## 1. CEMAC: Sources of Imports and Tariff Revenue by Region of Origin

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### Introduction: reform context and scope of analysis
- Creation of the CEMAC customs union in 1994 introduced:
  - a common external tariff (CET),
  - gradual removal of tariffs on intra-regional trade (completed in 1998),
  - harmonization of indirect taxation (VAT introduced in 1999),
  - replacement of quantitative import barriers by temporary import surcharges (to be phased out by 2000).
- Implementation problems have persisted: cumbersome border procedures, national restrictions and exemptions, weak transportation infrastructure, security problems, and high common external tariffs.
- A 2002/03 initiative (Steenlandt report and October 2003 Brazzaville workshop) proposed reforms; momentum has since stalled though some roadmap actions proceeded.
- Recent external trade developments affecting reform options:
  - suggestion to reduce CET rates from four to three and lower the top rate from 30 percent to 20 percent (proposal aligned with WAEMU);
  - potential Economic Partnership Agreement (EPA) with the EU;
  - implications of global liberalization (Doha Round), particularly for agricultural markets.
- Quantitative assessment in the paper is constrained by data limitations: sufficiently detailed recent balance of payments data were available for Cameroon, Gabon, and the Central African Republic only.

### Trade characteristics: recent trends and magnitudes
- Exports and GDP:
  - Total goods exports to GDP rose from about 34 percent of GDP in 1994 to about 51 percent of GDP in 2005.
  - Non-oil exports fell from 12 percent of GDP to 8 percent of GDP over 1994–2005.
  - CEMAC countries’ share of non-oil exports in total regional exports declined from 35 percent to 16 percent during 1994–2005.
- Direction of exports:
  - Since about 2004, EU countries are no longer the primary destination for CEMAC exports.
  - Exports to the US and to Asia increased in the last two years (at 33 and 29 percent in 2005, respectively).
- Imports and trade balance:
  - Goods trade (imports) remained fairly constant at about 18 percent of GDP in 1994 and 2005.
  - Trade balance improved from 5 percent of GDP to 21 percent of GDP over the same period.
  - EU countries accounted for about 52 percent of total CEMAC imports in 2005; their share has been declining, while imports from Asian countries more than doubled in the last three years.
- Intra-community trade:
  - Intra-community trade in the CEMAC is low: less than 2 percent of GDP and about 1.5 percent of total trade.
  - The share of intra-regional trade has been stagnant over the past five years and trended down since 1997.
  - By comparison: intra-regional trade in WAEMU is more than 10 percent of total trade; for SADC and COMESA the share is between 5 and 10 percent.
  - Official data may understate intra-regional trade due to unrecorded trade; anecdotal evidence suggests unrecorded informal trade could be about 50 to 60 percent of recorded trade.

### Tariff structure and revenue sources (exact figures)
- CET structure (current):
  - 5 percent for basic necessities,
  - 10 percent for raw materials and capital goods,
  - 20 percent for intermediate and other goods,
  - 30 percent for general consumer goods.
- Unweighted average MFN tariff rate: close to 20 percent.
- Most imports enter under the 10 percent rate.
- Sources of imports and tariff revenue by region of origin (based on total imports by Cameroon (2004), Gabon (2004) and the CAR (2003); in percent of total):
  - CEMAC: Imports 2.1; Tariff revenue n/a
  - Rest of sub-Saharan Africa: Imports 16.0; Tariff revenue 13.2
  - Asian countries: Imports 12.8; Tariff revenue 18.7
  - EU: Imports 52.9; Tariff revenue 52.7
  - United States: Imports 4.9; Tariff revenue 4.2
  - Other countries: Imports 11.3; Tariff revenue 11.3
- Sources of imports and tariff revenue by import tariff band (based on total imports by Cameroon (2004), Gabon (2004) and the CAR (2003); in percent of total):
  - 5% band: Imports 6.8; Tariff revenue 2.2
  - 10% band: Imports 54.9; Tariff revenue 35.5
  - 20% band: Imports 17.9; Tariff revenue 22.8
  - 30% band: Imports 20.5; Tariff revenue 39.4

### Implementation deficiencies: administration, exemptions, valuation, transit
- Administrative and institutional weaknesses:
  - customs union hampered by red tape, weak and inefficient customs administration, misclassification of imports, and corruption including theft.
  - Executive Secretariat in Bangui (CAR) lacks authority and resources for effective oversight; incomplete data reporting from member countries limits visibility on regional trade flows.
- National deviations from community rules:
  - Discrepancies between the CET and actual tariff rates introduced to protect national industries.
  - Temporary tariff surcharges of up to 30 percent introduced in 1994 were to be removed by 2000 but not all were abolished; surcharges reportedly removed in CAR, Cameroon, Republic of Congo, and Gabon; Equatorial Guinea and Chad still maintain surcharges on selected products.
  - Firm-level tariff exemptions (Conventions d’Etablissement) persist in some countries; some members have phased them out, but remaining exemptions need renegotiation and alignment with the CEMAC Investment Charter.
  - Additional taxes and charges complicate the regime: community integration tax (1 percent) introduced in 2002, statistical fee (up to 2 percent), and other levies at the national level (including levies related to ECCAS and OHADA) with unclear legal status under the common regime.
- Rules of origin and certification:
  - Community origin: raw products from CEMAC qualify; manufactured goods qualify if at least 40 percent or at least 50 percent of raw materials (in value terms) used in production stem from the CEMAC.
  - Certificates of origin are to be issued by the customs office closest to a producer, but not all customs offices have required expertise, resulting in improper certification and frequent rejection by other members (examples: powdered milk and wine).
  - A pre-certification procedure for frequent exporters is hardly used.
  - In 2006 the CEMAC secretariat initiated a consultant study to simplify rules and improve compliance (including consideration of “sufficient transformation” as evidenced by a change of product classification based on the SH nomenclature).
- Import valuation:
  - Three member countries (Cameroon, Republic of Congo, and the CAR) in principle apply transaction-based import valuation (mandatory since 2000 under WTO agreement).
  - In Chad, move to transaction-based valuation has been hampered by training problems; Gabon has delayed adjustment citing revenue concerns.
  - Even where transaction-based valuation is formally applied, implementation has been incomplete.
- Transit procedures, double taxation, and guarantees:
  - Existing transit regime uses a costly guarantee (bond) system at point of entry aimed at ensuring duties are paid and re-exports occur; bonds can be very costly and reimbursements are subject to long delays.
  - A CAR customs official was recently stationed in Douala to collect import duties at point of entry (suggestion from 2003 Roadmap); similar procedure under consideration for Douala port goods destined for Chad.
  - A more efficient transit regime would reduce double taxation of customs duties, excises, and VAT on goods imported from a third country and reexported within CEMAC.

