Regional tax bodies unveil joint scheme to clear cargo

Cargo trucks await clearance at the Malaba border post in western Kenya. FILE PHOTO |  NATION MEDIA GROUP

By BERNARD BUSUULWA, The EastAfrican

In Summary

• The tax bodies of the region have rolled out a scheme to consolidate gains from local Customs incentives in order to increase import revenues and minimise trade bottlenecks faced by business people while clearing goods.
• By leveraging the efficiency gains generated by the Single Customs Territory arrangement rolled out in February 2013, regional AEO firms could register Customs turnaround times of one day on certain trade routes compared with the current three-and-a-half days, sources said.
• After nearly three years of preparation, 13 pioneer firms were awarded regional AEO status last month, with revenue officials citing delays in resolving tax-related queries concerning selected businesses as a major challenge during the vetting process.

The tax bodies of the region have rolled out a scheme to consolidate gains from local Customs incentives in order to increase import revenues and minimise trade bottlenecks faced by business people while clearing goods.

The Authorised Economic Operator (AEO) scheme allows accredited firms to enjoy shorter turnaround times for clearing goods at border points across the region and faster verification checks, according to officials.

Local AEO schemes offer faster Customs clearing procedures to gazetted firms within national borders.

Leveraging efficiency gains

By leveraging the efficiency gains generated by the Single Customs Territory arrangement rolled out in February 2013, regional AEO firms could register Customs turnaround times of one day on certain trade routes compared with the current three-and-a-half days, sources said.

Richard Kamajugo, a trade and Customs expert based at Trademark East Africa said: “For example, cargo consignments between Kampala and Katuna border station will take less than a day for beneficiaries.”

Over the medium term, businesses should post higher profits due to the cost-saving thus effected.

The AEO model is the brainchild of the World Customs Organisation, which offers incentives to importers and exporters for the purpose of improving tax compliance, increasing revenues from Customs transactions and boosting efficiency levels among beneficiary companies.

After nearly three years of preparation, 13 pioneer firms were awarded regional AEO status last month, with revenue officials citing delays in resolving tax-related queries concerning selected businesses as a major challenge during the vetting process.

Eligible firms were selected from the pool of existing local AEOs supervised by national tax authorities.

The firms are Saidi Salim Bakhresa and Company Ltd of Tanzania, Super Star Forwarders Ltd of Tanzania, Haco Industries Ltd of Kenya, Freight In Time Ltd of Uganda, Nice House of Plastics Uganda Ltd, Unifreight Cargo Handling Uganda Ltd and Spedag Interfreight Uganda Ltd.

Others are Intraspeed Ltd, Tradel Ltd, Global General Merchandise Ltd of Rwanda, Toyota AS of Burundi, Barudi Ltd of Burundi and Sodetra Burundi Ltd.

The AEOs self declare their cargo at Customs stations while verification of their goods takes less than an hour.

“Through this programme, we expect to collect more taxes by virtue of higher compliance levels,” said Kateshumbwa C Dicksons, Commissioner for Customs at the Uganda Revenue Authority.

Full implementation

The full implementation of the regional AEO scheme is likely to yield the most cost-savings for producers of fast-moving consumer goods such as wheat flour, beverages and plastic products.

In recent times, for example, Saidi Salim Bakhresa and Company Ltd has realised savings worth $25,000 per month for every cargo truck deployed on the Tanzania-Rwanda trade route according to data compiled by the Tanzania Revenue Authority. The firm exports wheat flour and soft drinks to Uganda, Rwanda and Malawi.

The company despatches some 500 cargo trucks to Rwanda every month. Its annual turnover has grown to more than $45 million.

Nice House of Plastics Ltd has registered cost savings worth Ush10 million ($2,918) per month since being enlisted on the local AEO programme.

“The pilot phase of this scheme showed that the number of days spent delivering goods across borders would significantly reduced to less than three days. However, we are yet to determine projected cost savings from the introduction of the regional AEO scheme,” said Betty Kiguli, procurement co-ordinator at Nice House of Plastics Ltd, a producer of household plastic items and writing pens.