7.

8 INTRODUCTION TO CUSTOMS

7.8.1. COURSE DESCRIPTION

This Course unit is designed to introduce to the learner the basic knowledge in Customs Management. It
considers the basic principles and concepts underlying Customs operations in Uganda and the East
African Community.

It will explore the legal framework under which customs operate and the common administrative
procedures followed in clearing goods and passengers crossing the border.

7.8.2 COURSE OBJECTIVES

a) Understand the History/Origin of customs
b) Define the structure of customs administration in Uganda
c) Introduce the East African Community Customs Management Framework under which Customs
is administered.
d) Introduce the key processes involved in clearance of passengers and cargo.
e) Show the linkage and interdependence between Customs and Domestic taxes
f) Explore the changing roles of Customs as primarily a facilitator of trade and not collector of
revenue.

7.8.3 SUMMARY OF LEARNING UNITS UNDER THE COURSE

1. Introduction to customs
2. Administrative Provisions
3. Arrival and report of aircraft and vessels
4. Prohibitions and restrictions
5. Entry of Cargo
6. Liability to Duty
7. Examination /Verification and Delivery of Imports
8. Determination of value of imported goods and computation of duty
9. Passenger and baggage clearance
10. Transit and transhipment procedures
11. Smuggling and Customs Control of goods
12. Provisions relating to ware housing of goods
13. Linkage between customs and domestic taxes
14. Customs as a facilitator of trade
15. International Agreements and Economic Block
16. Other Considerations
DETAILED COURSE
UNIT 1: INTRODUCTION TO CUSTOMS
Topics to be covered
a) Overview of Customs administration in Uganda, structure of the Customs Department
b) The East African Customs Union and Common Market
c) Customs law and practice, EACCMA, Regulations and other relevant legislation

Overview of Customs administration in Uganda, structure of the department

Customs is a general term used to refer to the process of clearing goods and people entering leaving or
transiting through the country. The process of clearing goods involves verification, valuation, tariff
classification for purposes of ascertaining the correct taxes and the quality of goods being entered into the
Country. The clearance of people is managed by the immigration Department under the Ministry of
internal Affairs.

The Customs Department of the Uganda Revenue Authority (URA) is charged with administering the
East African Customs Management act 2004 (EAC-CMA) and related laws and regulations.

The Customs Department was established to be a department of the Government within the Ministry of
Finance headed by the Commissioner of Customs. The Commissioner of Customs is responsible for the
management/foreseeing the operations of Customs and specifically the collection of taxes and trade
facilitation.

Over the years, Customs administrations with other stake holders in global trade have made great efforts
to simplify and harmonise various Customs procedures by introduction of information technology.

The Customs Department has automated most of the manual systems to increase speed in clearance time
for both international and national trade. In 1996, URA introduced the Wide Area Network on all customs
stations at Kampala, Busia, Malaba, Jinja, Katuna, Mbarara and Arua customs. ASYCUDA Direct trader
input has also been implemented in the Internal Container Depots.

The major roles of the Customs department are;

► Assessing and collecting revenues from imports, exports and other dues in accordance with the
EAC-CMA, 2004
► Supervising and controlling the entrance and clearance of vehicles, vessels and aircraft engaged
in international trade and the movement of goods and people across Uganda.
► Supervising and controlling all the import and export cargo or stored at the various terminals
including Internal container depots
► Implementing Government objectives and commitments relating to international and regional
treaties on trade and other related arrangements
► Generating and providing timely and quality statistics to facilitate both organisational and
national planning.
► Playing a role in facilitating trade in line with the WTO Trade Facilitation Agreement

Laws administered by Uganda Customs:

► The East African Community Customs Management Act, EAC-CMA, 2004 as amended
 ► The East African Community Customs Regulations,2010
► Protocol establishing the East African Community (Common External Tariff (CET), Elimination
of Internal tariff, Rules of Origin)
► International Conventions; Regional and Worldwide e.g. the WTO agreements.
► The Value Added Tax Act as amended
► The Income Tax Act as amended
► The Finance Act as amended
Other laws for which Customs performs agency work like the Narcotic Drugs & Phychotropic Substance
Act.