### Boxed country example — Chad (implementation problems summarized)
- ASYCUDA customs database introduced in main customs offices but not extended to provinces; introduction hampered by planning problems, lack of training, and lack of network wiring; statements vary and many smaller offices do not report tariff line and/or country of origin.
- Large range of exemptions from import tariffs, including for Doba oil project, French military base, and specific firms via Conventions d’Etablissement; in 2002–03 actual import tax base was only 23 percent of total imports.
- Imports of sugar, cigarettes, and drinks from non-member countries are still subject to a “temporary” 25 percent surcharge (scheduled to be removed by 2000).
- Imports from all countries—including other CEMAC members—are subject to charges including a statistical fee (2 percent) and a storage fee (depending on number of days in customs storage).
- Chad agreed in 2002 to apply transaction values as basis for import valuation, but minimum values still used for imports from non-CEMAC bordering countries.
- Exports: no taxes except for cattle (FCFA 1,500 per head) and other livestock and some plants; 2 percent statistical fee also applies to exports; exports are free from quantitative restrictions apart from some restrictions for reproductive cows.

### Steps and reforms discussed in the source
- Proposed measures and initiatives cited in the source:
  - Review and possible reduction in number of CET rates (proposal from four to three) and lowering top rate from 30 percent to 20 percent.
  - Move toward ASYCUDA across member countries (planned gradual move by five member countries, excluding Equatorial Guinea).
  - Detailed review of nomenclature and tariff rates to restore compliance with CET (proposed in 2003 roadmap).
  - Renegotiation and alignment of remaining firm-level tariff exemptions with the CEMAC Investment Charter.
  - Simplification and improved compliance for rules of origin (consultant study initiated in 2006).
  - Measures to resolve transit guarantee problems (example: collecting import duties at point of entry).

### Box 2 — Republic of Congo: implementation outcomes and trade regime specifics
- De-facto tariff and additional charges:
  - Imports subject to additional duties and fees, raising the de-facto import tariff from 19 percent to about 22 percent.
  - Additional charges on imports (exact terms as reported):
    - automation fee (2 percent)
    - Community Integration Tax (1 percent)
    - statistical tax (0.2 percent)
    - OHADA levy (0.05 percent)
    - (ECCA) Community Integration levy (0.04 percent)
    - inspection fees for qualifying transactions
  - Other import-related levies and taxes:
    - 15 percent tax on imports of woods products
    - customs collect a 5 percent levy as an advance payment on income taxes or the flat-rate tax
  - For certain goods, including cement, customs valuation is still based on reference prices.
  - Widespread structural and ad hoc exemptions (products, flour imports, imports for public investments) undermine customs duty collection.
  - Nontariff barriers include price controls and domestic monopolies for sugar and wheat flour; imports are constrained by quotas and import licensing procedures.
- Export regime specifics:
  - Export levies and fees applied include:
    - automation fee (2 percent)
    - supplementary exit duty (2 percent)
    - diamond royalties (2 percent)
    - various fixed and variable levies on wood
  - Most, but not all, export taxes have been phased out. Export taxes are set at the national level and are applied on exports to all countries, including other members.
  - Country-specific export tax notes (as reported):
    - The CAR maintains export taxes of 2.25 percent, 4.25 percent, 4.05 percent, and 10.5 percent on gold, diamond, processed wood, and timber respectively.
    - Equatorial Guinea currently has export taxes that range between 1 percent for (coffee and cocoa) to 15.8 percent (logs), with intermediate rates for other goods (re-exports, plywood and sawn wood).
    - Cameroon and the Republic of Congo maintain export taxes on timber and logs only.
    - Chad imposes export taxes on cattle and some plants.
- Regulatory environment and Doing Business indicators (selected exact ranks as reported):
  - Overall rank: WAEMU 153, CEMAC 157, Sub-Saharan Africa 131, Latin America 84, East and Central Asia 77, East Asia and Pacific 74
  - Trading Across Borders rank: WAEMU 130, CEMAC 138, Sub-Saharan Africa 124, Latin America 82, East and Central Asia 97, East Asia and Pacific 66
  - Other component ranks (WAEMU / CEMAC / Sub-Saharan Africa / Latin America / East and Central Asia / East Asia and Pacific):
    - Starting a Business: 152 / 151 / 125 / 87 / 77 / 74
    - Dealing with Licenses: 123 / 110 / 110 / 69 / 111 / 74
    - Employing Workers: 147 / 156 / 118 / 79 / 86 / 57
    - Registering Property: 128 / 119 / 121 / 87 / 72 / 81
    - Getting Credit: 137 / 119 / 112 / 70 / 62 / 89
    - Protecting Investors: 107 / 78 / 92 / 78 / 85 / 76
    - Paying Taxes: 135 / 141 / 104 / 102 / 105 / 63
    - Enforcing Contracts: 132 / 138 / 111 / 116 / 50 / 93
    - Closing a Business: 100 / 132 / 111 / 94 / 80 / 95
- Overlapping agreements and preferences:
  - CEMAC countries are also members of ECCAS (aim to create a free trade area by the end of 2007).
  - Preferential access arrangements include Cotonou and Everything But Arms (EBA), AGOA, and GSP.

