duty is a duty relating the customs duty collection to the price of the imported products. , For example, a variable duty could be the price difference between the unit value of the imported product and the unit value of the equivalent product produced domestically in the import market. , If the price of the imported goods is lower than the internal price, a variable duty is levied.

VARIABLE LEVY , See VARIABLE DUTY.

WORLD CUSTOMS ORGANIZATION (WCO) An international body located in Brussels through which participating countries seek to simplify and rationalize customs procedures. , WCO is responsible for all issues related to the nomenclature and classification of products. , This institution was formerly called the Customs Co-operation Council.

Foreign investment risk

Recently much has been said about the South African government's decision not to renew existing bilateral investment treaties (BITs). The discussions became even more heated after South Africa unilaterally terminated its BITs with Belgium, Luxembourg and Spain. Since then Karel de Gught, European Commissioner for Trade, and the South African Minister of Trade and Industry, Rob Davies, have been airing their opposing views on the matter. The European Union accounts for approximately 80% of all foreign direct investment in the country, thus explaining why the topic is so significant.

BITs are international agreements between two countries whereby each country affords the investors of the other country protection against expropriation. This protection afforded to foreign investors is independent of any protection offered in terms of , a country's domestic legislation or a country's international obligations, for instance at the World Trade Organization. In other words a foreign investor does not need to have recourse to a foreign domestic legal system in order to enforce its protection. Nor does the foreign investor have to lobby its national government to become involved in international disputes, such as the World Trade Organization's Dispute Settlement Body, where an international obligation not to expropriate foreign investment has been violated. Instead, BITs typically allow foreign investors immediate recourse to arbitration, such as at the World Bank's International Centre for the Settlement of Investment Disputes (ICSID). This is indeed an important aspect of BITs as it does not subject the foreign investor to either a foreign legal system nor to difficult lobbying and a potentially political compromise that may not necessarily be in the foreign investor's best interest.

The South Africa government attempted to soothe the European investors' fears by stating that the termination and non-renewal of the BITs was due to the fact that South Africa is in the process of modernizing its current regulatory framework dealing with foreign investment. To this extent, the South African government is in the process of drafting a Foreign Investment Bill which will replace all of South Africa's BITs. In the meantime, South Africa states, investors should not fear as the South African Constitution protects foreigners against expropriation.

Indeed it is true that the South African Constitution does in fact protect investors against expropriation. However, the level of protection is not as wide or as certain as what may be provided for under BITs and as such may be limited under the Constitution. The section of the Constitution dealing with this aspect has not yet been comprehensively defined in prior challenges brought and as such the relevant section does remain somewhat uncertain. , Where the Constitution does indeed allow for expropriation, compensation needs to be paid, which can either be agreed or in the event that there is no agreement, a court will decide on the compensation (a court's approval may also be required even if there is agreement). The amount of compensation must be just and equitable and must reflect an equitable balance between the public interest and the interests of the foreign investor having regard to a host of factors which may positively or negatively affect the determination of the compensation. The valuation of the compensation under the South African Constitution may not be as favourable as the value of compensation afforded under the BITs. Thus save for the fact that a foreigner will have to have recourse to a foreign court system if it challenges an expropriation under the Constitution, it may be that the foreigner will not obtain the same bargain under the South African Constitution than what was on offer under a BIT.

In any event even if South Africa unilaterally terminates all of its BITs, it does not imply that foreigners have less protection (if reliance is only placed on the South African Constitution). In fact the foreigners will remain to enjoy the same level of protection afforded by the relevant BIT for a number of years. This is due to the fact that all BITs provide for protection even once the BIT has been cancelled. The duration of such protection will vary from BIT to BIT and ranges from 10 to 20 years.

