Archives For non-tariff barriers

Uganda, Malaba border crossing

Uganda, Malaba border crossing

The New Vision (Uganda) reports on a draft law which will punish countries that fail to implement agreed upon mechanisms to eliminate trade barriers has been submitted at the regional Parliament.

Jose Maciel, the TradeMark East Africa director of trade facilitation, noted that while most of the non-tariff barriers (NTBs), including road blocks and corruption have slightly declined, the proposed law in the East African Legislative Assembly, if enacted, would create the possibility of sanctions against stubborn states that do not enforce the check points. “It is important to give teeth to the system. We need to make it possible to impose sanctions for countries that do not eliminate NTBs,” said Maciel.

He was speaking at a Kenya Ports Authority (KPA) organised meeting with EAC media in Mombasa. TradeMark is a trade facilitating agency operating in the five states of East Africa. Maciel said non-tariff barriers like road blocks, which are easy to eradicate, are some of the biggest impediments to East Africa’s competitiveness.

States are not the only defaulting party to agreed upon positions on eliminating NTBs. P.J. Shah, a Mombasa entrepreneur, for instance notes that while Mombasa began 24-hour operations about three years ago, other agencies like banks and shipping lines are not operating 24 hours. The poor infrastructure such as rail and water systems, whose potential is yet to be optimised, also increase trade costs. Other NTBs include weighbridges and corrupt state enforcement agencies.

Regional trade experts and facilitation agencies such as Trade Mark East Africa agree that NTBs are known, and numerous researches have been done about them and their impact on trade. Although some efforts have been made to eradicate or reduce the salient ones such as road blocks, overall NTBs remain a major trade impediment.

Two thirds of goods are shipped in containers. TradeMark estimates that 20% of annual shipments face NTBs. TradeMark is also targeting to work with regional governments to harmonise 20 standards in a year, amongst the other efforts at making EAC more competitive.

During the Mombasa meeting, it was agreed that because sometimes there seems to be no communication between the different government agencies such as the Kenya Revenue Authority (KRA) and KPA, hinterland states suffer.

There should be a single authority that oversees them all and ensures enforcement. There are about 24 road blocks between Mombasa and Uganda’s border and another 21 in Uganda, four in Burundi and two in Rwanda. There are also 12 weighbridges in Kenya, five in Uganda and two in Rwanda.

“A well run efficient port can help shape economic growth and performance of the economy,” said Antony Hughes, a TradeMark official.

Mombasa handles about 20 million tonnes of cargo, 85% destined for Uganda and other hinterland states. Transit states always suffer the biggest brunt of NTBs and poor flow of information regarding imminent disruptions at the border. This was witnessed during the recent cash bond imposed by KRA that caught Uganda traders unaware, leading to massive clog ups of cargo and huge loss of value.

Comment: It appears that regional bodies such as the EAC are to get extraordinary powers to enforce rules over sovereign states. Would be interesting to learn whether these member states voted for such action, or if it is rather the ideal and persuasion of ‘foreign’ interests.

This year’s World Trade Report ventures beyond tariffs to examine other policy measures that can affect trade. As tariffs have fallen in the years since the birth of the General Agreement on Tariffs and Trade (GATT) in 1948, attention has progressively shifted towards non-tariff measures (NTMs). The range of NTMs is vast, complex, driven by multiple policy motives, and ever-changing. Public policy objectives underlying NTMs have evolved. The drivers of change are many, including greater inter-dependency in a globalizing world, increased social awareness, and growing concerns regarding health, safety, and environmental quality. Many of these factors call for a deepening of integration, wresting attention away from more traditional and shallower forms of cooperation. Trade in services is a part of this development and has come under greater scrutiny, along with the policies that influence services trade.

So what does the report contain? Click here to download the report!

