Understanding the Single Customs Territory and the benefits of other Trade Facilitation Instruments CBC Dialogue September 2015 Nairobi Safari Club

Outline Introduction What is a Single Customs Territory (SCT)? Why do we need a (SCT) How does it Operate? The benefits Other COMESA Trade Facilitation instruments and their benefits Perspectives

Introduction In the globalised world where trade liberalisation and trade facilitation are being pursued at a multilateral level, regional and bilateral levels, countries can only do well if they are competitive in both the production and distribution of goods; Cooperation among countries is essential to achieve trade facilitation and enhance competitiveness at multilateral, regional and bilateral levels;

Introduction At the multilateral level, conclusion of negotiations on Trade facilitation gave birth to the Trade Facilitation Agreement (TFA) in 2013 in Bali, Indonesia. The TFA will enter into force when 2/3 of the WTO membership ratify it. There are 161 WTO Members as at April As of 4 September 2015, Sixteen Members had ratified the TFA and only Mauritius in COMESA

Introduction Meanwhile developing countries and LDC WTO Members need to categorize their obligations under the TFA into Category A commitments, which they will implement within a year; Category B commitments, which they can only implement after a transitional period; and Category C commitments, for which they require assistance and support for capacity building.

Introduction At the regional level, the COMESA Treaty Chapter Nine, Articles 69 to 71 provide for the simplification and harmonisation of trade documents and procedures. This is with a view to facilitate trade in the region and beyond COMESA Has developed a number of reputable Trade Facilitation instruments

Understanding the Single Customs Territory (SCT) a Single Customs Territory is a stage towards full attainment of the Customs Union achievable by the removal of restrictive regulations/or minimization of internal border controls on goods moving between the Member States with an ultimate realization of free circulation of goods Consider how goods are treated once they enter a country as they move from point A to point B in the same country in terms of customs control!

How does a SCT Operate? Goods imported into the Regional Grouping are entered only once in the country of destination and released at the first Port of entry to the destination Member State; Duty paid goods are not allowed to change destination into another Member State except where permission is granted by both Member States. Duty paid goods are released to the destination Member State for home use and are subjected to Customs controls through the Electronic Cargo Tracking System (ECTS)

Why is a SCT needed? The system of transit and goods clearance in the absence of a SCT is long and cumbersome along the transit route and involves: a)Difference in application of Custom Laws and Instruments’; b)Multiple Customs declarations at Internal Borders; c)Multiple Security Bond regimes; d)Multiple Road Blocks along the Transit Corridor Application of varying Valuation approaches; and e)Complex Clearance Procedures involving many Government Agencies. f)Multiple weigh bridges along the transit routes.

Benefits of the SCT The SCT has the following benefits: Reduces the Cost of doing business by eliminating duplication of processes; Single weighing for Transit cargo; Removal of road blocks; Enhances application of Information Technology and data collection at regional level; Reduced turn-around time (18 to 4 days for Mombasa/Kampala and 21 to 7 days for Mombasa/Kigali); Single Customs declaration for goods destined to Uganda and Rwanda for both International and Intra clearance; and Reduced Customs documentation, cost of doing business and information exchange.

Trade Facilitation Trade facilitation is a concept directed towards reducing the complexity and cost of the trade transaction process and ensuring that all these activities take place in an efficient, transparent and predictable manner. Trade facilitation comprises the whole trade chain from exporter to importer, including transportation and payment, with emphasis on the border-crossing and the agencies involved there.

Selected COMESA TF instruments and their benefits COMESA Customs Document Adopted in 1996, replaces a multiplicity of documents that were required in some Member States The COMESA-CD reduces the number of documents required for customs declarations

Yellow Card Third Party motor vehicle insurance with coverage over all the participating Member States. The participating Member States are: Burundi, D R Congo, Djibouti, Eritrea, Ethiopia, Kenya, Malawi, Rwanda, Sudan, Tanzania, Uganda, Zambia and Zimbabwe Benefits: Convenience, less premiums, saves on time

Regional Customs Transit Guarantee (RCTG) This is a system where an importer buys a bond to cover the duty at stake in one country and this one bond covers and is recognised in all the participating countries along the transit route. 12 Member States have ratified the RCTG Agreement, namely: Burundi, Djibouti, DR Congo, Ethiopia, Kenya, Madagascar, Malawi, Rwanda, Sudan, Tanzania, Uganda and Zimbabwe. The implementation of the RCTG is expected to reduce cost of transit trade and transport by between 15%-20%. Rwanda has indicated that in the three years of implementation of the RCTG , $4.3 million has been saved.

Benefits of the RCTG

Regional Payment and Settlement System (REPSS) This is a payment system that is fast, secure and cost effective. Allows use of local currency to pay for imports and foreign currency is required only for settling the net amounts. Involves Central banks and hence credible system Participating Central Banks: Mauritius, Rwanda, Malawi, D R Congo, Kenya, Uganda, Swaziland and Zambia. Others at various stages of participation

Benefits of using REPSS It guarantees prompt payment for exports as well as other transfers. This is because T+0 settlement is possible with the Settlement Bank (Bank of Mauritius) being within the operating times of all other participants; The system eliminates mistrust among traders as there is Central Bank involvement. This in turn increases trade within the region; It reduces foreign funding as the amount to be paid at the end of the day by a participant is on a net basis; It reduces foreign counterparty exposures – participants are able to send payment instructions through REPSS to the Settlement Bank, thus reducing transactions and exposures via correspondent banks; and It reduces collateral requirements as Central Banks are directly involved in the system and trade is mainly amongst members.

Simplified Trade Regime (STR) this is a regime for small scale traders whose consignments are $2000 and less and are subjected to simplified customs document and in some cases simplified certificate of origin provided the goods are on a Common List of Products Benefits: allows the small scale traders to benefit from the preferential trade arrangements under COMESA

Perspectives For maximum benefits from the trade facilitation instruments, it is essential that all Member States in the transit route participate in implementing the trade facilitation instruments; This applies to RCTG, Customs data sharing, REPSS, etc

With many Thanks