Single Customs Territory Implementation, a Major Milestone in EAC Economic Developmen

BLOG 20/06/2018

Single Customs Territory Implementation, a Major Milestone in EAC Economic Developmen

Non-Tariff Barriers (NTBs) are often blamed for the escalation of trade costs in the East African Community and the world in general. These NTBs can be operational in nature and may result from Customs and other cargo interveners at the ports of entry or be perpetrated by regulatory restrictions.

According to the World Trade Organization (WTO) World Trade report 2015, trade costs contribute significantly towards the cost of production, placing trade costs in developing countries equivalent to applying a 2.19 per cent ad-valorem tariff (duty levied on value of item).

The report indicates that trade facilitation can reduce trade costs in African countries and Least Developed Countries (LDCs) by an average of 14.3 per cent, with trade costs of manufactured goods reducing by 18 per cent and agricultural goods by 10.4 per cent.

Further studies by WTO show that trade facilitation has the potential to increase the total merchandise exports in developing countries by 9.9 per cent at the tune of US$ 569 billion.

It was in this context that WTO members at the 2013 Bali Ministerial Conference signed the landmark Trade Facilitation Agreement (TFA), which was enforced on 22nd February 2017, after being ratified by two-thirds of the WTO members. The implementation of this agreement has the potential to increase world trade by up to US$ 1 trillion per annum. The TFA contains clauses aimed at expediting the movement, release and clearance of goods, including goods in transit.

The global report adds that with trade facilitation, exports from developing countries can increase by between US $170 billion and US$730 billion per annum and it can boost a country?s economic growth by 0.9 per cent annually and boost their exports by an additional 3.5 per cent annually.

It was with this in mind that Heads of States in the East African Community agreed to implement the Single Customs Territory (SCT) in the region in 2014 to promote investment and improve the welfare of EAC residents.

The Single Customs Territory involves goods being cleared by lodging a Single declaration in the country of destination and the goods being subsequently released upon confirmation by the country of destination that the taxes have been paid, unlike in the past when multiple declarations at the borders were made.

Goods are moved under a single bond from the Port to destination as opposed to when there were multiple bonds required. The goods are monitored under the Electronic Cargo Tracking System which prevents the risk of theft and diversion.

Other features include, Interconnected Customs Systems and Minimal Internal Controls which promote the seamless movement of cargo and save time and costs in the movement of goods within the region.

Following the roll out of this system, the time taken to transport imported goods from the Port of Mombasa to Uganda and Rwanda has reduced from over five days to three days and from over eight days to five days respectively. Further, with full implementation of SCT, border crossing time has improved remarkably, as it is the case for Busia and Mutukula by 74% and 83% respectively. The single entry is used to facilitate movement through the partner states till destination countries. This further guarantees destination partner state revenue authorities of the projected and due revenues.

Following the decision by the Heads of States in the region, the East African Community has begun to reap the benefits of trade facilitation following the full roll out of the Single Customs Territory (SCT) Import Regime on 1st December 2017. Kenya Revenue Authority dully complied with the directive like the rest of EAC partner states revenue authorities.

To accelerate these gains, the 19th Ordinary Summit of Heads of State of the East African Community held in Kampala on 23rd February 2018, gave impetus towards the achievement and objectives of the EAC by directing the Council of Ministers and the Partner States to fully implement the Single Customs Territory by rolling out all products and all customs regimes like Exports and Transit. The Piloting for the roll out of the Export Module has been scheduled for 10th May 2018 and the full roll out of export module is to be completed by 1st June 2018. Training of port users and other stakeholders has been taking place in preparation for this roll out.

The simplification of regulations in regard to cross border trade and minimizing delays benefit small scale and informal rural traders. The rural traders quite often lack adequate resources to handle complex documentation requirements for export of perishable goods which empower them to come out of the vicious cycle of poverty.

The Single Customs Territory is expected to promote investment in the East Africa Community region and enable local industries to take advantage of economies of scale in production and the nations to earn more foreign exchange by producing more goods for export. This, in turn, will greatly contribute towards fulfilling the quest of EAC member states to achieve middle class status for their citizens.

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