PUBLISHED ON October 24th, 2014

Adopting customs union should not be at the expense of our economic interests

Clearing and Forwarding firms have rekindled their agitation for the suspension of the Single Customs Territory (SCT) programme, arguing that it will make them lose business to their counterparts from the neighbouring countries.

To appreciate the gravity of the issues raised by the clearing agents, it is important to understand some facts about the SCT.

SCT is one of the phases towards attaining the East African Customs Union. The Customs Union Protocol aims to facilitate regional trade through harmonisation of import duties and taxes, simplification of documentation processes, elimination of non-tariff barriers, among other targets.

To achieve these objectives, The East African Community (EAC) set up the Directorate of Customs, whose mandate was to oversee the integration of the customs authorities.

Therefore, SCT cannot be seen as an end in itself. Rather, it is a culmination of an elaborate but gradual process, including restructuring of the legal and institutional framework in the socioeconomic sectors.

Further, the impact of SCT on trade and industry, movement of persons, sustainability of jobs, and revenue streams for the governments must be determined prior to its full roll-out.

A section of the business community lauded the launching of the tripartite SCT by the governments of Uganda, Rwanda, and Kenya under the so-called “coalition of the willing”, saying it would boost regional integration and lower the cost doing business.

However, the Kenya International Freight & Warehousing Association (Kifwa), the body representing the freight forwarders in Kenya, strongly opposed it, terming the directives as irregular and untimely.

The association raised serious concerns, among them the huge risk it posed to Kenya’s fragile economy and, most significantly, the loss of business to its members. Kifwa demanded that specific measures be taken to mitigate the anticipated economic losses.

Kifwa is concerned about the governments’ commitment to protecting the interests and sovereignty of Kenya within the principles of the EAC Treaty for two reasons.

First, not all the five partner states were in concurrence with the timing of the launch of the SCT and some do not seem to be fully committed to it.

Second, the SCT concept can only apply where no single entity has a lot to lose. It is senseless for a party to enter into a deal knowing well that it will deplete its fortune and benefit the other party.

There is no doubt that facilitation of trade is of great significance to the EAC integration process. However, the decision to rush the SCT process without taking into consideration its consequences is misadvised for several reasons.

First, none of the member states has initiated any process for the legislation or development of institutional policies for the sensitisation and implementation of the programme.

Second, the members’ revenue authorities continue to use separate electronic systems for customs transactions (Kenya uses Simba, Uganda, Rwanda, and Burundi use Asycoda, while Tanzania uses Tancis. This is a strong indicator of their reluctance and lack of preparedness to fully embrace the SCT.

Third, customs adopted the “destination model”, which effectively cuts off the demand for clearing and forwarding services in the transit or exporting countries, thus leading to loss of business for local clearing agents.

Fourth, each country has deployed customs officers to Mombasa port. This is causing confusion and delays in delivery of cargo. In fact, this scramble has rendered the Mombasa Port Service Charter redundant.

Fifth, customs manifested immense power in the control of cross-border trade prior to the SCT. Often, they would impose strict measures such as the infamous “cash-bond” rule enforced recently by KRA on transit goods. Under the SCT, customs cannot elicit such autonomous authority.

In the face of such concerns, the government needs to determine the effects of SCT on the economy and the livelihoods of Kenyans. The country may be walking on quicksand — moving from the known to the unknown. This could have dire consequences.

Source:: Daily Nation

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.