Structure of the Tax framework in Uganda;

EXECUTIVE
President approves Parliament’s Bills

PARLIAMENT MINISTRY OF FINANCE PLANNING &

ECONOMIC DEVELOPMENT
 Enacts laws that guide
URA operations  Represents the executive arm in the tax
 Approves policy administration.
 Oversees the operations of the URA.
 Drafts government tax policies.
 Funds the operations of URA.
 Ensures proper national budgeting,
utilisation and accountability.

URA BOARD ADMINISTRATION

 Administers and gives effect to the laws
set out in the First Schedule of the URA
Act Cap 196.
Customs  Advises the Minister on revenue Domestic Taxes
Deals with: implications, tax administration and Deals with:
 Import duty. aspects of policy changes relating to all • VAT.
 Excise Duty the taxes. • Income Tax.
 VAT on  Performs such other functions in relation • Rental Tax.
imports. to revenue as the Minister may direct. • Excise Duty.
 Withholding • Gaming Tax.
taxon imports.
 Trade
KEY TERMINOLOGIES / INTERPRETATIONS
Term Description
Customs duty “means an amount of tax based on the customs tariffs which is levied on, collected from or
paid for goods entering or leaving the customs territory of a country.

The customs means the value of goods for the purpose of levying ad valorem duties of customs on
value of imported goods.
imported
goods”

Importation means to bring goods from a foreign country into a partner state for personal use or
commercial purposes.

Exportation refers to goods that are taken out of or goods that are caused to be taken out of a partner
state for whatever reason.

Custom area means that area licenced by a competent authority for purposes of specific customs
operations

Customs duties means import or export duties and other equivalent effect levied on goods by reason of their
importation or respectively on the basis of legislation in the partner states and includes
duties or taxes but does not include internal duties and taxes such as sales, turnover or
consumption taxes, imposed otherwise than in respect of the importation or exportation of
goods

Customs means the geographical area of the republic of Uganda.

territory

Duty means any duty leviable under any customs law and includes surtax

Goods include all wares, articles, merchandise, animals, matter, baggage, stores, material, currency
and includes postal items other than personal correspondence and where such goods are sold
under auspices of this protocol, the proceeds of sale

Person means a natural or legal person

Remission means the waiver of duty or refrainment from exacting duty

Stores means goods for use in aircraft, vessels and trains engaged international transport for
consumption by passenger and crew and goods for sale on board.

Objective of levying Customs duties

► To generate revenue for the government by levying duties or charges on imports
► It is a policy implementation instrument in the sense that it can encourage or discourage the
importation of specified goods through various policy measures.

The East African Community Customs Union

Customs Union
The East African Community (EAC) Customs Union is the regional intergovernmental Organisation of
the Republic of Uganda, Kenya, Rwanda, Burundi, Tanzania and South Sudan with headquarters located
in Arusha Tanzania. The Democratic Republic of Congo has expressed interest in joining the EAC.

The main Organs of the EAC are the Heads of Partner states, Council of ministers, coordination
committees, Sectoral Committees, East African Court of Justice, East African Legislative Assembly and
the secretariat.

Stages of regional integration

Stage Level of completion

First stage Preferential Trade Area

(PTA)

Second stage Free Trade Area (FTA)

Third stage Customs Union (CU)

Fourth stage Common market

Fifth Stage Monetary Union

Sixth Stage Political Union

The EAC has attained and implemented a single customs territory under a Customs Union Protocol. The
EAC also achieved the Common Market under a Common Market Protocol however this has not yet fully
been implemented by the Partner states.
Main features of a Customs Union

► Has common set of import duty rates (common external tariffs) on goods imported from outside
the member states
► Duty free and quota free movement of tradable goods within the region
► Adoption of common safety measures for regulating the importation of goods from third parties
e.g. Food standards and other sanitary requirements
► Common set of customs rules and procedures including documentation
► Common coding and description of tradable goods (common tariff nomenclature)
► Common valuation methods of tradable goods for tax purposes
► A structure for collective administration of the customs union
► Common trade policy that guides the trading relationship with third parties or trading blocs
outside the customs Unions

The EAC has a single law called the East African Community Customs Management Act (EAC-CMA).
The East African Customs Management act (EAC-CMA),2004 as revised was adopted as a common legal
document under which customs in the partner states is administered.
The Customs Administration collects the following taxes upon importation/exportation of goods:
► Import duty,
► Excise Duty
 ► Value Added Tax (VAT),
► Withholding tax,
► Infrastructure levy
► Export duty

Some imports may qualify for duty remission, duty exemption, VAT deferment, duty deferment
(Warehousing), inward/outward processing relief depending on the regime being applied at importation.

