A SIMPLIFIED PACKAGE FOR CUSTOMS INTERVIEW

HAMISI YANGE
 ABSTRACT

A Simplified Package for Customs Interview is an essential handbook that

aims to provide readers with a clear understanding of customs and its
associated issues. This handbook serves as a valuable resource for individuals
seeking to navigate the complex world of customs regulations and trade
policies. By equipping readers with the knowledge and understanding
necessary to navigate the customs landscape, this book empowers individuals
to make informed decisions and assist them with a true ability of doing and
passing Customs related Job Interviews.

The author of this handbook has an article known as "Common Questions

and Answers for Job Interviews," which is an essential resource for job
seekers preparing for oral interviews.
 TABLE OF CONTENTS

CHAPTER 1

INTRODUCTION TO CUSTOMS ...................................................................................... 1

CHAPTER 2

COMMERCIAL INCOTERMS ............................................................................................ 5

CHAPTER 3

COMPUTATION OF CUSTOMS DUTY ......................................................................... 10

CHAPTER 4

CUSTOMS TARIFF CLASSIFICATION ......................................................................... 16

CHAPTER 5

CUSTOMS VALUATION OF IMPORTED/EXPORTED GOODS ........................... 29

CHAPTER 6

IMPORT AND EXPORT PROCEDURES ....................................................................... 41

 CHAPTER 1

INTRODUCTION TO CUSTOMS

CUSTOMS

These are duties and taxes that are imposed by central government on imports of
goods in the country and export of goods from the country. Usually, they are
collected from the importers or exporters of the goods.

LAWS GOVERNING CUSTOMS IN TANZANIA

Depending on the specific subject matter, Customs in Tanzania is governed by the

following Laws: -

(a) East African Community Customs Management Act, 2004

(b) East African Community Customs Management Regulation, 2010
(c) East African Community Customs Management Rules of Origin
(d) Excise Management and Tariff Act
(e) Customs tariff Act, 2012
(f) Port and Departure Service Act
(g) Value Added Tax Act 2015
(h) Tax Revenue Appeal Act 2000
(i) Airport Service Act
(j) Road and fuel levy Act

CUSTOMS ADMINISTRATION IN TANZANIA

Customs are administered by the Customs and Excise Department which is

within the Tanzania Revenue Authority (TRA). This department performs both
Revenue and non- revenue functions, including, but not limited to:
i) Collection of taxes and revenue on behalf of the Government
ii) Facilitation of international Trade
iii) Enforcement of import and export restrictions and prohibition
iv) Administration of external tariff and rules of origin
v) Prevention of smuggling and promotion of voluntary tax compliance

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 vi) Compilation, production and dissemination of trade statistics

TYPES OF DUTIES AND TAXES ADMINISTERED BY CUSTOMS AND EXCISE

DEPARTMENT

The Customs and Excise Department administers the following types of customs
duties:

1. Import duty

This is the duty imposed on the customs value usually CIF value of the goods
imported. The Applicable rates are: -

0% - For capital goods eg. Machinery

10% - For semi-finished goods Eg Spare parts

25% - For finished goods

2. Excise duty on import

This is levied on certain consumer goods on importation. The traditionally

excisable goods are goods whose consumption is seen by the society as immoral
i.e. beer and cigarettes, and goods whose consumption creates negative
externalities to the society i.e. petroleum. In Tanzania apart from the traditional
excisable goods soft drinks and motor vehicles are excisable for revenue generation
purposes.

It is charged in both specific and ad valorem rates.

- Items charged under specific rates include:

Wine, spirits, beer, soft drinks, mineral water, fruit juices, Recorded DVD, VCD,
CD and audio tapes, cigarettes, tobacco, petroleum products and Natural gas.

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- Items charged under ad-valorem rates include:

Money transfer services, electronic communication services, pay to view television

services, imported furniture, motor vehicles, plastic bags, specified aircrafts,
firearms, specified cases, cosmetics and medicaments.

Ad-valorem rates are: 0%, 5%, 10%, 17%, 15%, 20%, 25% ,30% and 50%.

3. VAT on import

This is a consumption tax charged on taxable goods and services of any economic
activity whenever they are imported except those exempted.