Given that the timeframe during which full protection is being afforded is rather lengthy, the concerns with relying on domestic legislation as well as foreign investor concerns, would it not have been prudent for the South African government to first conclude a suitable Foreign Investment Bill, taking on board its current BITs partners inputs, prior to terminating the current BITs? The Department of Trade and Industry itself was also recently involved in ensuring investor protection and compensation for expropriation was included in the Bilateral Investment Protection Agreement (BIPA) concluded between South Africa and Zimbabwe. This protection was seen as a prerequisite by South African investors, without which they were not willing to commit to investing in Zimbabwe. As such investor protection, whether for South African Companies or foreigners, is an important consideration which investor consider prior to investing in foreign markets. ,

Rian Geldenhuys

© Trade Law Chambers 2013

Foreign investment risk1

Recently much has been said about the South African government's decision not to renew existing bilateral investment treaties (BITs). The discussions became even more heated after South Africa unilaterally terminated its BITs with Belgium, Luxembourg and Spain. Since then Karel de Gught, European Commissioner for Trade, and the South African Minister of Trade and Industry, Rob Davies, have been airing their opposing views on the matter. The European Union accounts for approximately 80% of all foreign direct investment in the country, thus explaining why the topic is so significant.

BITs are international agreements between two countries whereby each country affords the investors of the other country protection against expropriation. This protection afforded to foreign investors is independent of any protection offered in terms of , a country's domestic legislation or a country's international obligations, for instance at the World Trade Organization. In other words a foreign investor does not need to have recourse to a foreign domestic legal system in order to enforce its protection. Nor does the foreign investor have to lobby its national government to become involved in international disputes, such as the World Trade Organization's Dispute Settlement Body, where an international obligation not to expropriate foreign investment has been violated. Instead, BITs typically allow foreign investors immediate recourse to arbitration, such as at the World Bank's International Centre for the Settlement of Investment Disputes (ICSID). This is indeed an important aspect of BITs as it does not subject the foreign investor to either a foreign legal system nor to difficult lobbying and a potentially political compromise that may not necessarily be in the foreign investor's best interest.

The South Africa government attempted to soothe the European investors' fears by stating that the termination and non-renewal of the BITs was due to the fact that South Africa is in the process of modernizing its current regulatory framework dealing with foreign investment. To this extent, the South African government is in the process of drafting a Foreign Investment Bill which will replace all of South Africa's BITs. In the meantime, South Africa states, investors should not fear as the South African Constitution protects foreigners against expropriation.

Indeed it is true that the South African Constitution does in fact protect investors against expropriation. However, the level of protection is not as wide or as certain as what may be provided for under BITs and as such may be limited under the Constitution. The section of the Constitution dealing with this aspect has not yet been comprehensively defined in prior challenges brought and as such the relevant section does remain somewhat uncertain. , Where the Constitution does indeed allow for expropriation, compensation needs to be paid, which can either be agreed or in the event that there is no agreement, a court will decide on the compensation (a court's approval may also be required even if there is agreement). The amount of compensation must be just and equitable and must reflect an equitable balance between the public interest and the interests of the foreign investor having regard to a host of factors which may positively or negatively affect the determination of the compensation. The valuation of the compensation under the South African Constitution may not be as favourable as the value of compensation afforded under the BITs. Thus save for the fact that a foreigner will have to have recourse to a foreign court system if it challenges an expropriation under the Constitution, it may be that the foreigner will not obtain the same bargain under the South African Constitution than what was on offer under a BIT.

In any event even if South Africa unilaterally terminates all of its BITs, it does not imply that foreigners have less protection (if reliance is only placed on the South African Constitution). In fact the foreigners will remain to enjoy the same level of protection afforded by the relevant BIT for a number of years. This is due to the fact that all BITs provide for protection even once the BIT has been cancelled. The duration of such protection will vary from BIT to BIT and ranges from 10 to 20 years.

