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The East African : Nov 17th 2014
44 GROWTH IN TRADE Region starts realising benefits from Single Customs Territory Latest figu≥es on Uganda’s fuel impo≥ts between Feb≥ua≥y and Octobe≥ show a substantial inc≥ease in volumes By BERNARD BUSUULWA The EastAfrican A surge in fuel imports and increased Customs revenues are the results of the rollout of the Single Customs Territory in February, reflecting the benefits of reduced trade barriers. However, the depreciation of the Uganda shilling has denied consumers price discounts. Reduced turnaround times on the movement of fuel, cement and clinker, wheat, used clothes and beverages have spurred significant growth in import volumes. “This Customs arrangement of- fers local businesses huge benefits in moving goods and raw materials across borders at a lower cost. “But some of these cost sav- ings have been eroded by the depreciation of the Uganda shilling against the dollar, and this has constrained local businesses from passing on new cost benefits realised in the Customs value chain,” said Richard Kamajugo Uganda Revenue Authority’s Commissioner for Customs. The Uganda shilling fell by 2.9 per cent against the dollar during the first quarter of 2014/15. Results from a survey conducted jointly by the Uganda Revenue Authority and the Rwanda Revenue Authority show that the average time spent clearing and transporting cargo from Mombasa to Kampala dropped from 18 days, two hours and 27 minutes to an average of four days and 15 hours after implementation of the Single Customs Territory system. Similarly, clearance and trans- portation of cargo from Mombasa to Kigali dropped from an estimated 21 days to an average of five days and two hours. The cost of transporting goods from Mombasa to Kigali decreased from an average of $5,200 to $4,200 per trip, and the number of trips made by cargo trucks between Kigali and the Hima border post rose from an average of four to eight per month. The survey, compiled in August, covered 26 importers, 10 transporters, 25 clearing firms and 40 drivers based in Uganda and Rwanda. The SCT system includes the use of pre-arrival declaration forms, reduction of multiple Customs declaration requirements by about 90 per cent, single declarations for bulk purchases such as fuel products and cement, payment of certain fees in the country of destination, and the introduction of a sin- 4 days The average time spent clearing and transporting cargo from Mombasa to Kampala, which has dropped from 18 days gle regional bond that offers high cost savings to importers by replacing multiple guarantee bonds. The latest figures on Uganda’s fuel imports between February and October show a substantial increase in volumes and Customs revenues. Total fuel volumes grew from 1.09 billion litres between February and October 2013, to 1,24 litres recorded in the same period this year, URA statistics show, representing a growth of 13.6 per cent over 12 months. Petrol imports rose by 19.5 per cent to 503 million litres between February and October 2014, and diesel imports increased by 10.9 per cent to 569 million litres over the same period. The high growth posted by fuel imports boosted Customs revenues during the first four months of 2014/15. International trade taxes grossed Ush1.38 trillion ($502 million) between July and October 2014, an increase of 19.6 per cent from the same period in 2013. Whereas increased import vol- umes are good for revenue collections, observers claim that the smoother trade rules could spell doom for local sectors that are less competitive than their foreign peers. Through faster inflows of cheap high quality goods, particularly consumer items, Ugandan firms producing similar products at a higher cost could be forced out of the market. “Huge growth in import volumes tied to the Single Customs Territory has boosted tax revenues, and indirect losses attributed to this regime can be mitigated through strong export numbers in some sectors. For example, local cement producers have increased exports to neighbouring markets like the Democratic Republic of Congo, which could reverse trade-related economic losses over the medium term,” said Stephen Magera, URA’s The EastAfrican BUSINESS NOVEMBER 15-21,2014 New ≥ules fo≥ fuel impo≥ts unde≥ OTS By KENNEDY SENELWA Special Correspondent KENYA’S MINISTRY of Energy has released new rules to guide the importation of refined petroleum products under the centralised open tender system. The rules say winners who have been awarded contracts under the open tender system (OTS) must honour their obligations. Under the OTS, a firm that submits the lowest bid wins the tender to import petrol, diesel or jet fuel on behalf of the industry. Under the OTS terms, firms must provide a performance bond to reduce defaults. “The value of the performance bond will be at the rate of $20 per metric tonne based on cargo quantity, and is valid until the issuance of a pre-discharge certificate at Mombasa,” states the draft OTS agreement. In a letter to fuel marketing firms dated October 27, Energy Principal Secretary Joseph Njoroge said the new terms will be effective from December 1. He said the 42 companies are required to agree to the new terms in order to participate in importation and delivery of refined petroleum products to Mombasa port. Firms are required to have a li- Above, fuel trucks await offloading at the Jinja fuel reserve tanks. Below, a trader sells cement in Kampala. Sharp declines in turnaround times spent on movement of fuel, cement and other goods have spurred considerable growth in import volumes. Pictures: Morgan Mbabazi ECONOMIES OF SCALE The aim of creating the Single Customs Territory is to enable partner states to enjoy economies of scale, with a view to supporting the process of economic development. Unlike in developed countries, economic integration is not just for purpose of trade per se, but as a vehicle for bringing about faster economic development. The Customs Union on its own will not bring about faster economic development. Therefore, it has to be supported by other measures such as development of infrastructure to link production areas to markets. Measures to support development of human resources across the region are similarly important. Assistant Commissioner for Trade. Other trade experts also say growth in the manufacturing sector could overturn economic losses. “Fuel consignments take a shorter time because several trucks are The agreement states in part: Clearance of goods shall be done at the destination country while the goods are at the first point of entry. Warehousing can be done anywhere within the EAC and goods can be transferred under a single bond system. Transit regimes shall only apply to goods originating from a foreign country and destined to a foreign country through the partner states or a partner state. A single regional bond system shall apply on transit goods. Inland partner states may have representatives of their agencies operating at the main ports of entry. consolidated into a single batch instead of clearing them separately. This has directly reduced the number of fuel shortages experienced,” said Moses Sabiiti, programme manager at TradeMark East Africa. cence from the Energy Regulatory Commission, a transport and storage agreement signed with the Kenya Pipeline Company, and should not have defaulted in paying for their share of imports allocated under OTS within the past three months, among other conditions. Major industry players support the new rules but small marketers oppose the requirement to provide a performance bond upon winning a tender as it will increase costs. If the performance bond is not submitted within the stipulated time, the importer will be deemed to be in default and a fresh tender for the defaulted cargo will be called by the Ministry of Energy. A seller who is awarded a tender but does not deliver fuel will pay buyers a penalty of $20 per tonne not delivered. A buyer who fails to pay a seller within four days will pay $20 per tonne. Mr Njoroge said the defaulting supplier will be locked out of the OTS and the performance bond will only be cashed if a default in cargo delivery necessitates the calling of an emergency tender for a replacement cargo. The new OTS rules require all tankers delivering petroleum products to be double hull, and be under the maximum age limit of 20 years. The International Maritime Au- thority requires tankers to have two separate watertight plating structures at a sufficient distance from each other to prevent crude oil and refined fuel leaking into the sea.
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