### Box 3 — Transportation delays and costs (empirical findings)
- Cargo journey times:
  - Douala (Cameroon) to Bangui (CAR): 2 weeks (average).
  - Douala to N’djamena (Chad): 5 weeks (average).
  - In principle, Douala to N’djamena could be completed in one week (Integrated Framework, 2005).
- Clearing and transportation costs:
  - Average clearing and transportation cost for a 20 foot container from Douala to Bangui or N’djamena: €4,000.
  - This is about four times the cost of maritime transport from Europe to Douala (World Bank, 2004).
  - Port expenses account for about 25 percent of that amount.
  - Remaining 75 percent is spent on road transportation.
- Port clearance times and road quality:
  - Average clearance time for imported containers in the ports of Douala: about 19 days (second only to Senegal at 30 days in a review of 8 west coast African countries) (SAATP 2004).
  - Costs and delays for landlocked East African countries are about 30 percent lower (example: Kigali, Rwanda).
  - Roads classified as in good or fair condition: Uganda 72 percent; Tanzania 85 percent; Cameroon 30 percent (World Bank SAATP indicators).
- Doing Business trade procedural indicators:
  - Average cost to export a 20 foot container: about $1800.
  - Average cost to import a 20 foot container: almost US$2100.
  - These costs exceed those in the WAEMU by about 60 percent (exports) and 20 percent (imports), largely due to high costs in Gabon.
  - Time required to export and import is, on average, about 20 percent more for CEMAC countries than in the WAEMU.
- Trade complementarity and intraregional potential:
  - Trade Complementarity Index (TCI) measures similarity between export and import baskets (0 to 100 scale); TCI above 25 considered indicative of strong complementarity.
  - Average complementarity within WAEMU: 30.4.
  - Average complementarity within CEMAC: 16.9.
  - Highest average complementarity in the CEMAC (Cameroon exports → CAR imports): 28.6.
  - Lowest recorded in CEMAC sample (CAR exports → Gabon imports): 7.8.
  - Within WAEMU, average TCI for Senegal: 51.3.
  - Potential for internal sourcing and production: for 21 percent of total CEMAC imports, there may be potential for development of internal sources (based on 6-digit level analysis).

### Tariff revenue, reform scenarios, and policy implications (from Box 3 and simulations)
- Tariff levels and dispersion:
  - CEMAC tariff rates up to 30 percent, with an unweighted average of about 19 percent.
  - WAEMU average tariff rate: about 13 percent (capped at 20 percent rather than 30 percent).
  - CEMAC tariffs exceed WAEMU tariffs for all sectors; highest rates apply to footwear, wood products, and agriculture (average rates of 23 percent or more).
  - CEMAC tariffs are more dispersed than WAEMU tariffs.
- Tariff revenue trends:
  - Tariff revenue amounted to 1.5 percent of GDP in 2004, and 1.3 percent in 2005.
  - Tariff revenue declined from 9 percent of total revenues to 7 percent (as higher oil prices boosted GDP and fiscal receipts).
- Country-level reported tariff receipt format (preserve original formatting as reported):
  - Based on Revenue excl. grants GDP tariff schedule
    - Cameroon10.11.42.2
    - Gabon8.42.32.1
    - Central African Republic16.91.11.8
    - Chad25.71.3...
    - Rep. of Congo6.62.1...
    - Equatorial Guinea12.80.3...
    - CEMAC9.41.52.2
- Simulation results (Table 11 example, adopting WAEMU rates):
  - Reducing calculated receipts (disregarding exemptions) from 2.2 percent of GDP to 1.3 percent would imply a revenue impact “as large as 40 percent.”
  - Simulation scenario entries (preserve original formatting as reported):
    - Based onWAEMUEPAEPA and tariff scheduletariff ratesWAEMU tariff rate s
      - Cameroon2.21.31.20.6
      - Gabon2.11.50.70.5
      - Central African Republic1.80.91.00.5
      - Chad............
      - Rep. of Congo............
      - Equatorial Guinea............
      - CEMAC2.21.31.00.6
- Policy implications from simulations:
  - Reducing tariff exemptions provides a first option to offset revenue losses from tariff cuts.
  - Further revenue measures should strengthen income and indirect tax policies and administration.
  - Shifting from trade taxes to taxes on domestic consumption would help offset revenue loss while preserving efficiency gains.