Given that the timeframe during which full protection is being afforded is rather lengthy, the concerns with relying on domestic legislation as well as foreign investor concerns, would it not have been prudent for the South African government to first conclude a suitable Foreign Investment Bill, taking on board its current BITs partners inputs, prior to terminating the current BITs? The Department of Trade and Industry itself was also recently involved in ensuring investor protection and compensation for expropriation was included in the Bilateral Investment Protection Agreement (BIPA) concluded between South Africa and Zimbabwe. This protection was seen as a prerequisite by South African investors, without which they were not willing to commit to investing in Zimbabwe. As such investor protection, whether for South African Companies or foreigners, is an important consideration which investor consider prior to investing in foreign markets. ,

Rian Geldenhuys

© Trade Law Chambers 2013

Dealmakers Trade Customs Law Firm of the Year

The 2013 DealMakers Monthly Global Awards have recognised us as the South African Trade and Customs Law Firm of the Year. The 2013 DealMakers Monthly Global Awards recognize a select number of leading professional firms from across the globe for their individual areas of specialization within their geographical location.

Trade and Customs Law Firm of the Year

Trade Law Chambers has been recognised as the South African Trade and Customs Law Firm of the year for 2013. This is according to the Lawyers World Law Awards 2013.

The Lawyers World Law Awards 2013 recognize a select number of leading professional firms, across the globe, for their individual areas of specialization, within their geographical location. We are proud of the fact that our dedication has again been recognised in this award.

© Trade Law Chambers 2013

Trade Law Chambers attends inaugural BRICS Business Council meeting

Earlier this week Niel Joubert, one of our directors, had the privilege to attend the inaugural meeting of the BRICS Business Council in Johannesburg as a business delegate.

South Africa formally joined the BRICS group in December 2010. The BRICS group is an international forum encouraging commercial, political and cultural cooperation between the BRICS nations in an effort to reduce the dependence of developing countries on the West. The five members of BRICS (Brazil, Russia, India, China and South Africa) decided in March this year at the BRICS Summit held in Durban to form a Business Council to facilitate trade and development between its members. The Business Council's founding Declaration states that the Council should constitute a platform that will strengthen and promote economic, trade, business and investment ties among the business communities of the five BRICS members, as well as ensure that there is regular dialogue between the business communities of the BRICS nations and the governments of the BRICS countries.

South African businessman Patrice Motsepe was named as the first chairperson of the Business Council. The BRICS countries have each nominated five business leaders to make up the Council. The four other South Africans who will serve on the body are Business Unity SA CEO Nomaxabiso Majokweni, Zungu Investment Company executive chairman Sandile Zungu, Sekunjalo Investments CEO Iqbal Surve, and Transnet CEO Brian Molefe.

The Business Council made the following main recommendations at the conclusion of its meeting in Johannesburg:

  • BRICS governments should facilitate convenience in expediting multiple-entry business visas for longer periods as well as consider a proposal to create a BRICS business travel card
  • To enhance connectivity within and between the BRICS members
  • To create an information exchange platform (BRICS business portal) which will be facilitated by the BRICS Business Council Secretariat
  • To increase cooperation on harmonisation of technical standards
  • To signal the interest of the BRICS Business Council in respect of the BRICS Development Bank and to appeal to Governments to accelerate the formation of the Bank
  • To increase value-added trade among BRICS countries
  • To address tariff and non-tariff barriers to trade between BRICS members.

The meeting was attended by President Jacob Zuma, who also addressed the meeting together with prominent business leaders from South Africa and the rest of the continent. This gave a strong signal to the rest of BRICS that South Africa is taking its membership of BRICS very seriously. In the light of the decline in South Africa's traditional export markets and the economies of its main trading partners, its relationship with its fellow BRICS members is becoming increasingly important.

© Trade Law Chambers 2013

Cross Border Law Firm of the Year

Trade Law Chambers is delighted to announce that it has been recognised as the Cross Border Law Firm of the Year in South Africa for 2013. This award was received in the Finance Monthly Law Awards of 2013.

The Finance Monthly Law Awards recognize law firms and legal professionals who have outperformed their peers through dedication to client service, innovation and industry knowledge.