Exemption to VAT on Importation

The Commissioner General may, upon application by an applicant in the

prescribed form, exempt value added tax on-

(a) importation of raw materials to be used solely in the manufacture of long-

lasting mosquito nets.
(b) importation by or supply to a Government entity of goods or services to be used
solely for implementation of a project funded by-
(i) the Government.
(ii) a concessional loan, non-concessional loan or grant through an
agreement between the Government of the United Republic and
another government, donor or lender of concessional loan or non-
concessional loan.
(iii) a grant agreement duly approved by the Minister in accordance with
the provisions of the Government Loans, Grants and Guarantees Act
entered between local government authority and a donor: Provided
that, such agreement provides for value added tax exemption on
goods or services.
(c) importation or supply of goods or services for the relief of natural calamity or
disaster.
(d) importation by or supply of goods or services to an entity having an agreement
with the Government of the United Republic for purpose of operating or

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 executing a strategic project: Provided that, such agreement provides for value
added tax exemption on goods or services;
(e) an importation by or supply of goods or services to a non-governmental
organization having an agreement with the Government of the United Republic
solely for project implemented by the respective non-governmental
organization: Provided that, such agreement provides for value added tax
exemption on goods or services.

4. Railway and Development levy

This is imposed on all imports for the purpose of promoting railway transportation.
It is levied at 1.5%.

5. Fuel levy

This is imposed on importation of petroleum and diesel products at a rate of TZS

413 per litre.

6. Customs and processing fees

This is the fee imposed on all items imported at 0.6% of FOB Price.

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 CHAPTER 2

COMMERCIAL INCOTERMS

INCOTERMS

These are set of commercial/trade rules established by the International Chamber

of Commerce (“ICC”) that are used in international sale contracts.

CLASSIFICATION OF INCOTERMS

The Incoterms are divided into four principal categories such as: E, F, C and D,
as elaborated below.

1. Category E (Departure)

This contains only one trade term, which is EXW (Ex Works).

EXW is an Incoterm that specifies that the seller's only obligation is to make the
goods available at their premises or another agreed-upon location. The buyer is
responsible for all costs and risks associated with the transportation of the goods
from the seller's location to the final destination.

2. Category F (Main Carriage Unpaid)

This contains three trade terms:

i) FCA (Free Carrier)

FCA is an Incoterm that specifies that the seller is responsible for delivering the
goods to a carrier or nominated person at a specified place, while the buyer is
responsible for arranging and paying for the transportation of the goods to the
final destination.

ii) FAS (Free Alongside Ship)

FAS is an Incoterm that specifies that the seller is responsible for delivering the
goods alongside the vessel nominated by the buyer at a specified port of
shipment. The buyer is responsible for arranging and paying for the main

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 carriage of the goods, as well as any costs associated with unloading the goods
at the port of destination.

iii) FOB (Free on Board)

FOB is an Incoterm that specifies that the seller is responsible for delivering the
goods on board the vessel nominated by the buyer at a specified port of
shipment. The buyer is responsible for arranging and paying for the main
carriage of the goods, as well as any costs associated with unloading the goods
at the port of destination.

3. Category C (Main Carriage Paid)

This contains four trade terms:

i) CPT (Carriage paid to)

CPT is an Incoterm that specifies that the seller is responsible for delivering the
goods to the carrier or another person nominated by the seller at a specified
place and paying the freight charges for the main carriage of the goods. The
buyer is responsible for arranging and paying for any additional transportation
or insurance required to move the goods from the port or terminal to the final
destination.

ii) CIP (Carriage and Insurance paid to)

CIP is an Incoterm that specifies that the seller is responsible for delivering the
goods to the carrier or another person nominated by the seller at a specified
place and paying the freight charges for the main carriage of the goods. The
seller is also responsible for obtaining insurance for the goods during transit.
The buyer is responsible for arranging and paying for any additional
transportation required to move the goods from the port or terminal to the final
destination.

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 iii) CFR (Cost and Freight)

CFR is an Incoterm that specifies that the seller is responsible for delivering the
goods on board the vessel at the port of shipment and for paying the freight
charges for the main carriage of the goods. The buyer is responsible for
arranging and paying for any additional transportation or insurance required
to move the goods from the port of destination to the final destination.

iv) CIF (Cost, Insurance and Freight)

CIF is an Incoterm that specifies that the seller is responsible for delivering the
goods on board the vessel at the port of shipment and for paying the freight
charges for the main carriage of the goods. The seller is also responsible for
obtaining insurance for the goods during transit. The buyer is responsible for
arranging and paying for any additional transportation required to move the
goods from the port of destination to the final destination.

