Fake certificates used to smuggle goods into Zim- CZI

Terence Zimwara

Confederation of Zimbabwe Industries (CZI) is complaining that smuggling continues to be a threat to the survival of the few remaining manufacturers.

The CZI a lobby group for Zimbabwean producers repeated the same complaint when its leaders appeared before parliament recently with one of its officials suggesting smuggling was now being conducted via official channels.

Sifelani Javangwe raised the issue of faked certificates of origin that smugglers were easily obtaining in South Africa to facilitate the movement of goods into Zimbabwe with having to pay the relevant fees or penalties.

A certificate of origin is a document declaring in which country a commodity or good was manufactured. The certificate of origin contains information regarding the product's destination and country of export and is required by many treaty agreements before being accepted into another nation.

Since some countries limit or ban imports from certain countries altogether, all incoming goods would be required to have a certificate of origin. To encourage imports from specific nations, governments may lower the duty on goods if accompanied by a certificate of origin from those countries. 

However according oral given evidence given by CZI before the Finance and Budget committee of parliament, certain unscrupulous businessman were exploiting the lax system around the issuance of these certificates to import goods into the country.

“Once a certificate of origin is issued and once the South African Revenue Services (SARS) endorses the certificate by stamping it, Zimbabwe Revenue Authority is then forced treat the certificates as original,” said Mr Jabangwe.

He added that at the moment anyone (in South Africa) can issue such a certificate because there is no agreement between regional countries on the rules to ascertain the originality of these certificates and who issues such certificates.

Consequently, Zimbabwe has been at the mercy of smuggling cartels, which have brought everything from sweets to semi durable items like stereo systems or LED televisions.

A number of these products are not originating from neighbouring countries like South Africa or Zambia which are normally exempted from customs duties that apply to countries outside regional trading blocs.

Zimbabwe is a member of the SADC and the COMESA economic union. Countries in these trading blocs have standing agreements that allow for free passage of goods originating from inside member countries.

In order to evade the customs duties that will apply if the products are from outside the region, importers are resorting to using faked certificates that then give easy passage for their goods into Zimbabwe.

The net effect is that Zimbabwean producers will be forced to compete with products that enjoy subsidies in the country of origin and even products that do not meet local heath standards.

Such products create an unfair playing field, eventually driving out local products thus leading to job losses and a growing balance of trade deficit.

According Mr Jabangwe this is in violation of World Trade Organisation’s (WTO) standards on rule of origin in international trade.

Rules of origin are used to determine the country of origin of a product for purposes of international trade. There are two common types of rules of origin depending upon application, the preferential and non-preferential rules of origin.

Non-preferential rules of origin are used to determine the country of origin for certain purposes. These purposes may be for quotas, anti-dumping, anti-circumvention, statistics or origin labeling.

Preferential rules of origin are part of a free trade area or preferential trade arrangement which includes tariff concessions. These trade arrangements might be unilateral, bilateral or regional as is the case with COMESA and SADC.

 The rules of origin determine what products can benefit from the tariff concession or preference in order to avoid transshipment.

By forging certificates of origin, importers can benefit from trade concessions that naturally should be enjoyed by products that are made in countries that qualify for the concessions.

The CZI essentially sees this as a way of formalizing smuggling and the consequences of smuggling are quite apparent in the case of Zimbabwe. Smuggling distorts the entire production chain making difficult for producers to continue with operations.

In a parliamentary submission in November 2013, CZI at the time argued that there was abuse of COMESA and SADC certificates of origin to bring goods into the country.

CZI suggested to authorities then, to allocate a greater budget to the Zimbabwe Revenue Authority (ZIMRA) to specifically fund investigations into such activities.

No concrete steps have been taken to address this and in the meantime the economy continues to bleed as the recent events will show.

The economy is essentially now in deflation mode and according to Zimstats , the country trade deficit continues ( about $1 billion in the first quarter of 2014) to grow as imports to continue to flood the local market.

Government needs to take action to help local producers who employ thousands to remain afloat while elsewhere government has to work hard to convince international investors to come on board.