In March 2013 the Finance Monthly research team began contacting its corporate readership to glean direct feedback regarding their experiences and the services received by law firms used. In parallel we asked the readership of Finance Monthly to participate in an online voting process and nominate their preferred law firm for 2013.

This process has led to a celebrated list of winners across the key practice areas in law. Each winner has demonstrated client care, innovation and above all, each firm has delivered results for their respective clients.

Finance Monthly is a global publication providing news, analysis and features on all the latest headlines within the financial and legal sectors. Finance Monthly provides expert analysis on the ever changing financial and corporate worlds on a month by month basis.

© Trade Law Chambers 2013 ,

Obama expresses support for extension of AGOA

US President Barack Obama this week expressed his support to extend the African Growth and Opportunity Act (AGOA) beyond 2015. AGOA provides for the duty-free access of thousands of products from designated African countries into the US market. It was first signed into law in 2000 and initially covered a period of eight years, but it was subsequently extended in 2004 until 2015.

AGOA expands the (duty-free) benefits previously available only under the US Generalised System of Preferences (GSP) programme to qualifying African countries. In total GSP and AGOA provides duty-free access to the US market for approximately 7 000 product tariff lines. This includes products such as clothing and textiles, wine, motor vehicles and components, various agricultural products, platinum and diamonds, iron and steel products and many others.

AGOA is very important for South African exporters. According to the South African Chamber of Commerce and Industry (SACCI) the US market represents 8.7% of South African exports by value, and more than a quarter (27.5%) of South African exports for high value added items such as motor vehicles. South Africa exported more than R16 billion worth of motor vehicles to the US last year.

While the support from the US President is a welcome signal for South African exporters, the ultimate decision unfortunately lies with the US Congress. Certain elements within the US Congress feel that South Africa should be graduated out of AGOA due to the competitiveness of some of its exports. Trade and Industry Minister Rob Davies has however indicated that South Africa's lobbying will continue in Washington later this year where DTI officials will engage directly with congressmen, senators and lobbyists for the extension.

Niel Joubert
© Trade Law Chambers 2013

Lawyers World Global Awards 2013 winner

Trade Law Chambers has been selected as the winner of the South African Trade and Customs law firm of the year in the Lawyers World Global Awards for 2013.

The Lawyers World Global Awards 2013 recognize a select number of leading professional firms, across the globe, for their individual areas of specialization, within their geographical location.

This latest award again recognises our professionals' expertise and drive to remain at the forefront of the practice of international trade law. , ,

Trade Law Chambers attends Fifth BRICS Summit in Durban

The directors of Trade Law Chambers recently attended the fifth BRICS Summit held in Durban as business delegates. This was the first time that a BRICS Summit was held on African soil.

The BRIC grouping of developing countries, consisting of Brazil, Russia, India and China, invited South Africa to join the group in 2010. South Africa formally joined the group in December 2010, after which it became known as the BRICS. The BRICS group is an international forum encouraging commercial, political and cultural cooperation between the BRICS nations in an effort to reduce the dependence of developing countries on the West.

The Summit brought together the Heads of State and other high level government officials including the Ministers of Trade of all the BRICS members, but also provided a platform for business from all BRICS members to network and to increase business and trade between the members. The BRICS Business Council was also launched at the Summit, which has as its main aim the strengthening of trade and investment relations between the five BRICS members.

The Business Council's objectives include the strengthening of trade relations, promoting business relations, technology transfer and co-operation in the areas of skills development, banking, the green economy, manufacturing and industrialisation. The Council will co-ordinate the interaction between member states' governments and their private sectors, in order to identify concerns that business might have with regard to obstacles to trade and investment between these countries.

South Africa is also hosting a BRICS Trade Exchange in October this year in Johannesburg which will bring together business leaders from all BRICS countries in an effort to further promote trade and investment between South Africa and the BRICS nations. The Trade Exchange will focus on sectors of growth and opportunity in each of the BRICS countries, including manufacturing, services and agriculture, energy, infrastructure, mining beneficiation and healthcare, construction and water provision and the green economy and tourism.