  • Section A of the Report presents an overview of the history of non-tariff measures in the GATT/WTO. This overview discusses how motivations for using NTMs have evolved, complicating this area of trade policy but not changing the core challenge of managing the relationship between public policy and trading opportunities.
  • Section B examines the reasons why governments use NTMs and services measures and the extent to which public policy interventions may also distort international trade. The phenomenon of off-shoring and the cross-effects of services measures on goods trade are also considered. The section analyses choices among alternative policy instruments from a theoretical and empirical perspective. Finally, case studies are presented on the use of NTMs in particular contexts.These include the recent financial crisis, climate change policy and food safety concerns. The case studies consider how far measures adopted may pose a challenge for international trade.
  • Section C of the Report surveys available sources of information on NTMs and services measures and evaluates their relative strengths and weaknesses. It uses this information to establish a number of “stylized facts”, first about NTMs (TBT/SPS measures in particular) and then about services measures.
  • Section D discusses the magnitude and the trade effects of NTMs and services measures in general, before focusing on TBT/SPS measures and domestic regulation in services. It also examines how regulatory harmonization and/or mutual recognition of standards help to reduce the trade-hindering effects of the diversity of TBT and SPS measures and domestic regulation in services.
  • Section E looks at international cooperation on NTMs and services measures. The first part reviews the economic rationale for such cooperation and discusses the efficient design of rules on NTMs in a trade agreement. The second part looks at how cooperation has occurred on TBT/SPS measures and services regulation in the multilateral trading system, and within other international forums and institutions. The third part of the section deals with the legal analysis of the treatment of NTMs in the GATT/WTO dispute system and interpretations of the rules that have emerged in recent international trade disputes. The section concludes with a discussion of outstanding challenges and key policy implications of the Report. Source: World Trade Organisation.
Related articles

Ugandan importers say they intend avoiding using the Port of Mombasa in Kenya in favour of Tanzania’ Dar es Salaam in future, because of unresolved issues with the Kenyan taxman.

Some 600 containers destined for Uganda are being held at the Kenyan port following the introduction of a cash bond tax. The chairman of the Kampala Traders Association announced last week that the association had resolved to suspend using Mombasa in the interim, reports New Vision (Kampala).

In addition, importers say they will take legal action against the Kenya Revenue Authority (KRA) which has issued a directive instructing importers to lodge either a cash bond equivalent to the value of the imported goods or a bank guarantee to the same value. This must be deposited before the goods being imported can be cleared.

The directive has affected not only the 600 containers waiting at the port but imports of motor vehicles and sugar.

Uganda’s trade minister, Amelia Kyambadde said she had been informed by the Uganda business community that the KRA, under notice CUS/L&A/LEG/1 had made a unilateral decision on a requirement for a cash bond or bank guarantee on transit sugar and motor vehicles above 2000cc.

Ugandan authorities say the action by the KRA directive constitutes another non-tariff barrier imposed by Kenyan authorities on its transit cargo and contravenes East African Community Customs Union protocol and decisions reached by the Council of Ministers in March 2012 on removal of non-trade barriers in the community.

“If Kenya needs an instrument to regulate regional trade in sugar and other products, a cash bond is not the instrument to apply,” said Kyambadde. Sources: Ports.co.za / New Vision (Uganda).

It’s quite amazing the number of reports featured in various african media across the continent pushing the ‘free trade’ agenda. The incumbent governments on the other hand are naturally concerned with dwindling tax collections, while at the same time increasing incidents of graft, collusion, and corruption run rampant at the border. While the following article states the obvious, unfortunately, nowhere will you find or read a practical approach which deals with increased ‘automation’ at borders and the consequential re-distribution of ‘bodies’ to other forms of gainful employment. Its jobs that will be on the line. Few governments wish to taunt their electorates – non-essential jobs are a fact of life and are destined to stay if that is what will earn votes and a further term in power. Moreover, there is no question of removing internal borders with the emphasis on costly ‘One-Stop Border’ facilities. To some extent the international donor community won’t mind this as there’s at least some profit and influence in it for them.

Poverty in Sub- Saharan Africa is a man-made phenomenon driven by internal warped policies and international trade systems. The continent cannot purport to seek to grow while it blocks the movement of goods and services through tariff regimes at the same time Tariff and non-tariff barriers contribute to inefficient delivery systems, epileptic cross-border trading and thriving of illicit/contraband goods.

This ultimately harms the local and regional economy. Delays at ports of delivery, different working hours and systems of control across the continent, unnecessary police roadblocks and poor infrastructure condemn countries to prisons of inter-regional and intra-regional trade poverty.

According to the United Nations Economic Commission for Africa, removal of internal trade barriers would lead to US$25 billion per year of intra-regional exports in Africa, an increase by 15,4 percent by 2022. Making African border points crossings more trade efficient would increase intra-regional trade by 22 percent come 2020. Trade barriers in East Africa Community alone increase the cost of doing business by 20 percent to 40 percent.

Such barriers include the number of roadblocks within each country, cross- border charges for trucks and weighing of transit vehicles on several points on highways. Kenya is grappling to reduce the number of its roadblocks from 36 to five and Tanzania from 30 to 15. Sub-Saharan Africa records an average port delay of 12 days compared to seven days in Latin America and less than four days in Europe. Africa is lagging behind!

