Free Trade Agreements and Preferential Duties: How to Benefit

How free trade agreements cut import duties: check the preferential rate, meet the origin rule and prove it. EU–Algeria, GAFTA and AfCFTA explained.

Key takeaways

A trade agreement only lowers duty for goods that meet its rules of origin and travel with the proof it requires.
The preference is claimed by the importer, but it depends on documents and records only the exporter can provide.
Always compare the MFN rate and the preferential rate: when the margin is zero, the paperwork brings nothing.
For Algerian exporters the key agreements are the EU–Algeria Association Agreement, GAFTA and, as it becomes operational, the AfCFTA.
An unsupported origin claim exposes your buyer to back duties and interest, often years after the sale.

A free trade agreement can turn a 12% duty into zero, which in competitive markets is often the difference between winning and losing a contract. Yet many exporters ship under agreements without ever using them, and others use them wrongly, exposing their buyers to back duties. The preference is not automatic: it is earned product by product, shipment by shipment, and it must be proven.

This lesson explains how trade agreements reduce duties, the step-by-step method to claim a preferential duty, what you need to know about the agreements that matter most to North African exporters, and how to calculate whether the effort pays. The rules that decide whether your product qualifies are covered in detail in rules of origin.

What is a free trade agreement?

Under WTO rules, a country must normally apply the same duty to the same product from every WTO member: the most-favoured-nation (MFN) rate. Article XXIV of the GATT allows an exception for free trade areas and customs unions that eliminate duties on substantially all trade between their members.

Arrangement	What it does	Examples
Free trade agreement (FTA)	Members remove duties between themselves; each keeps its own tariff towards the rest of the world	EU–Algeria Association Agreement (trade part), GAFTA, AfCFTA
Customs union	An FTA plus a common external tariff	The EU, the EU–Turkey customs union for industrial goods, ECOWAS with its common external tariff
Unilateral preference	A rich country grants reduced duties to developing countries without reciprocity	The EU's Generalised Scheme of Preferences (GSP)

Because each FTA member keeps its own external tariff, an FTA needs rules of origin: otherwise a Chinese product could enter the member with the lowest tariff and circulate freely to the others.

How to claim a preferential duty, step by step

Find the agreement. Identify whether an agreement in force covers trade between your country and the destination, and whether your product is covered (agricultural goods often have separate, more limited schedules).
Classify the product. The preferential rate and the rule of origin both depend on the HS code at six digits or more.
Compare the rates. Look up the destination's MFN rate and the preferential rate for your origin. The difference is the preferential margin. Check also for tariff quotas: some preferential rates apply only to a fixed annual quantity, often allocated first come, first served.
Check the rule of origin. Read the list rule for your product's heading in the agreement's origin protocol and run the calculation with real costs.
Prepare the proof of origin the agreement requires: a EUR.1, an origin declaration on the invoice, or an agreement-specific certificate.
Respect the transport conditions: direct transport or non-alteration, as required.
Send the proof to your buyer in time for the import declaration, and keep the supporting file for at least the period the agreement requires (three years under the PEM rules, often longer under national law).

The agreements that matter for Algerian exporters

Country-specific rules change. The facts below were checked at the time of writing; confirm the current schedules with customs or your chamber of commerce before quoting. Algeria's trade agreements gives a deeper country view.

The EU–Algeria Association Agreement

Signed on 22 April 2002 and in force since 1 September 2005, it created a free trade area for industrial goods. Industrial products originating in Algeria enter the EU duty free; Algeria phased out its own duties on EU industrial goods over a transition period that ended in 2020. Agricultural, processed agricultural and fishery products have concessions that are partial and often subject to tariff quotas.

Origin is governed by the Pan-Euro-Mediterranean rules. Most partners of the PEM zone moved to the revised PEM Convention, in force since 1 January 2025, but Algeria continues for now to apply the 2012 Convention rules: 10% tolerance, no-drawback rule, EUR.1 or origin declaration as proof. Diagonal cumulation is not available with partners applying the revised rules.