Niel Joubert
© Trade Law Chambers 2013

SA needs to grow export capacity

Business Day reports that South Africa has a need to expand its export base. This is according to Minister Rob Davies on Wednesday after the launch of a revised national exporter development programme targeting smaller enterprises.To read the article and Trade Law Chambers' quotations, kindly click here.


© Trade Law Chambers 2013

Safeguards against EU agricultural imports

On Friday 5 April 2013 the International Trade Commission of South Africa (ITAC) published draft guidelines for safeguard applications against EU agricultural imports. These guidelines are meant to provide guidance on Article 16 of the SA EU Trade Development and Cooperation Agreement (TDCA) which deals specifically with safeguards for agricultural products.

The TDCA provides for a specific and special agricultural safeguard in addition to a general safeguard (Article 24) applicable to all other products covered by the TDCA.

Typically a safeguard is a trade remedy which is a temporary measure which the domestic industry can use to protect itself from a sudden surge of imports. Typically safeguards do not take the form of an increase in the tariff applicable to a product, but takes the form of a quota (or quantitative restriction). Thus a quota on the amount of products allowed to be imported into a country will be imposed. As soon as the quota has been reached, no further imports of that product will be allowed into the territory of the country making use of the safeguard measure. However, the investigating officials may decide to increase the customs duty applicable to the product in question, usually to the level to attain the same result as a quota. Safeguards may only be used to prevent or remedy serious injury or to facilitate the adjustment to increased competition for the domestic industry due to further trade liberalisation. It is vital to prove that the surge in imports is responsible for the serious injury or threat thereof and that no other market forces are at play. Due to the nature for which safeguard measures are normally used, the application procedure is more expedient than anti-dumping duties and countervailing measure. However the time period for which a safeguard measure may be used is also shorter, namely four years although this may be increased for further periods. However, where a safeguard measure is imposed for longer than a year, the investigating officials will normally impose conditions for its liberalisation during the period for which it is imposed.

Although SA has a legal framework which allows for the imposition of safeguard measures (as outlined above), it has not been of much help to the agricultural industry. This is mainly due to two reasons. Firstly the TDCA set up a different method in terms of which safeguards will work for agricultural trade between SA and the EU. As there has been no local guidance on how this will work, the agricultural industry has not taken advantage of this method of protection. Secondly, traditionally it is required that there must be sudden surge of imports. In the context of the TDCA this won't necessarily be the case as tariff liberalisation occurred gradually and as such no surge would be present. However the text of Article 16 of the TDCA does not require a surge or sudden surge, it merely requires that imports of products originating in the EU causes or threatens to cause a serious disturbance to the markets in SA. It is thus possible to apply for a safeguard measure if the domestic agricultural industry suffers injury as a result of imports from the EU.

There has been much criticism levied against the TDCA as it is not a balanced agreement in that SA ?liberalised' more than it should have, compared to the liberalisation of the EU. This is especially true in the agricultural sector, where we maintain lower duties than the EU on products which are important to both parties and where we also face other non-tariff barriers in the EU. The South African agricultural sector thus struggles to compete locally with imports from the EU, whilst it also struggles to export due to the higher tariffs and non-tariff barriers faced in the EU. There has indeed been a feeling that SA should try and claw back some of the concessions it made in the TDCA. The proposed draft guidelines seems to be a step in that direction, signalling to the South African agricultural sector (in line with the text of the past and current Industrial Policy Action Plan), that SA is willing to assist the agricultural sector against EU imports which may cause harm to the domestic industry (perhaps in many cases as a result of the TDCA).

To read Rian's quotations in a Business Day article on the draft safeguard guidelines, kindly click here.

Rian Geldenhuys
© Trade Law Chambers 2013

Last chance to lodge Memorandum of Incorporation

Companies have until 30 April 2013 to either adopt a new Memorandum of Incorporation or amend an existing Memorandum of Incorporation to ensure that no provisions of its current memorandum and articles of association, shareholders agreement or Memorandum of Incorporation are in conflict with the Companies Act.