4. Category D (Arrival)

This contains three trade terms:

i) DAP (Delivered at Place)

DAP is an Incoterm that specifies that the seller is responsible for delivering the
goods at a specified place and paying the freight charges for the main carriage
of the goods. The buyer is responsible for arranging and paying for any
additional transportation or insurance required to move the goods from the place
of delivery to their final destination.

ii) DPU (Delivered at Place Unloaded)

DPU is an Incoterm that specifies that the seller is responsible for delivering the
goods at a specified place, unloading them from the delivering vehicle and paying
the freight charges for the main carriage of the goods. The buyer is responsible
for arranging and paying for any additional transportation or insurance required
to move the goods from the place of delivery to their final destination.

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 iii) DDP (Delivered Duty Paid)

DDP is an Incoterm that specifies that the seller is responsible for delivering the
goods at a specified place and paying all the costs associated with the delivery,
including any import duties or taxes. The buyer is responsible for any additional
costs or risks associated with the goods from that point on, including any further
transportation or storage costs.

THE DESCRIPTION OF INCOTERMS

GROUP INCOTERM ABBREVIATION MODE OF

TRANSPORTATION

E Ex Work EXW Land, Sea, Air, or a

mixture of them

F Free Carrier FCA Land, Sea, Air, or a

mixture of them

Free Alongside Ship FAS Sea and Inland

waterway

Free on Board FOB Sea and Inland

waterway

C Carriage paid to CPT Land, Sea, Air, or a

mixture of them

Carriage and Insurance CIP Land, Sea, Air, or a

paid to mixture of them

Cost and Freight CFR Sea and Inland

waterway

Cost, Insurance and CIF Sea and Inland

Freight waterway

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D Delivered at Place DAP Land, Sea, Air, or a
mixture of them
Delivered at Place DPU Land, Sea, Air, or a
Unloaded mixture of them
Delivered Duty Paid DDP Land, Sea, Air, or a
mixture of them

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 CHAPTER 3

COMPUTATION OF CUSTOMS DUTY

INTRODUCTION

Customs duty is charged either at Specific basis (according to the physical

measurement) or Ad valorem (according to the value of the goods). Each type of
Customs duty has its formula of computation. Consider below.

1. IMPORT DUTY

Import duty is computed using the following formula

Import duty = CIF Value X Applicable Import Duty Rate %

Consider the Example below

Let's say you have imported a shipment of goods that has a CIF value of $10,000,
and the applicable import duty rate for these goods is 5% (By Assuming). To
calculate the import duty for this shipment, you would use the formula as follows:

Import duty = $10,000 X 5%

= $500

Therefore, the import duty for this shipment would be $500.

Note:

One may further ask you to change the above $ into Tanzanian Shillings given that
$1 = 2300 Tsh

To change $500=

= 500 x 2300

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 = 1,150,000/=

Therefore, $500 (Import duty) is equivalent to 1,150,000/= Tanzanian Shillings.

Consider the 2nd Example below

Let's say you have imported a shipment of goods with the following values:

Cost of goods: $8,000

Insurance cost: $500

Freight cost: $1,000

Applicable import duty rate: 10% (By Assuming)

To calculate the CIF value for this shipment, you would add up the cost of goods,
insurance cost, and freight cost as follows:

CIF value = Cost of goods + Insurance cost + Freight cost

= $8,000 + $500 + $1,000

= $9,500

Now, to calculate the import duty for this shipment, you would use the
formula as follows:

Import duty = CIF Value X Applicable Import Duty Rate %

= $9,500 X 10%

= $950

Therefore, the import duty for this shipment would be $950.

Note:

One may further ask you to change the above $ into Tanzanian Shillings given that
$1 = 2300 Tsh

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To change $950=

= 950 x 2300

=2, 185,000/=

Therefore, $950 (Import duty) is equivalent to 2, 185,000/= Tanzanian Shillings

2. EXCISE DUTY

Excise duty is computed using the following formula

Excise duty = CIF Value + Import Duty X Applicable Excise Duty Rate %

Consider the Example below

Suppose Mr. X has imported goods with a CIF value of $10,000 and an import duty
rate of 8%. The applicable excise duty rate is 10%.