In the EAC, a Common External Tariff (CET) is applied on goods entering the community, while the
movement of trade goods originating within the partner state is free of duty. Where goods are imported
and duties are paid in one partner state, and then exported to the territory of any partner state, any
repayment of internal taxation shall not exceed the internal taxation imposed on them whether directly or
indirectly.

Classification of goods is based on the Nomenclature established under the international convention on
the harmonised commodity description and coding system approved by the Customs Cooperation Council
(CCC) in June 1983.The CCC is the current World customs organisation.

The Nomenclature is the system of naming and coding commodities for purposes of classification of
goods

A tariff is a tax imposed on imports and exports. The tariff is imposed in accordance with the
classification of goods in the Nomenclature.

Community Tariff treatment

According to Section 111(1) of the EAC-CMA 2004, goods originating from the partner states shall be
accorded community treatment in accordance with the EAC Customs Union (rules of origin) rules, 2015.

Under section 111(2), Customs require production of certificate of origin and other documents as proof of
origin.

The Common External Tariff (CET), three band structure (currently under review)
Import type rate
Raw material and Capital goods 0
Semi processed and intermediate goods 10%
Finished products 25%
Goods originating from the partner states nil

Duty rates for sensitive products

 60% for Milk of chapter 0401 and chapter 0402
 70% or $ 200 whichever is higher for rice of chapter 1006.10.00
 100% or $200 whichever is higher for Cane sugar of chapter 1701.13.90
 35% for Tobacco of chapter 2403.10.00
 45% or $0.3/kg whichever is higher Worn clothing and other worn articles of chapter 6309.00.00
Preferential Tariff treatment
Under section 112 of the EAC-CMA, preferential tariff shall be applied to goods Imported under the
COMESA and SADC arrangements in the partner states as prescribed in the partner states legislation.
Preferential rates of import duty are lower than the rates of import duty in the CET and these apply to
goods originating from the members of COMESA and SADC.

Effective 1 July 2016 and under the reciprocal benefits framework, Uganda’s Finance Act 2016
empowered the Uganda Revenue Authority (the URA) to start charging import duty on specified imports
from Common Market on East and South Africa (COMESA) countries that previously had enjoyed an
import duty exemption since 1 July 2014.

The affected imports include:

• Lubricants
• Un-denatured alcohol
• Steel and steel products
• Electronics including ridges, washing machines, radios, DVD players and Television Sets
• Paper and paper products

Preferential rates of duty may also be granted under other agreements that may be approved by the EAC
council e.g. the Africa Continental Free Trade Area to be implemented effective 1 January 2021.

Advantages of the East African Customs Union.

► New business opportunities
► Larger market due to a wider population of the East African Member states
► Communication network being integrated and coordinated providing an environment in which
institutions enjoy new freedom
► Flow of new ideas, innovations and new practices
► Achieving a comparative advantage through specialisation by different member states. Member
states will concentrate on what they do best
► Co-operation among member states and intense but friendly competition improving inefficiency
and effectiveness

Challenges of the Customs Union

► Economic disparity among the partner states for example, it is believed that Kenya has a
competitive edge above the rest of the partner states especially with industrialisation.
► The growing importation and dealing in narcotic drugs
Failure to harmonise other tax laws that have a direct relationship with the customs union is another big
challenge like harmonisation of the tax appeals legislation, Excise, VAT and income tax act.
Customs law and practice, EAC-CMA, regulations and other relevant legislation

Section 3 and 4 of the EAC-CMA provide guidelines for the directorate of customs. The directorate of
customs as established by the council under the treaty is responsible for initiation of policies on customs
and related trade matters in the community and coordination of such policies in the partner states. The
functions of the directorate in relation to management and administration of customs laws include;

► Coordinate and monitor

► Administration of the common external tariff
► Enforcement of the custom law of the community
► Trade facilitation as provided for in Article 6 of the Protocol for the establishment of East African
Customs Union l
► Administration of the rules of origin
► Compilation and dissemination of trade statistics
► Application and interfacing of Information technology in Customs administration
► Quality control in customs operations and enforcement of compliance
► Training in Customs related matter