Kenya, Rwanda and Uganda are moving ahead with the rollout of a Single Customs Territory (SCT) from January 1 as part of an accelerated programme for regional integration.
The three countries — which came in together in June under what is now officially known as the Tripartite Initiative for Fast Tracking the East African Integration, to the exclusion of fellow EAC partner states Tanzania and Burundi — have shown their commitment by putting in place the necessary systems and even deploying their Customs officers to the port of Mombasa to implement the Single Customs Authority.
Under the provisions of the SCT, tax on incoming goods is to be collected at a single point of entry, in this case the port of Mombasa. This is meant to ease trade within the three countries that are part of the controversial troika popularly known as the Coalition of the Willing (CoW).
According to sources, Customs commissioners from the three countries met a week ago to ensure that their systems are working following a directive by the EAC Heads of State Summit in Kampala last month that the process commence next year.
Although the three countries use different automated systems to collect revenues and clear goods, efforts are underway to interlink the systems in the next six months. This will ensure that revenues are collected effectively and will allow faster clearance of goods for traders from the two countries.
Kenya uses the Simba Customs software, while Uganda and Rwanda are on a different platform called ASYCUDA.
“The two systems will be used in the initial stages but will be upgraded and interlinked in the next few months,” said a KRA official.
Also the Single Electronic Window System, whose first phase was rolled out in October by Kenya, will be recast to ensure that regional revenue authority systems are integrated to allow for information sharing and to facilitate the release of cargo at the first point of entry.
“As of now, a number of modules dealing with the lodgement of pre-clearance documents such as licences, permits, import declaration forms, sea and air manifests, integration with the KRA and the national payment gateway, have been successfully rolled out,” said Alex Kabuga, chief executive officer of the Kenya Trade Network Agency (Kentrade), which is charged with implementing the electronic single window system (ESWS).
Mr Kabuga said that the remaining modules are scheduled to be rolled out by May 2014.
“Efforts are underway, spearheaded by the EAC Secretariat, to have a regional ESWS. A technical working group has been formed to make the concept operational,” he said.
Under the SCT, assessment of goods imported by traders from the three countries will only be conducted at the first point of entry and trucks weighed only on crossing the border.
Revenue collection will also take place at the first point of entry and revenues will remitted to the destination partner states, subject to the fulfilment of some preconditions.
All the roadblocks between Mombasa and Kigali will, therefore, be eliminated and the weighbridges reduced from nine to three at most.
The move is expected to speed up movement of goods along the Northern Corridor to the landlocked countries of Rwanda and Uganda and materially cut the cost of doing business in the three countries.
Burundi and Tanzania, which have expressed misgivings about being excluded from the CoW, are not part of the process since the two countries rely almost solely on the Central Corridor, which is served by the port of Dar es Salaam.
Rwanda, Kenya and Uganda signed a trilateral deal to operationalise the Single Customs Territory during their second infrastructure conference in October in Kigali where they also signed a memorandum of understanding to fast track the EAC integration.
Meshack Kipturgo, managing director at freight logistics firm Siginon, said implementation of the SCT could see cargo clearing costs drop by up to half since the transit bond fees along the corridor will be scrapped.
“Although the number of roadblocks and weighbridges has been reduced and the time and cost of transporting goods from Mombasa to the interior have come down, with the SCT, the cost will reduce even more,” said Mr Kipturgo.
Since August, the transit time for containers from Mombasa to Kampala and Kigali has dropped from 18 days to five and from 22 days to eight respectively. This is expected to fall further.
The cost of transporting a 20-foot container from Mombasa to Kigali is also expected to drop from $383 to $193, resulting in savings of about $45 million annually.
Also, since all the revenues will be collected at the port of entry, the cost of clearing imported goods and transporting them around the region is also expected to come down.
It is estimated that over 200,000 containers destined for Rwanda and Uganda are cleared annually at the port of Mombasa.
Apart from reducing the cost, Mr Kipturgo says the move could see more cargo, especially that destined for Rwanda, come through the port of Mombasa.
“About 70 per cent of Rwandan cargo goes through the port of Dar es Salaam because the distance is shorter by about 200 km as compared with the distance from the port of Mombasa. But with the SCT, the clearing of goods will be more efficient and thus Rwandan traders are likely to prefer Mombasa port in order to save time and money,” noted Mr Kipturgo.
The SCT covers the handling of imported goods in the EAC, intra-EAC transfer of goods, export of goods from partner states to markets outside the EAC, port and border operations and trade facilitation.
Goods imported into the Single Customs Territory shall be entered only once at the first port of entry and released at the destination state.
“Locally produced goods for transfer from one partner state to another shall also be entered only once in the destination partner state and the information shall be transferred to the originating partner state,” said Richard Sindiga, director of economic affairs at Kenya’s Ministry of EAC Affairs, Commerce and Tourism.
Currently, a trader importing goods through the port of Mombasa destined for Rwanda pays at least $98 to a Kenyan Customs officer depending on the goods and the same amount to the Ugandan Customs authorities and, if the goods are destined for Rwanda, an even higher fee of at least $146 to the Rwandan Revenue Authority as transit bond.
All these fees will now be collected as a single duty, reducing the total paid by half.
Betty Maina, chief executive of the Kenya Association of Manufacturers, said that for the system to work effectively, the EAC countries need to harmonise their internal tax rates.
Currently, Uganda, Rwanda and Burundi levy VAT at a rate of 18 per cent while Kenya and Tanzania charge 16 and 20 per cent respectively. Income tax in the region averages 30 per cent except for Burundi, where it is at 35 per cent.
Last month, the EAC Secretariat, in partnership with the German Development Agency GIZ, invited consultancy firms to submit proposals for the development of policies for the harmonisation of excise duties, value added tax and income tax in the region. The successful firm is expected to submit the final report in March 2014.
Although the EAC had originally planned to have a fully operational Single Customs Territory by 2010, its implementation has been hampered by the absence of a harmonised internal tax regime.