Private sector welcomes single customs territory

By David Mugabe

The proposed Single Customs Territory (SCT) for EAC which will ensure taxes are collected from first point of entry, has stimulated contrasting reactions from the private sector in Uganda and Kenya.

Uganda’s private sector has welcomed efforts to establish the SCT, saying it will greatly benefit the long suffering hinterland businesses.
Heads of revenue authorities in Kenya, Uganda and Rwanda concluded the latest SCT meeting on Tuesday at Kenya’s port city of Mombasa.

Kassim Omar, the national chairman of the Uganda Clearing and Forwarding Association, says the SCT will benefit Ugandans but the public needs to be sensitised.

“It looks very complicated on the outside but for us, businesses will shift from Mombasa to Uganda’s clearing agents,” said Omar. He also pointed out that the SCT will ensure that multiple bonds are eradicated which means reduced cost to business.

“When you log your entry from here, you can pay from here which means multiple entries are reduced,” said Omar.

Under SCT, taxes are collected at the first point of entry. In this case taxes on imports to Uganda and other hinterland states would all be collected at Mombasa and then shared among the states.

However, in Kenya, reports indicate that Kenyan clearing agents and warehouse operators are up in arms against the proposed regulation, arguing that it will lead to job losses.

Kenya International Freight and Warehousing Association chairman Boaz Makomere said more than 700 Kenyan clearing and forwarding companies will lose business to Uganda and Rwanda if the new rule takes effect.

Makomere said more than 500,000 Kenyans who are both directly and indirectly employed in the transit trade and transport sector will also lose their jobs.

The new regulations will allow Uganda, Rwanda and South Sudan to position customs officials at the Mombasa Port.

Tanzania and Burundi were absent at the Mombasa. Both states were also absent in the tripartite meeting in Uganda held in June which laid the foundation for the development.

But Gerald Ssendaula, the chairman of the Private Sector Foundation (PSFU) said the EAC treaty has room for tripartite or bilateral agreements between states until such a time when the integration is complete with a single currency, customs union and free movement of labour.

“There is no contradiction (on the absence of Tanzania and Burundi), the other member states can move in the meantime,” said Ssendaula.

“Once there is proof of payment, the goods can go through Kenya to Uganda. Today Kenyan authorities will say they are not sure and ask for bonds,” said Sendaula.

Deliberations on the SCT follow a directive from EAC heads of state meeting in April 2011 to the council of ministers to undertake a study for the attainment of a Single Customs Territory and present their findings.

In April 2012, the summit considered the report of the council of ministers and agreed in principle to adopt a single customs territory.

A tripartite summit involving the three presidents of Kenya, Uganda and Rwanda on June 25, at Entebbe directed the commencement of the collection of customs duties by Uganda and Rwanda before goods are released from Mombasa Port and for the goods destined for warehousing, importers to continue executing the general bond security.

Benefits of the single customs territory to the region

• Kenyan clearing agents will lose some business that will go to hinterland states like Uganda — an indication of the win-win situation provided by the integration process.
   
• Restrictive regulations are eliminated as the corridor is now considered to be one region for customs purposes while circulation of goods will happen with no or minimal border controls.
   
• Under the SCT, the three partner states will recognise mutual customs bonds executed by their respective insurance companies, as cargo destined to bonded warehouses will be verified at port of origin or entry, by liaison customs officials representing the destination countries.
   
• Ultimately, it will reduce cargo clearance delays, reduce clearance costs and multiple bond securities and eliminate checkpoints along the Northern Corridor.
   
• It will also ensure seamless flow of goods, increase revenue collection through easier payment systems.
   
• In effect it will be the culmination of a fully-fledged Customs Union that will enhance regional trade.