GAFTA (Greater Arab Free Trade Area)

Also called PAFTA (Pan-Arab Free Trade Area), it was launched by the Arab League in 1998, with duties between participating states eliminated by 2005. Algeria joined in 2009. Goods qualify on the basis of origin rules that have long relied on a minimum of 40% value added in the exporting member state, and travel with a GAFTA certificate of origin. GAFTA is a free trade area, not a customs union: each member keeps its own external tariff, and members have at times applied lists of products excluded from the preference.

AfCFTA (African Continental Free Trade Area)

The AfCFTA Agreement entered into force on 30 May 2019 and trading under it formally began on 1 January 2021. Members commit to remove duties on 90% of tariff lines over a transition period (longer for least-developed countries), with up to 7% of lines treated as sensitive and up to 3% excluded. Algeria ratified the Agreement in 2021. Products qualify under the AfCFTA rules of origin (wholly obtained, or product-specific processing rules) with an AfCFTA certificate of origin. In practice a preference is only available when both countries have their tariff schedules and customs procedures in place for AfCFTA trade, so check the status for each destination.

Comparing the three agreements

	EU–Algeria	GAFTA	AfCFTA
In force for Algeria	2005	2009	Ratified 2021; trading depends on implementation
Products covered	Industrial goods fully; agriculture partly, often under quotas	Most goods, subject to exclusion lists	Gradually 90% of tariff lines, then more
Origin rule	PEM list rules (2012 Convention rules for Algeria)	Generally 40% local value added	Wholly obtained or product-specific rules
Proof	EUR.1 or origin declaration	GAFTA certificate of origin	AfCFTA certificate of origin

Worked example: is the preference worth it?

Example

An Algerian extruder sells aluminium profiles to two buyers: 20 tonnes to Valencia, Spain, and 20 tonnes to Sfax, Tunisia. Customs value of each lot: EUR 64,000. For illustration, assume an EU MFN rate of 6% and a Tunisian MFN rate of 20% on the line concerned (check the real rates in each tariff).

Spain: without a valid proof, the buyer pays 6% = EUR 3,840. With a EUR.1 and the origin rule met (aluminium extruded from Algerian billets), the duty is zero. Saving: EUR 3,840 per lot.
Tunisia: without a GAFTA certificate, the buyer pays 20% = EUR 12,800. With it, and the 40% value-added test met, the duty is zero. Saving: EUR 12,800 per lot.

The exporter in this example shares part of the saving: it raises its Tunisian price by 3% (EUR 1,920) and still leaves its buyer EUR 10,880 better off than with a non-preferential competitor.

Common mistakes

Assuming the agreement covers everything: check the product line, the quotas and any exclusion list.
Issuing proofs without checking the origin rule, or for goods only repacked in the exporting country.
Ignoring the zero-margin case: if the MFN rate is already 0%, the preference saves nothing.
Sending the proof too late: the importer then pays full duty and must claim a refund, if national rules allow it within the deadlines.
No origin file: verifications can come years after shipment, and the burden of proof is on the exporter.
Forgetting that VAT is not reduced: a preference lowers customs duty, not import VAT or excise.

To price the advantage into your offers, use the cost build-up method in export pricing. The proof documents themselves are described in certificates of origin.

Frequently asked questions

How do I benefit from a free trade agreement?

Check that an agreement in force covers your product between the two countries, compare the preferential rate with the normal rate, verify that your product meets the agreement's rule of origin for its HS heading, then issue or obtain the proof of origin the agreement requires. Your buyer claims the preference in the import declaration using that proof.

Who pays less duty under a free trade agreement, the exporter or the importer?

The importer pays the duty, so the importer benefits directly. The exporter benefits indirectly: its products become more competitive, and it can often negotiate a better price because the buyer's landed cost is lower.

Do Algerian products enter the EU duty free?

Under the EU–Algeria Association Agreement, in force since 1 September 2005, industrial products originating in Algeria enter the EU free of customs duty. Agricultural, processed agricultural and fishery products receive concessions that are often limited by tariff quotas or specific conditions, so you must check the product line by line.

What happens if my proof of origin is rejected?

The importer pays the normal duty rate, plus interest and sometimes penalties if the preference was already granted. Under most agreements, the importing customs can ask the exporting country's customs to verify the proof, and if your records do not support it the preference is withdrawn.