### Economic Partnership Agreement (EPA), Doha Round, and preference erosion (Box 3 and Box 4)
- EPA negotiation status and rules:
  - Discussions with the EU on an EPA started in 2003; an agreement could be enacted as of January 1, 2008.
  - First phase completed in December 2005; second phase involves drafting specific agreements (product exemptions, rules of origin, pace of liberalization).
  - Rules of origin discussions have focused on a 50 percent local content requirement (in context of wider ACP-EU talks). Current internal CEMAC local content requirement: 40 percent.
- EPA benefits and risks:
  - Potential benefits: area-wide political momentum, technical assistance, uniform application of trade rules, harmonization of rules and procedures, and investment climate reform.
  - Liberal rules of origin (low value added criterion) likely to attract foreign investors into new export industries using third-country inputs (evidence from AGOA experience).
  - Risks: large-scale trade diversion due to relatively high CET and selective liberalization.
- Quantitative indicators and simulations related to EPA and trade diversion (preserve original formatting):
  - Table 12 indicators (preserve original formatting):
    - Totalnot "overlapping" with imports from EU
      - CEMAC471
      - Cameroon533
      - Gabon321
      - CAR5812
  - Share statistics:
    - Imports from non-European sources accounted for 47 percent of total imports.
    - Imports from non-European sources concerning goods not also imported from the EU amounted to only 1 percent of total imports.
    - More than 50 percent of CEMAC imports originate in the EU; CEMAC average EU share: 53 percent; Gabon EU share: about 65 percent.
  - Revenue simulations:
    - An EPA with full import liberalization for EU goods could reduce tariff revenue by more than half (benchmark in Table 11), with Gabon experiencing the largest tariff loss.
    - Parallel MFN tariff cuts to WAEMU rates could reduce import tariff revenues by about three-quarters (final column scenario in Table 11).
- Doha Round and preference erosion findings:
  - Estimated impacts of preference erosion are often overstated because analyses frequently fail to account for underutilization of preferences and export increases in sectors not affected by preference erosion.
  - Preference erosion typically represents a permanent shock occurring over a long period of time which can be anticipated.
  - If recent trends continue, by the time Doha liberalization is implemented (say, 2015), developing countries may account for an even larger share of Africa’s exports.
  - Liberalization in developing countries will lead to little preference erosion because no major preferences for Africa are in place in these countries.
  - Trade barriers against African exports remain significantly higher in developing countries than in industrial countries; hence, potential market access gains are larger for Africa in developing-country liberalization.
- Policy recommendations regarding EPA and global liberalization:
  - Combine EPA-related liberalization with parallel MFN tariff cuts to limit trade diversion.
  - Strengthen domestic revenue mobilization in a timely manner to compensate for tariff losses.
  - Ensure liberal rules of origin to foster investment and export-sector development.
  - Liberalize imports of services on both MFN and intra-SSA regional-block basis concurrently with liberalization vis-à-vis the EU, while sequencing liberalization by domestic regulatory capacity.
  - EPA preparations should include poverty and social impact analyses, taking into account differential impacts on import and export prices of goods produced and consumed by urban and rural households.

### Overarching recommendations and priorities (synthesizing actions reported)
- Renew political commitment to regional integration and effective central oversight; convert the CEMAC secretariat into a commission with adequate means and authority is proposed.
- Improve data collection on trade flows and country-specific regulations and practices.
- Key immediate measures to improve customs union compliance:
  - limit tariff exemptions;
  - phase out remaining surcharges;
  - strengthen and possibly simplify determination of products’ origin;
  - enhance customs administration, including wider ASYCUDA adoption;
  - improve transportation infrastructure and organization.
- Fiscal and revenue policy measures:
  - Use reduction of tariff exemptions as a first step to offset revenue losses from tariff cuts.
  - Strengthen income and indirect tax administration to mobilize domestic revenue.
  - Shift from trade-based to domestic consumption taxes over time, building on VAT systems introduced in the 1990s.

*Source: IMF staff report content from "_wp07137 - 1. CEMAC: Sources of Imports and Tariff Revenue by Region of Origin" and accompanying Boxes 2–4 (extracted text).*

### 1. CEMAC: Sources of Imports and Tariff Revenue by Region of Origin ...............................5

### 1. CEMAC: Sources of Imports and Tariff Revenue by Region of Origin

### Introduction: reform context and scope of analysis
- Creation of the CEMAC customs union in 1994 introduced:
  - a common external tariff (CET),
  - gradual removal of tariffs on intra-regional trade (completed in 1998),
  - harmonization of indirect taxation (VAT introduced in 1999),
  - replacement of quantitative import barriers by temporary import surcharges (to be phased out by 2000).
- Implementation problems have persisted: cumbersome border procedures, national restrictions and exemptions, weak transportation infrastructure, security problems, and high common external tariffs.
- A 2002/03 initiative (Steenlandt report and October 2003 Brazzaville workshop) proposed reforms; momentum has since stalled though some roadmap actions proceeded.
- Recent external trade developments affecting reform options:
  - suggestion to reduce CET rates from four to three and lower the top rate from 30 percent to 20 percent (proposal aligned with WAEMU);
  - potential Economic Partnership Agreement (EPA) with the EU;
  - implications of global liberalization (Doha Round), particularly for agricultural markets.
- Quantitative assessment in the paper is constrained by data limitations: sufficiently detailed recent balance of payments data were available for Cameroon, Gabon, and the Central African Republic only.

### Trade characteristics: recent trends and magnitudes
- Exports and GDP:
  - Total goods exports to GDP rose from about 34 percent of GDP in 1994 to about 51 percent of GDP in 2005 (Figure 1).
  - Non-oil exports fell from 12 percent of GDP to 8 percent of GDP over 1994–2005.
  - CEMAC countries’ share of non-oil exports in total regional exports declined from 35 percent to 16 percent during 1994–2005.
- Direction of exports:
  - Since about 2004, EU countries are no longer the primary destination for CEMAC exports.
  - Exports to the US and to Asia increased in the last two years (at 33 and 29 percent in 2005, respectively).
- Imports and trade balance:
  - Goods trade (imports) remained fairly constant at about 18 percent of GDP in 1994 and 2005.
  - Trade balance improved from 5 percent of GDP to 21 percent of GDP over the same period.
  - EU countries accounted for about 52 percent of total CEMAC imports in 2005; their share has been declining, while imports from Asian countries more than doubled in the last three years.
- Intra-community trade:
  - Intra-community trade in the CEMAC is low: less than 2 percent of GDP and about 1.5 percent of total trade.
  - The share of intra-regional trade has been stagnant over the past five years and trended down since 1997.
  - By comparison: intra-regional trade in WAEMU is more than 10 percent of total trade; for SADC and COMESA the share is between 5 and 10 percent.
  - Official data may understate intra-regional trade due to unrecorded trade; anecdotal evidence suggests unrecorded informal trade could be about 50 to 60 percent of recorded trade.