In West Africa, Ghanaian exports to Nigeria are faced with informal payments and delays as the goods transit across the country borders whether there is proper documentation. In the Great Lakes Region, an exporter is faced with 17 agencies at the border between Rwanda and Democratic Republic of Congo each with a separate monetary charge sheet.

A South African retail chain Shoprite reportedly pays up to US$20 000 a week on permits to sell products in Zambia. Each Shoprite truck is accompanied with 1 600 documents in order to get its export loads across a Southern African Development Community border. Tariff and non-tariff barriers simply thicken the wall that traps Africans in economic poverty.

The new African Union chair should push for urgent steps to lower barriers to trade within Africa. Border control agencies need retraining and border country governments need to integrate their processes; long truck queues waiting to cross border points should not be used as an indicator of efficiency.

If it takes a loaded truck one hour to cover 100 kilometres; a four-hour wait at the border increases the distance to destination to another 400 kilometres. Increased distance impacts on the prices of goods at the retail end hence limiting access to products to majority of Africans. Limited access translates to less freedom of choice — similar to a locked up criminal prisoner.

With modern technology, goods should be declared at point of origin and point of receipt. Border points should simply have scanners to verify the content of containers. Protectionism, tariffs and non-tariff barriers within the continent sustains African market orientation towards former colonisers.

African entrepreneurs are subjected to longer travel schedules due to constant police checks and slow border processes. To fight poverty on the continent, African people would benefit from an African Union Summit that resolves to facilitate efficiency in movement of goods and services. Efficient delivery systems on the continent will tackle challenges of food insecurity, poor health care, conflicts and further promote diversified economies arising from competitive healthy trading amongst and between African nations.

Elimination of tariff and non-tariff barriers to trade will provide an opportunity for African entrepreneurs to adequately take their rightful places as relevant players in the global trade system. It is imperative that African countries re-orient their strategies to promote productivity by reviewing tariffs that hold back entrepreneurs from accessing the continent’s market. This calls for both a competitive spirit and a sense of integrated tariff and process compromise if the continent is to haul its population from poverty. Source: The Herald (Zimbabwe)

On January 10 2012 the Argentine tax authorities passed General Resolution 3252/2012, requiring importers to file an advance import affidavit before the definitive import of any type of goods. The affidavit is analysed by the tax authorities and by any other relevant government agency; only once approval has been granted may the import be carried out  The resolution applies to all types of product definitively imported into the country as from February 1 2012.

Under the resolution, importers must file an affidavit (through the tax authority’s website) before issuing a purchase order or similar document. The authority will inform importers (through its online application) of any news regarding the status of their petition and, if applicable, the reasons for any objections made and the government agencies where importers can remedy those objections. Importers must enter the affidavit number in the authority’s María Information System when the goods enter customs clearance. The customs clearance process will be automatically stopped if this number is not entered.

The tax authority has a 72-hour period (from the date on which the affidavit is filed by the importer) to make any comments. This time period may be extended by up to 10 calendar days in “those cases in which the specific activities of the agency in charge so requests”. Once the above periods have elapsed with no comments being made, the import operation may continue. Otherwise, the comments should be dealt with by the importer with the agency that raised them.

Import operations that already have an open irrevocable letter of credit (or similar document) or that have been prepaid (in both cases dating from before February 1 2012) are exempt from the obligation to obtain an affidavit. However, there are some contradictions in the text of the resolution that may create problems at the time of applying this exemption. The following import operations, among others, are exempt from the obligation to obtain an affidavit:

  • imports made under the courier or sample regimes;
  • imports that relate to turnkey projects (provided that they were approved before February 1 2012); or
  • imports that are sent in different shipments (provided that they were approved before February 1 2012).

At present, the foreign trade sector of Argentina is almost paralysed, with no clear sense of direction. Only time will tell whether the affidavit system starts processing requests relatively smoothly, or if the paralysis will result in an increase in litigation by desperate importers. Source: taken from the article: “Argentina’s foreign trade paralysis continues” – International Law Office.

Assuming that the RSA government favours the drive for increased inter-Africa trade and free movement of goods and conveyances, perhaps its time for transport officials to look beyond the letter of the law and automate their process.

South African truckers have been warned not to travel without their cross-border permits as they could face hefty fines. According to the Cross Border Road Transport Agency (CBRTA), trucks dispatched to the border ahead of a permit being issued could be fined as the permit has to be in the truck at all times. “According to the legislation anyone with the intent of crossing the border must be in the possession of these permits,” said CBRTA CEO Sipho Khumalo. “That means operators cannot dispatch their trucks to the border and then send the permit with a car once it has been issued later to catch up with the truck. That is against the law.” Source: FTW