In terms of the new Companies Act the memorandum and articles of association is replaced by a document known as the memorandum of incorporation or ?MOI?. The Companies Act requires every company's MOI to comply with the provisions of the Companies Act. Should there be any inconsistencies between a company's MOI and the Act, the provisions of the MOI will be void to the extent that it is inconsistent with the Companies Act. The same is true for a company's shareholders agreements.

The Companies Act introduces many changes many which may have an important impact on the way a company will operate or the way in which shareholders agreed to regulate their relationship with the company and one another. It is thus vital for companies to consider their current constitutional documents and to consider the role of its existing shareholders agreements, failing which there may be unintended consequences.

Rian Geldenhuys
© Trade Law Chambers 2013

SA Gateway to Africa through infrastructure

South Africa is championing the development of transport infrastructure in Africa as it seeks to maintain its position as the Gateway to Africa. To read the article by Frontier Market Network and Trade Law Chamber's contribution thereto, kindly click here.

South Africa to introduce carbon tax

Yesterday Finance Minister Pravin Gordhan announced that South Africa will introduce a carbon tax on 1 January 2015. The introduction of the carbon tax is in line with South Africa's approach to adopt a low-carbon economy, which includes mobilisation of its renewable energy potential, as outlined in the National Development Plan. South Africa is one of the biggest carbon dioxide emitters in the world, although its emissions are much less than compared to the emissions of the USA, EU and some of our fellow BRICS members.

It was proposed that carbon should be taxed at a rate of R120 per ton of CO2 equivalent. It was further proposed that any adverse impact may be softened by introducing a tax-free exemption threshold of 60 per cent, with some additional allowances for emission intensive and trade-exposed industries.

However, the proposed tax rate and possible exemptions are mere proposals and as such business needs to keep an eye out for further developments and engage government hereon. Minister Gordhan did indicate that an updated carbon tax policy paper will be published for further consideration by the end of March 2013.

Rian Geldenhuys
© Trade Law Chambers 2013

Expropriation of foreign investors in South Africa

Last year we reported that the Department of Trade and Industry would refrain from entering into any future bilateral investment treaties (?BITs?) and in fact was looking at terminating the BITs. The Department of Trade and Industry is currently drafting a new bill, the Foreign Investment Bill that will replace all existing BITs.

According to the Deputy-Director General of International Trade, Mr Xavier Carim, the bill would deal with how the South African government would compensate foreign investors in the event of expropriation. It is understood that this new bill is not a reversal of government's protection of foreign investors but rather an attempt to modernise and improve on the current regulatory framework. This could indeed be valuable as South Africa has many BITs which may not always be aligned.

Although Mr Carim is reported to have stated that the proposed bill was unlikely to frighten investors as none of these investors cared about BITs the reality is that foreign investors do seek some form of protection. The proposed reform comes shortly after South Africa was engaged in arbitration proceedings with some Italian investors at ICSID (the World Bank's International Centre for Settlement of Investment Disputes) in terms of the South African - Italy BIT. The Italian investors claimed that their expropriation of certain mining rights in terms of South Africa's Black Economic Empowerment policy violated the provisions of the specific BIT. Had it not been for the BIT, the Italian investors may not have been able to bring such a dispute and attempt to enforce their rights, as under South African law the expropriation and the manner in which it occurred was sanctioned. The Department of Trade and Industry itself was also recently involved in ensuring investor protection and compensation for expropriation was included in the Bilateral Investment Protection Agreement (BIPA) concluded between South Africa and Zimbabwe. This protection was seen as a prerequisite by South African investors, without which they were not willing to commit to investing in Zimbabwe. As such foreign investor protection is an important consideration for foreign investors and the proposed bill will be followed closely.

To read Rian's quote in the Business Day, please click here.

Rian Geldenhuys
© Trade Law Chambers 2013

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