### Tariff structure and revenue sources (exact figures)
- CET structure (current):
  - 5 percent for basic necessities,
  - 10 percent for raw materials and capital goods,
  - 20 percent for intermediate and other goods,
  - 30 percent for general consumer goods.
- Unweighted average MFN tariff rate: close to 20 percent.
- Most imports enter under the 10 percent rate.
- Table 1 (Sources of Imports and Tariff Revenue by Region of Origin, based on total imports by Cameroon (2004), Gabon (2004) and the CAR (2003); in percent of total):
  - CEMAC: Imports 2.1; Tariff revenue n/a
  - Rest of sub-Saharan Africa: Imports 16.0; Tariff revenue 13.2
  - Asian countries: Imports 12.8; Tariff revenue 18.7
  - EU: Imports 52.9; Tariff revenue 52.7
  - United States: Imports 4.9; Tariff revenue 4.2
  - Other countries: Imports 11.3; Tariff revenue 11.3
- Table 2 (Sources of Imports and Tariff Revenue by Import Tariff Band, based on total imports by Cameroon (2004), Gabon (2004) and the CAR (2003); in percent of total):
  - 5% band: Imports 6.8; Tariff revenue 2.2
  - 10% band: Imports 54.9; Tariff revenue 35.5
  - 20% band: Imports 17.9; Tariff revenue 22.8
  - 30% band: Imports 20.5; Tariff revenue 39.4

### Implementation deficiencies: administration, exemptions, valuation, transit
- Administrative and institutional weaknesses:
  - customs union hampered by red tape, weak and inefficient customs administration, misclassification of imports, and corruption including theft.
  - Executive Secretariat in Bangui (CAR) lacks authority and resources for effective oversight; incomplete data reporting from member countries limits visibility on regional trade flows.
- National deviations from community rules:
  - Discrepancies between the CET and actual tariff rates introduced to protect national industries.
  - Temporary tariff surcharges of up to 30 percent introduced in 1994 were to be removed by 2000 but not all were abolished; surcharges reportedly removed in CAR, Cameroon, Republic of Congo, and Gabon; Equatorial Guinea and Chad still maintain surcharges on selected products.
  - Firm-level tariff exemptions (Conventions d’Etablissement) persist in some countries; some members have phased them out, but remaining exemptions need renegotiation and alignment with the CEMAC Investment Charter.
  - Additional taxes and charges complicate the regime: community integration tax (1 percent) introduced in 2002, statistical fee (up to 2 percent), and other levies at the national level (including levies related to ECCAS and OHADA) with unclear legal status under the common regime.
- Rules of origin and certification:
  - Community origin: raw products from CEMAC qualify; manufactured goods qualify if at least 40 percent or at least 50 percent of raw materials (in value terms) used in production stem from the CEMAC.
  - Certificates of origin are to be issued by the customs office closest to a producer, but not all customs offices have required expertise, resulting in improper certification and frequent rejection by other members (examples: powdered milk and wine).
  - A pre-certification procedure for frequent exporters is hardly used.
  - In 2006 the CEMAC secretariat initiated a consultant study to simplify rules and improve compliance (including consideration of “sufficient transformation” as evidenced by a change of product classification based on the SH nomenclature).
- Import valuation:
  - Three member countries (Cameroon, Republic of Congo, and the CAR) in principle apply transaction-based import valuation (mandatory since 2000 under WTO agreement).
  - In Chad, move to transaction-based valuation has been hampered by training problems; Gabon has delayed adjustment citing revenue concerns.
  - Even where transaction-based valuation is formally applied, implementation has been incomplete.
- Transit procedures, double taxation, and guarantees:
  - Existing transit regime uses a costly guarantee (bond) system at point of entry aimed at ensuring duties are paid and re-exports occur; bonds can be very costly and reimbursements are subject to long delays.
  - A CAR customs official was recently stationed in Douala to collect import duties at point of entry (suggestion from 2003 Roadmap); similar procedure under consideration for Douala port goods destined for Chad.
  - A more efficient transit regime would reduce double taxation of customs duties, excises, and VAT on goods imported from a third country and reexported within CEMAC.

### Boxed country example — Chad (implementation problems summarized)
- ASYCUDA customs database introduced in main customs offices but not extended to provinces; introduction hampered by planning problems, lack of training, and lack of network wiring; statements vary and many smaller offices do not report tariff line and/or country of origin.
- Large range of exemptions from import tariffs, including for Doba oil project, French military base, and specific firms via Conventions d’Etablissement; in 2002–03 actual import tax base was only 23 percent of total imports.
- Imports of sugar, cigarettes, and drinks from non-member countries are still subject to a “temporary” 25 percent surcharge (scheduled to be removed by 2000).
- Imports from all countries—including other CEMAC members—are subject to charges including a statistical fee (2 percent) and a storage fee (depending on number of days in customs storage).
- Chad agreed in 2002 to apply transaction values as basis for import valuation, but minimum values still used for imports from non-CEMAC bordering countries.
- Exports: no taxes except for cattle (FCFA 1,500 per head) and other livestock and some plants; 2 percent statistical fee also applies to exports; exports are free from quantitative restrictions apart from some restrictions for reproductive cows.

### Steps and reforms discussed in the source
- Proposed measures and initiatives cited in the source:
  - Review and possible reduction in number of CET rates (proposal from four to three) and lowering top rate from 30 percent to 20 percent.
  - Move toward ASYCUDA across member countries (planned gradual move by five member countries, excluding Equatorial Guinea).
  - Detailed review of nomenclature and tariff rates to restore compliance with CET (proposed in 2003 roadmap).
  - Renegotiation and alignment of remaining firm-level tariff exemptions with the CEMAC Investment Charter.
  - Simplification and improved compliance for rules of origin (consultant study initiated in 2006).
  - Measures to resolve transit guarantee problems (example: collecting import duties at point of entry).

