Demystifying free and fair trade agreements

Posted by Vincent Zikhali on 30 Mar 2021 9:45:00 AM
Vincent Zikhali

Fair trade vs free trade

The terms ‘free’ and ‘fair’ trade are constantly used when it comes to the South African economy and the import and export of goods. While it’s possible to take a fairly accurate guess what these mean, there’s a lot more that goes into ensuring these regulations are followed.In my role, I oversee the following, which all has an impact on how Barloworld and our clients operate within trade agreement frameworks:

  • Customs brokerage, is the process of filling all customs declarations relating to imports, exports, as well as in transit goods, declaring the goods through the South African Revenue Services Customs Authorities.

  • Customs compliance, which is a constant process to ensure we comply with customs regulations in all the countries where we operate and transit. As a transit agent, we are registered with SARS, so we have to ensure we follow all customs laws and regulations in SA, as well as other operating countries. 

    This, in turn, means Barloworld can act as a customs advisor, which is considered a Value Added Service (VAS). Barloworld will guide clients through the process of registering with SARS and completing all necessary documentation to ensure clients are also compliant with all customs regulations.

  • Bonded facility management, which is a service where our customers use Barloworld bonded facilities, which is the facility where cargo needs to be kept until it has been customs cleared.

At Barloworld we ensure not only that we are customs compliant, but also our clients. We handle all compliance documentation on their behalf, which dramatically reduces stress and admin for our customers.

Free Trade explained

In South Africa, free trade agreements revolve around the fact that we are part of the World Trade Organisation (WTO) and the World Customs Organisation (WCO). South Africa joined these organisations since the country properly opened its borders 24 years ago, when we became a democracy.

This means that South Africa opened to trade with other nations. The WTO actively encourages trade among its member countries. All countries within the WTO, however, have individual agreements with each other. As members of the WTO, they need to abide by the organisation's rules pertaining to free and fair trade.

Within this space of the WTO, South Africa is consistently amending and strengthening its trade agreements across Africa, the EU and other trading nations.

These types of agreements give SA, and other member countries, the opportunity to collaborate and advance their own levels of manufacturing and export. By working together, these countries can predict, and to some extent create demand, which in turn boost trade and manufacturing.

Fair Trade explained

Fair Trade is, in principle, a part of all free trade agreements. A core function of the WTO is to ensure that all free trade agreements are also fair to all parties. This prevents more powerful nations from exploiting emerging countries, and the goal is to level the playing field giving everyone a fair opportunity to benefit equally from all free trade agreements.

At a country level, organisations such as SARS also play a role in ensuring fair trade. A core function at SARS is to facilitate trade for South Africa. They do this by making sure the correct value of all imports and exports are declared, and constantly keep tabs on the market value of these trades, so that SA doesn’t pay too much, or charge too little.

This, in turn, affects how much SARS can collect in duties and taxes, so it is vital that SARS allocate the correct evaluation to all goods entering and exiting via customs. This, in a nutshell, is what keeps things fair: one importer can’t charge more than another for importing the exact same goods that are manufactured in the exact same place.

The International Trade Admin Commission (ITAC), plays a similar role to SARS, but on a global level. They set up global trade policies, according to the free and fair regulations of the WTO, and SARS in turn applies and/or administers these policies within South Africa.

These regulations also prevent the practice of ‘dumping’ – where other countries will ‘dump’ extremely cheap goods in SA, meaning that local manufacturers and suppliers can’t compete, which is detrimental to local industries. In such instances, ITAC will impose a duty on the products, raining the price so that local businesses can remain competitive.

How Barloworld ensures compliance with free and fair trade

From Barloworld’s side, our responsibility lies in remaining on top of all these regulations. We ensure we have all the information relating to our clients imports and exports.

We will update our clients if ITAC or SARS regulations have a direct impact on any of their products. Because Barloworld has such a wide variety of clients, it means we always have the latest information, which is a big benefit to our clients.

Summary

When you consider all of the information above, it’s clear that maintaining free and fair trade is a constant delicate balance. We must ensure that our clients are always operating in accordance with the latest regulations and also best practice, which ensures the utmost efficiency for themselves, as well as our own organisation.

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