Customs regime: Is it vital for Zambia?

Daily Mail, Zambia

Customs regime: Is it vital for Zambia?

17 July 2013

By Bruce Kaemba

The history of the Common Market for Eastern and Southern Africa (COMESA) began in December 1994, when it was formed to replace the Preferential Trade Area (PTA), which had existed from the earlier days of 1981.

According to its treaty, COMESA was established as an organisation of free independent sovereign states.

COMESA’s current strategy can thus be summed up in the phrase “economic prosperity through regional integration”. COMESA is then ideally positioned to champion economic prosperity through free trade.

Over the years of its existence, COMESA has formulated and implemented various trade programmes aimed at reducing trade barriers.

COMESA’s primary objective is to foster economic development by devising trade agreement that should be tenable to all member states.

Some programmes being spearheaded by COMESA have stirred an avalanche of debate bordering on their relevance to the current economic status of each individual country.

Typical of one such programme is the Regional Customs Transit Guarantee Scheme (RCTG), whose genesis rolls back to November 1990, when heads of State and Government of the precursor to COMESA, PTA signed the agreement at a summit in Mbabane, Swaziland. The RCBG is a component of the COMESA Protocol on transit trade and transit facilitation.

NEED FOR CUSTOMS GUARANTEE

According to COMESA, while all the COMESA member states have legislations that require customs guarantees to be taken by persons responsible for the execution of the transit operation, the objective of the customs bond guarantees is to ensure that the government is able to recover duties and taxes from the guarantors, should the goods in transit be illegally disposed of for home consumption in the country of transit.
Under the current nationally executed bond system, when goods cross the customs territory of one or more states in the course of their transit by road, the customs authority in each state applies national controls and procedures. These vary from state to state, but primarily involve the inspection of cargo at each national frontier and the imposition of national security requirements to cover the potential duty and taxes at risk while the goods are in transit through each territory. These measures applied in each country of transit cause considerable expense, delays and interference with the regional transport and trade.

To address the challenges experienced by transport operators, freight forwarders and clearing agents offer customs administration a secured regional system of control replacing the nationally executed practices and procedures, while effectively protecting the revenue of each state through which goods are carried.

COMESA formulated the RCTG on the premise of a reliable guarantee mechanism that will protect the interest of all stakeholders. COMESA further states that the RCTG provides a uniform basis for transit movement throughout the region, where only one guarantee is used for the transit of goods through all transiting member states accompanied by customs declaration and the COMESA Carnet throughout the transiting process.

Additionally, COMESA argues that throughout the transit, duties and taxes should be covered by a regional valid guarantee.

FAILURE OF CUSTOMS GUARANTEE

As countries roll out preparations for the RCTG, a large number of those who are part to the agreement on the establishment of the RCTG have noticed glaringly inconsistencies in this scheme. They have realised the negative and devastating effects, which this scheme would have on their economies.

The fact that transiting goods would already have been cleared from the exporting country as they pass through various countries to the final consumption destination using a COMESA carnet entails that the rest of the various indigenous guarantors would be reduced to mere spectators in the trade chain.

A carnet is a security printed document that is used throughout the transit process of goods as proof of a valid guarantee and undertaking to comply with customs obligations within each transited jurisdiction.

COMESA has not undertaken wider consultation over RCTG and to outline the merits, if any, and demerits of the RCTG.

It has instead decided to hold what would best be described as clandestine “consultative meetings”, where it has only invited a few sectors, who are apparently used as mere rubber-stamps to endorse the implementation of RCTG, leaving out those that are directly affected by it like clearing agents, banks and insurance companies.

So far, COMESA has held seven “consultative meetings” on RCTG, all of which had no key stakeholder as a participant. Interestingly, most of these meetings have been held in Lusaka and no deliberate attempt has been made by COMESA to invite any Zambian key stakeholder, but instead invitations have been extended to stakeholders from other countries.

Countries that have a strong manufacturing base and have sea ports stand to benefit greatly from this arrangement at the expense of those that are landlocked and are primary consumers of goods, like Zambia because the COMESA carnet will originate from the sea port and merely transit the other countries on its way to the final destination, making stakeholders like clearing agents, banks and insurance companies.

To date, 23 years since RCTG was formed, less than half of the number of COMESA member countries namely Ethiopia, Malawi, Uganda, Zimbabwe, Kenya, Sudan and Rwanda have signed for the implementation of RCTG.

If, indeed RCTG was of benefit to all COMESA member states, all the countries belonging to this economic bloc would surely have an opportunity to enhance their economic growth.

If the Patriotic Front government signs the RCTG, Zambia will be hit hard in terms of lost duty and taxes.

The author is the president of the Customs Clearing and Freight Forwarders Agents Association of Zambia.

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