Issue No.587
Economy
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23 -29 May 2002 Issue No.587 Economy |
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| Published in Cairo by AL-AHRAM established in 1875 | Recommend this page | ||
Back to the future
A comprehensive reform of Egypt's antiquated customs system is on the go, but the business community is wary. Mona El-Fiqi reports
Ask anyone involved in industry why Egyptian goods are unnecessarily expensive, and you most certainly will be told that the customs system is to blame. Horror stories have long abounded on production inputs that spent months in the ports until some minor bureacratic problem was sorted out, while the harrassed importer continued to pay daily fees for using the customs authority's warehouses.
Click to view captionReforming the customs system has long been on the business associations to-do lists frequently submitted to the government. Importers usually attribute the high prices of imported goods to the costs incurred in customs. Exporters complain that these high costs unnecessarily increase their production costs and erodes the competitive edge of locally-produced goods.
But Customs Authority Chairman Mohamed Abu Sheasha is intent on bringing the Egyptian customs system into the twenty-first century.
In an interview with Al-Ahram Weekly, Abu Sheasha said the government has laid the groundwork for comprehensive reform of its creaking customs system, with the assistance of experts from the International Monetary Fund (IMF), who were in Cairo for talks with the government early this month.
A joint government-business committee has been formed to reconsider the current customs law which was passed in the thirties.
According to Abu Sheasha, the reform programme aspires to simplify the current labyrinthine rules, restructure customs tariffs and improve the payment system.
But until these ambitious plans materialise, the customs authority is moving ahead with plans to modernise the system through which business people to take delivery of their goods. A new system is expected to be applied within days. "Imports will be released a few hours after arriving at customs rather than after two weeks as currently happens," Abu Sheasha said.
According to the new system, importers can deliver their shipment documents (an original receipt, a shipment bill of loading and a purchase contract) to the customs authority as soon as their ship leaves harbour.
That way, officials can check the documentation while the ship is at sea. This should allow cargo to be released after spending only a few hours in customs for checks.
The new system will be available only to importers who have never violated customs regulations. Two computerised customs centres will soon be established in Cairo and Alexandria to apply the new regulations and receive shipment documents. The centres will then pass on authorisation to customs outlets.
The authority aims to keep customs outlets empty. "We hope that customs outlets will be doorways and not warehouses for goods," Abu Sheasha said.
Abu Sheasha hopes the new system will help reduce the overall cost of importing. When imported goods sit in storage for a long time, importers incur additional expenses which they often recoup by charging higher prices in the market.
The new regulations also confirm Egypt's commitment to the World Trade Organisation's rules regarding "correction" by customs authorities. Egypt has long allowed customs authorities to "correct" the price of imports. When importers ship goods to the country, they must present the receipts and purchase contracts showing the purchase price to customs officials who then calculate the duty. But if officials feel the price quoted on the documentation does not reflect the true price of a good, they are at liberty to "correct" the price. The WTO stipulations state that customs duties should be imposed according to the supplied receipts and there should be no "correction" of prices.
Abu Sheasha said that Egypt applied its commitment a year ago, but "I sent a memo to all customs outlets to confirm that customs officials must apply the WTO commitment so long as the conditions of implementation are available." This means, he says, that the receipt and purchase contract for the good must be approved by "the Egyptian Embassy in the export country."
Another novelty in the government's new plan is the reactivating of the "dry" ports. These are customs areas away from actual harbours, usually located in industrial areas. The idea is that goods are unloaded at a marine port then taken for customs checks inland. This relieves pressure on customs facilities by the sea. Mustafa Zaki, chairman of the importers division at the Egyptian Federation for Chambers of Commerce said that new regulations are good: "It is an importer's dream to get hold of goods in a few hours," he said.
Yet knots remain that Zaki wants unravelled. He explained, for example, that if an importer ships a commodity at certain price and two weeks later the international markets set a lower price on that commodity, customs officials often disbelieve the new purchase receipts. Zaki thinks officials should use the Internet to keep abreast of commodity price fluctuations.
Zaki also thinks customs officials are too quick to view importers as swindlers. He complains that if the quantity of goods in a shipment is less by a few items or kilos than the figure registered on the documentation, customs officials automatically treat the case as a smuggling issue.
Zaki believes the main fault lies with the anachronistic customs law. "For comprehensive reform, there should be a new customs law," he argues.
Importers as well as exporters have given the authorities their thoughts on the new customs regulations, and they are mostly happy. But some exporters have misgivings. Helal Sheta, chairman of the exporters division at the Federation of the Egyptian Chambers of Commerce argues that the new regulations will save time, effort and money for business but argued that injustices will remain as long as the government continues to give preferential treatment to the public sector.
He says that the system differentiates between private sector exporters and public sector companies and that private sector companies are less kindly treated when it comes to tax rebates and the "draw-back" system (a procedure which allows exporters to import production inputs for goods for export and retrieve the duties paid on them).
Sheta complains that the private sector accounts for 75 per cent of investment in export manufacturing, but is deprived of the privileges state companies enjoy.
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