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Single Customs Territory still a document on the shelf as July 1 deadline lapses
The Single Customs Territory, whose major objective is to overcome the hurdle of slow and costly movement of goods and services and also improve the business environment in the region, is yet to be fully operational even after the lapse of the July 1 deadline.
In the Northern Corridor comprising Kenya, Uganda and Rwanda, the SCT project is at an advanced stage after being at the pilot stage for a long time, but not all goods have been added onto it.
Tanzania and Burundi, which make up the Central Corridor, began implementation on July 1 but are piloting with only a few products.
According to Michael Baingana, policy research advisor to the East African Business Council, piloting in the Central Corridor, that is Tanzania/Burundi and Tanzania/Rwanda, was meant to commence in May but was delayed.
The Tanzania Revenue Authority says the only imports from Kenya that the Central Corridor can handle for the time being are cigarettes, spirits and detergents.
For goods exported to other East African countries, TRA’s Director of Education and Taxpayer Services Richard Kayombo said, the system will only handle wheat flour and cooking oil.
“We hope that the new arrangement will help to increase business competition in the region and efficiency at the Dar es Salaam port,” said Mr Kayombo. “It would also help to foster business relations among clearing agents.”
The Northern Corridor is ahead of the Central Corridor in terms of goods handled under the SCT.
Officials at the Kenya Revenue Authority confirmed that the region failed to meet the deadline due to various hitches, ranging from bureaucracy to technology issues.
They however added that most of the imports to Rwanda passing through the Northern Corridor had been brought into the system.
Modalities are also being worked out to include more goods imported into Uganda from outside the region to be brought under the system, KRA officials said, adding that, at the moment, fuel and clinker imported from outside the region are among the goods included.
They also confirmed that some goods are still going through the old system, adding that the SCT will be implemented in phases.
Not fully implemented
Peter Njoroge, director of Economics at Kenya’s Ministry of East African Affairs, Commerce and Tourism, said Kenya, Uganda and Rwanda had agreed on the July 1 deadline first and that Tanzania and Burundi came on board later.
Uganda Revenue Authority spokesperson Sarah Banage said goods from within the East African Community will be cleared under the rules of origin but added that this has not been fully implemented.
Under the intra-regional arrangement, for example, a manufacturer in Kenya who wants to export their product to Uganda will pay duty at the destination even before the goods leave the Kenyan warehouse. This has cut the red tape that used to hinder intra-regional trade, she said.
It also eases the movement of the consignment through Kenya to Uganda, given that import levies have been removed and an importer is only required to pay domestic taxes that apply in the destination country, such as value added tax (VAT).
Initially, there was duplication of entries, where an importer had to clear with the point of entry country and destination country. However, this has been done away with for goods handled under the SCT system.
But given the missed deadline, handling of goods and services that are yet to be brought under the SCT will continue to be slow and costly, the biggest challenge being import and export through the Central Corridor.
“Missing the July deadline will affect some of the importers and exporters of goods as they will not enjoy the benefits of the SCT system,” George Ngaya, an economist with an interest in East African affairs, observed. “As a result, it is imperative that member countries ensure the SCT system is fully operational as it will help to bring the region under a single Customs Union.”
The SCT issue came up in the tripartite meeting between Kenya, Uganda and Rwanda in Kigali, where partner states again committed themselves to bringing all cargo under intra-regional trade on the Northern Corridor into the SCT effective July 1.
They also agreed that their revenue authorities would quickly finalise the survey on the SCT and continue stakeholder sensitisation on the gains made.
The states also agreed that technical teams finalise the administrative guidelines for harmonisation of electronic cargo tracking system by August 30 and that Ugandan and Rwandan agents be given access to the KRA Customs system by July 15.
It was also agreed that KRA and the Treasury would expedite the removal of VAT imposed on services rendered to goods in transit by September.
Fuel and clinker importers were the first beneficiaries of the SCT, which was launched on January 1 this year.
The revenue authorities from the three countries picked the two industries for the pilot phase to enable importers to clear their goods at the point of entry and have revenues collected at a single point, in this case the port of Mombasa. The revenues were to be remitted to the destination partner states.
According to EABC’s Mr Baingana, the products cleared under the SCT were expanded to include spirits, cement and cigarettes while those from Uganda/Rwanda were cement and Mukwano Industries products.
As at July 1, the EAC member states had expected to have a fully operational SCT, which would also help in the implementation of the Common Markets Protocol signed four years ago, but that was not to be.
Nonetheless, there were signs of progress. A recent public notice issued by URA said beverages such as mineral water, soft drinks and beer imported from Kenya would be allowed in the SCT system.
“Beginning June 16, the items mentioned above imported from Kenya will be cleared using Single Custom Territory (SCT) procedures,” read the URA public notice published in the Daily Monitor.
URA said inclusion of more items came about after SCT passed the experiment to clear fuel, neutral spirit, cigarettes and cement from Kenya.
Electronic declarations
Under SCT procedures, Customs declarations are made electronically and processed and released by URA prior to loading of goods for export from Kenya, said the notice signed by the URA Commissioner for Customs, Richard Kamajugo.
Ms Banage said the only SCT aspect not fully rolled out was where commodities imported into Uganda were cleared at the first port of entry, without needing things like bonds.
Ministry of East African Cooperation acting Director, Trade, Investment and Production, Bernard Haule, said the government planned to scale up public education of stakeholders, including private sector and government agencies, in the current financial year, to ensure all understood the benefits they stood to gain from the new system.
By Scola Kamau, Christabel Ligami, Dicta Asiimwe and Eric Kabendera