*Source: IMF staff report content from "_wp07137 - 1. CEMAC: Sources of Imports and Tariff Revenue by Region of Origin" (extracted text).*

### Box 2. Implementation of the Trade Regime in the Republic of Congo

### Box 2. Implementation of the Trade Regime in the Republic of Congo

### Implementation problems and de-facto tariff outcomes
- Imports are subject to a large number of additional duties and fees, raising the de-facto import tariff from 19 percent to about 22 percent, and hampering transparency.
- Additional charges on imports (exact terms as reported):
  - automation fee (2 percent)
  - Community Integration Tax (1 percent)
  - statistical tax (0.2 percent)
  - OHADA levy (0.05 percent)
  - (ECCA) Community Integration levy (0.04 percent)
  - inspection fees for qualifying transactions
- Other import-related levies and taxes:
  - 15 percent tax on imports of woods products
  - customs collect a 5 percent levy as an advance payment on income taxes or the flat-rate tax
- For certain goods, including cement, customs valuation is still based on reference prices.
- Widespread structural and ad hoc exemptions greatly undermine customs duty collection; exemptions include products, flour imports, and imports for public investments.
- Nontariff barriers include price controls and domestic monopolies for sugar and wheat flour that maintain high domestic prices; imports are constrained by quotas and import licensing procedures.

### Export regime specifics
- Export levies and fees applied include:
  - automation fee (2 percent)
  - supplementary exit duty (2 percent)
  - diamond royalties (2 percent)
  - various fixed and variable levies on wood
- Most, but not all, export taxes have been phased out. Export taxes are set at the national level and are applied on exports to all countries, including other members. Reportedly, the taxes concerned are generally low and relate to only few products (especially logs and timber products).
- Country-specific export tax notes (as reported):
  - The CAR maintains export taxes of 2.25 percent, 4.25 percent, 4.05 percent, and 10.5 percent on gold, diamond, processed wood, and timber respectively.
  - Equatorial Guinea currently has export taxes that range between 1 percent for (coffee and cocoa) to 15.8 percent (logs), with intermediate rates for other goods (re-exports, plywood and sawn wood).
  - Cameroon and the Republic of Congo maintain export taxes on timber and logs only.
  - Chad imposes export taxes on cattle and some plants.

### Trade-related regulatory environment and Doing Business indicators
- The World Bank’s Doing Business 2006 database indicates a relatively burdensome overall regulatory environment for doing business in CEMAC, which affects trade by increasing the cost of doing business and hampering entrepreneurship.
- Regarding trade-related impediments, the number of documents required for importing or exporting in CEMAC countries is comparable with WAEMU and SSA more generally.
- Selected Doing Business 2006 comparative ranks and indicators (exact entries as reported):
  - Overall rank: WAEMU 153, CEMAC 157, Sub-Saharan Africa 131, Latin America 84, East and Central Asia 77, East Asia and Pacific 74
  - Trading Across Borders rank: WAEMU 130, CEMAC 138, Sub-Saharan Africa 124, Latin America 82, East and Central Asia 97, East Asia and Pacific 66
  - Other reported component ranks (WAEMU / CEMAC / Sub-Saharan Africa / Latin America / East and Central Asia / East Asia and Pacific):
    - Starting a Business: 152 / 151 / 125 / 87 / 77 / 74
    - Dealing with Licenses: 123 / 110 / 110 / 69 / 111 / 74
    - Employing Workers: 147 / 156 / 118 / 79 / 86 / 57
    - Registering Property: 128 / 119 / 121 / 87 / 72 / 81
    - Getting Credit: 137 / 119 / 112 / 70 / 62 / 89
    - Protecting Investors: 107 / 78 / 92 / 78 / 85 / 76
    - Paying Taxes: 135 / 141 / 104 / 102 / 105 / 63
    - Enforcing Contracts: 132 / 138 / 111 / 116 / 50 / 93
    - Closing a Business: 100 / 132 / 111 / 94 / 80 / 95

### Overlapping trade agreements and preferential access
- CEMAC countries are also members of the Economic Community of Central African States (ECCAS), which aims to create a free trade area by the end of 2007.
- CEMAC countries benefit from preferential access arrangements, including:
  - Cotonou and Everything But Arms (EBA) agreements with the European Union
  - preferences under the African Growth and Opportunity Act (AGOA) for exports to the United States market
  - preferences under the Generalized System of Preference (GSP) for exports to several other countries

### Prospects for enhancing intra-community trade
- The lack of functional transportation corridors across the CEMAC countries is likely the main impediment to intra-regional trade; several helpful initiatives are under way.
- Several weaknesses of the trade regime hamper trade within CEMAC—particularly problems concerning the rules of origin and double taxation—but these are probably overshadowed by severe deficiencies of transportation infrastructure.
- Ongoing infrastructure initiatives (as reported) include projects aimed at connecting Douala (Cameroon) with Bangui (CAR) and with N’djamena (Chad), supported by the European Union, the African Development Fund, and the World Bank.
  - A still unpaved section in the CAR of the Douala-Bangui corridor poses a serious bottleneck during the rainy season.
  - Part of the project has been delayed due to the CAR’s suspension from EU funding.
  - Projects include a trade facilitation component, with construction of border posts and checkpoints (on both sides of the border) for administrative services (including customs, police, and forestry services).
- Transportation is also hampered by serious security problems, involving highway robbers, armed cross-border rebels, and internal rebel groups.
- A structural determinant of low intra-community trade is the lack of complementarities in production structures; there is substantial similarity in natural comparative advantages across CEMAC countries, limiting scope for internal trade.
  - Oil is the main source of exports for all countries except the CAR.
  - Other exports relate to wood products and cotton.
  - There is very little diversification, especially in manufacturing; of the six members only Cameroon has a significant industrial base.

