Comesa bond scheme speeds up movement of goods in Northern Corridor

Goods ready for clearance at the port of Mombasa. With more than 200 Customs bonds worth $100 million executed in the clearance of transit goods on the Northern Corridor in less than three years, Uganda, Kenya and Rwanda have taken the lead in using the regional Customs bonds scheme of Comesa. FILE PHOTO | GIDEON MAUNDU |   NATION MEDIA GROUP

By JULIUS BARIGABA, The EastAfrican

In Summary

• The bonds scheme, known as Regional Customs Transit Guarantee (RCTG Carnet), is designed to fast-track movement of goods under Customs seals in the Comesa region.
• A Customs transit guarantee scheme is a system that ensures that Customs in a transit country receive proper payment for dues and duties for any goods in transit.
• Rwanda, which has already converted all local transit bonds into RCTG, is the stand-out performer, while Uganda has also embarked on a similar process, accommodating both small operators and big businesses.

With more than 200 Customs bonds worth $100 million executed in the clearance of transit goods on the Northern Corridor in less than three years, Uganda, Kenya and Rwanda have taken the lead in using the regional Customs bonds scheme of Comesa.

The bonds scheme, known as Regional Customs Transit Guarantee (RCTG Carnet), is designed to fast-track movement of goods under Customs seals in the Comesa region.

A Customs transit guarantee scheme is a system that ensures that Customs in a transit country receive proper payment for dues and duties for any goods in transit.

In a meeting last week in Lusaka, the Comesa bond was fixed at 0.5 per cent — a reduction from the initial 0.75 per cent.

“We thought this was too high,” said Merian Ssebunya, chair of Uganda Freight Forwarders Association.

“Economic blocs are about market access and integration. Setting the Comesa bond this high defeated the whole purpose of integration. But now 0.5 per cent is fair. It’s still high compared with the national bond of 0.25 per cent that we were paying in Uganda,” Ms Ssebunya said.

The bond has enhanced competitiveness for companies on the Northern Corridor. Studies indicate that the implementation of the RCTG Carnet reduces the cost of transport and clearance by between 10 and 15 per cent.

The RCTG was introduced in 2012 on the Northern Corridor to facilitate movement of goods from the port of Mombasa to the landlocked countries in the region.

Rwanda, which has already converted all local transit bonds into RCTG, is the stand-out performer, while Uganda has also embarked on a similar process, accommodating both small operators and big businesses.

READ: New clearing system saves Uganda and Rwanda $469m

The Comesa regional bonds scheme has generated premium incomes of over $600,000 from sureties covering 194 clearing and forwarding agents across the three East African countries.

“The RCTG scheme has matured and will sustain itself… The myth that a regional bond is only for multinationals and will hurt the businesses of small and medium enterprises has been debunked,” said Comesa Assistant Secretary-General Nagla El-Hussainy.

“Today, many small and medium clearing and forwarding agencies in Kenya, Uganda and Rwanda have formed partnerships and are doing business on the Northern Corridor,” El-Hussainy told the eighth meeting of the council of the RCTG scheme in Lusaka, Zambia on September 29.

The meeting brought together Commissioners of Customs, chief executives of insurance and reinsurance firms, revenue authorities, transporters and clearing and forwarding agents from across the Comesa region.

Single Customs Territory

The Customs bonds scheme found an uptake in Kenya, Uganda and Rwanda after the rollout of the East African Community Single Customs Territory (SCT) early this year.

A June 2014 World Trade Organisation study on Comesa’s RCTG titled “Supporting Implementation of the Trade Facilitation Agreement in the Post-Bali Context” shows that transit time from Mombasa to Kigali used to take 21 days or more, but has reduced since the  introduction of the SCT.

Under the SCT clearance of imports, tax assessment and collection is done at the first port of entry. 

This reduction on in transit time compelled freight forwarders and clearing agents in East Africa to ask Comesa to urgently implement the RCTG in DRC, Tanzania and South Sudan.

South Sudan and Tanzania are non-Comesa states so the rollout of the RCTG on their transport corridors has been delayed, although the countries are key trade partners of the EAC states and are served by the Northern Corridor.

The scheme’s rollout in the Central corridor, which covers Tanzania, Burundi and DRC, Comesa executives said “will commence before end of this year,” while the North-South Corridor countries are still held back by key member states like Zambia not ratifying the RCTG agreement.

However, the Ethiopia-Djibouti corridor is still experiencing challenges relating to the sharing of premiums on RCTG bonds.

Analysts say that for decades, guarantee systems have been devised as an alternative to direct Customs surveillance during the transit although such cumbersome procedures are still being applied in a number of countries.

Bonds or guarantees are emitted by the owner of goods or his agents who is usually the carrier to the benefit of the Customs of the country of transit.