*Source: IMF staff summary of Box 2, "Implementation of the Trade Regime in the Republic of Congo."*

### Box 3. Transportation Delays and Costs

### Box 3. Transportation Delays and Costs

### Transportation delays and costs: empirical findings
- Cargo journey times:
  - Douala (Cameroon) to Bangui (CAR): 2 weeks (average).
  - Douala to N’djamena (Chad): 5 weeks (average).
  - In principle, Douala to N’djamena could be completed in one week (Integrated Framework, 2005).
- Clearing and transportation costs:
  - Average clearing and transportation cost for a 20 foot container from Douala to Bangui or N’djamena: €4,000.
  - This is about four times the cost of maritime transport from Europe to Douala (World Bank, 2004).
  - Port expenses account for about 25 percent of that amount.
  - Remaining 75 percent is spent on road transportation.
- Port clearance times and road quality comparisons:
  - Average clearance time for imported containers in the ports of Douala: about 19 days (second only to Senegal at 30 days in a review of 8 west coast African countries) (SAATP 2004).
  - Costs and delays for landlocked East African countries are about 30 percent lower (example: Kigali, Rwanda).
  - Roads classified as in good or fair condition: Uganda 72 percent; Tanzania 85 percent; Cameroon 30 percent (World Bank SAATP indicators).
- Doing Business trade procedural indicators:
  - Average cost to export a 20 foot container: about $1800.
  - Average cost to import a 20 foot container: almost US$2100.
  - These costs exceed those in the WAEMU by about 60 percent (exports) and 20 percent (imports), largely due to high costs in Gabon.
  - Time required to export and import is, on average, about 20 percent more for CEMAC countries than in the WAEMU.

### Trade complementarity and intraregional potential
- Trade Complementarity Index (TCI) framework:
  - TCI measures similarity between one country's export basket and another's import basket; 0 means no overlap, 100 means exact match.
  - TCI’s above 25 are considered indicative of strong complementarity (Tsikata 1999; Khandelwal 2004).
- Measured complementarity:
  - Average complementarity within WAEMU: 30.4.
  - Average complementarity within CEMAC: 16.9.
  - Highest average complementarity in the CEMAC (Cameroon exports → CAR imports): 28.6.
  - Lowest recorded in CEMAC sample (CAR exports → Gabon imports): 7.8.
  - Within WAEMU, average TCI for Senegal: 51.3 (Senegal and Côte d’Ivoire best positioned to market exports regionally).
- Potential for internal sourcing and production:
  - For 21 percent of total CEMAC imports, there may be potential for development of internal sources (based on 6-digit level analysis comparing CEMAC member exports to non-CEMAC imports).

### Tariff structure, revenue, and reform scenarios
- Tariff levels and dispersion:
  - CEMAC tariff rates up to 30 percent, with an unweighted average of about 19 percent.
  - WAEMU average tariff rate: about 13 percent (capped at 20 percent rather than 30 percent).
  - CEMAC average tariffs exceed WAEMU tariffs for all sectors; highest rates apply to footwear, wood products, and agriculture (average rates of 23 percent or more).
  - CEMAC tariffs are more dispersed than WAEMU tariffs.
- Tariff revenue trends:
  - Tariff revenue amounted to 1.5 percent of GDP in 2004, and 1.3 percent in 2005.
  - Tariff revenue declined from 9 percent of total revenues to 7 percent (as higher oil prices boosted GDP and fiscal receipts).
- Country-level (as reported) tariff receipt and simulation figures (preserve original formatting):
  - Based on Revenue excl. grants GDP tariff schedule
    - Cameroon10.11.42.2
    - Gabon8.42.32.1
    - Central African Republic16.91.11.8
    - Chad25.71.3...
    - Rep. of Congo6.62.1...
    - Equatorial Guinea12.80.3...
    - CEMAC9.41.52.2
  - Table 11 simulation (adopting WAEMU rates example):
    - Reducing calculated receipts (disregarding exemptions) from 2.2 percent of GDP to 1.3 percent would imply a revenue impact “as large as 40 percent.”
  - Additional scenario table entries (preserve original formatting):
    - Based onWAEMUEPAEPA and tariff scheduletariff ratesWAEMU tariff rate s
      - Cameroon2.21.31.20.6
      - Gabon2.11.50.70.5
      - Central African Republic1.80.91.00.5
      - Chad............
      - Rep. of Congo............
      - Equatorial Guinea............
      - CEMAC2.21.31.00.6
- Policy implications from simulations:
  - Reducing tariff exemptions provides a first option to offset revenue losses from tariff cuts.
  - Further revenue measures should strengthen income and indirect tax policies and administration.
  - Shifting from trade taxes to taxes on domestic consumption would help offset revenue loss while preserving efficiency gains.

### Economic Partnership Agreement (EPA): implications and risks
- Negotiation status and scope:
  - Discussions with the EU on an EPA started in 2003; an agreement could be enacted as of January 1, 2008.
  - First phase of negotiations completed in December 2005; second phase involves drafting specific agreements (product exemptions, rules of origin, pace of liberalization).
  - Rules of origin discussions have focused on a 50 percent local content requirement (in context of wider ACP-EU talks). Current internal CEMAC local content requirement: 40 percent.
- Potential benefits:
  - An EPA could provide area-wide political momentum, technical assistance, uniform application of trade rules, harmonization of rules and procedures, and investment climate reform.
  - Liberal rules of origin (low value added criterion) likely to attract foreign investors into new export industries using third-country inputs (evidence from AGOA experience).
- Risks and quantitative indicators of trade diversion and revenue loss:
  - Large-scale trade diversion risk due to relatively high CET and selective liberalization.
  - Table 12 indicators (preserve original formatting):
    - Totalnot "overlapping" with imports from EU
      - CEMAC471
      - Cameroon533
      - Gabon321
      - CAR5812
  - Share statistics:
    - Imports from non-European sources accounted for 47 percent of total imports.
    - Imports from non-European sources concerning goods not also imported from the EU amounted to only 1 percent of total imports.
    - More than 50 percent of CEMAC imports originate in the EU; CEMAC average EU share: 53 percent; Gabon EU share: about 65 percent.
  - Revenue simulations:
    - An EPA with full import liberalization for EU goods could reduce tariff revenue by more than half (benchmark in Table 11), with Gabon experiencing the largest tariff loss.
    - Parallel MFN tariff cuts to WAEMU rates could reduce import tariff revenues by about three-quarters (final column scenario in Table 11).
- Policy recommendations regarding EPA:
  - Combine EPA-related liberalization with parallel MFN tariff cuts to limit trade diversion.
  - Strengthen domestic revenue mobilization in a timely manner to compensate for tariff losses.
  - Ensure liberal rules of origin to foster investment and export-sector development.
  - Liberalize imports of services on both MFN and intra-SSA regional-block basis concurrently with liberalization vis-à-vis the EU, while sequencing liberalization by domestic regulatory capacity.

### Global trade liberalization and the Doha Round
- General assessments:
  - Successful Doha Round conclusion alone may not bring substantial benefits to many African countries, partly because existing preferences (e.g., Everything But Arms) would be eroded.
  - Rising world agricultural prices could worsen terms of trade for Africa’s net food importers (including CEMAC), though over time some net importers might become net exporters.
- Conditional gains:
  - Gains from a Doha outcome for CEMAC critically depend on whether CEMAC countries also liberalize their own imports.
  - Anderson, Martin, and Mensbrugghe (2005): Sub-Saharan Africa would gain provided countries engage fully in the Doha reform process.
  - Simulation for Cameroon (Emeni, Cockburn, and Decaluwe, 2005): small adverse welfare impact under a Doha scenario, but positive results with full liberalization by Cameroon—contingent on export price developments and increased volumes in cash crops, wood processing, and forestry.

*Source: _wp07137 - Box 3. Transportation Delays and Costs*

### Box 4. The Doha Round and Africa’s Preference Erosion

### Box 4. The Doha Round and Africa’s Preference Erosion

### Key findings on preference erosion and African exports
- Estimated impacts of preference erosion are often overstated because analyses frequently fail to account for:
  - underutilization of preferences; and
  - export increases in sectors not affected by preference erosion.
- Preference erosion typically represents a permanent shock occurring over a long period of time which can be anticipated.
- Over the past two and a half decades, African countries have become increasingly dependent on other developing countries for trade, despite ever-expanding trade preferences they have received in industrial countries.
- If recent trends continue, it is likely that by the time any Doha round liberalization is implemented (say, 2015), developing countries may account for an even larger share of Africa’s exports.
- Liberalization in developing countries will lead to little preference erosion because no major preferences for Africa are in place in these countries.
- Trade barriers against African exports (especially those against manufactures) remain significantly higher in developing countries than in industrial countries; hence, the potential market access gains are larger for Africa in developing-country liberalization.

### Findings and policy implications for the CEMAC region and EPA preparations
- The agreed customs union regime has weak implementation by member countries, creating a need for a renewed political commitment to regional integration.
- Effective central oversight is required; the CEMAC secretariat lacks the means and the authority to oversee compliance effectively. Converting the secretariat into a commission with adequate means and authority is proposed as an important step.
- A first requirement for an effective central organization is improved data collection—both on trade flows and on country-specific regulations and practices.
- Key measures to improve compliance with customs union requirements should be adopted without delay at both regional and national levels. Identified actions include:
  - limiting tariff exemptions;
  - phasing out remaining surcharges;
  - strengthening (and, maybe, simplifying) the determination of products’ origin;
  - enhancing customs administration more generally, including through ASYCUDA;
  - improving transportation infrastructure and organization.
- Ongoing preparations for an EPA should be buttressed by comprehensive analyses of its likely effects. Specific points:
  - An EPA would reduce fiscal revenues from international trade—possibly by about half—and even more in the case of Gabon.
  - An EPA would entail serious risks for trade diversion, given the wide range of goods imported from the EU at present.
  - EPA preparations should include poverty and social impact analyses, taking into account differential impacts on import and export prices of goods produced and consumed by urban and rural households.
  - Main benefits from an EPA may stem from opportunities for improving the consistent application of trade regulations and possible EU assistance in upgrading and marketing CEMAC exports.

### Recommendations on tariff reform, trade liberalization, and revenue mobilization
- There is a strong case for tariff reduction, with or without an EPA:
  - CEMAC tariffs are relatively high, especially the top rate of 30 percent rate for consumer goods.
  - Trade liberalization would help boost economic growth and poverty alleviation and limit risks of trade diversion with an EPA.
  - Returns to trade liberalization will be larger if reforms take place in tandem with other structural reforms (e.g., labor market reform) to enhance market functioning.
- Tariff reform should be complemented by improvements in domestic revenue mobilization:
  - Both the introduction of an EPA and tariff reductions on an MFN basis would likely result in a significant loss of fiscal revenues that could amount to 1 percent of GDP or even more.
  - The gradual loss of fiscal revenues during the implementation period of an EPA would broadly coincide with the loss of oil-based revenues, as most oil resources are expected to be depleted over the coming decade, or so.
  - The introduction of VAT systems in the 1990s has provided a helpful foundation for shifting from trade-based to domestic taxation.

*Based on Box 2.4 Regional Economic Outlook: Sub-Saharan Africa (September 2005), and Yang (2005).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07137.pdf_