To calculate the excise duty, we first need to determine the amount of import duty:

Import duty = CIF value x Import duty rate

= $10,000 x 8%

= $800

Next, we can calculate the excise duty:

Excise duty = CIF value + Import duty x Applicable excise duty rate %

= $10,000 + $800 x 10%

= $10,000 + $80

= $10,080

Therefore, the excise duty on these imported goods is $10,080.

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Note:

One may further ask you to change the above $ into Tanzanian Shillings given that
$1 = 2300 Tsh

To change $10,080=

= 10,080 x 2300

=23,184,000/=

Therefore, $10,080 (Excise duty) is equivalent to 23,184,000/= Tanzanian

Shillings.

3. RAILWAY AND DEVELOPMENT LEVY

Railway and Development Levy is computed using the following formula

Railway and Development Levy = CIF Value X Applicable rate (1.5%)

Consider the Example below

Let's say you're importing goods with a CIF (Cost, Insurance, and Freight) value of
$10,000. To calculate the Railway and Development Levy

Railway and Development Levy = CIF Value x Applicable Rate (1.5%)

= $10,000 x 0.015

= $150

So, in this example, the Railway and Development Levy would be $150.

Note:

One may further ask you to change the above $ into Tanzanian Shillings given that
$1 = 2300 Tsh

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To change $150=

= 150 x 2300
=345,000/=

Therefore, $10,080 (Railway and Development Levy) is equivalent to 345,000/=

Tanzanian Shillings.

4. VAT ON IMPORT

VAT on import is computed using the following formula

VAT on Import = CIF Value + Import Duty + Excise duty + Railway and
Development Levy x Applicable VAT Rate %

Consider the Example below

Assume Mr. x has imported an article with the CIF value of $10,000. The import
duty on this product is 5%, the excise duty is 8%, and the railway and development
levy is $500. The applicable VAT rate is 10%.

To calculate the VAT on import using the formula you provided, we can substitute
the given values into the formula:

VAT on Import = CIF Value + Import Duty + Excise duty + Railway and
Development Levy x Applicable VAT Rate %

Calculating the individual components of the formula:

Import Duty = $10,000 x 5% = $500

Excise Duty = $10,000 x 8% = $800

Railway and Development Levy = $500

Now we can substitute these values back into the original formula:

VAT on Import = $10,000 + $500 + $800 + $500 x 10%

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VAT on Import = $10,000 + $500 + $800 + $50

VAT on Import = $11,350

Therefore, the VAT on import for this example would be $11,350.

Note:

One may further ask you to change the above $ into Tanzanian Shillings given that
$1 = 2300 Tsh

To change $11,350 =

= 11,350 x 2300

= 26,105,000/=

Therefore, $11,350 (VAT Value on import) is equivalent to 26,105,000/= Tanzanian

Shillings.

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 CHAPTER 4

CUSTOMS TARIFF CLASSIFICATION

INTRODUCTION

Tariff classification is the process of assigning a specific code or number to goods

that are being imported or exported. The code which is used in classification of
goods is known as a Harmonised Commodity Description and Coding System
(HS), which is an internationally recognized system for the classification of goods.

IMPORTANT TARIFF TERMS

• International Trade

The term International trade refers to an exchange of goods between two or more
countries.

• The Harmonized System

The harmonized system or HS is a goods nomenclature that is developed and

maintained by the World Customs Organization (WCO), and is governed by an
international convention. It is a standardized system of names and numbers used
to classify goods in international trade. It is developed and maintained by the World
Customs Organization (WCO).

• Goods Nomenclature

Goods Nomenclature refers to a systematic naming, or enumerating of all goods

found in international trade along with international rules and interpretations.

• Customs Tariff Nomenclature

Customs Tariff Nomenclature refers to a systematic classification of goods entering

the international trade along with world rules and interpretations for national
interests together with rates of duties.

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• Commodity Classification

The term commodity classification means, a process of arriving at a particular

heading or sub heading of a commodity entering the international trade in
accordance with the National customs tariffs. It entails the process of finding the
specific description of goods in harmonized system customs nomenclature.

Effects of correctly classifying goods; it ensures that you:

• pay the correct amount of duty and VAT

• receive any export refund due on some agricultural goods, provided all other
conditions are satisfied
• contribute to the accuracy of import and export trade statistics and
• know if you need an import or export permit.

Effects of poorly classifying goods:

• You have to pay any arrears plus interest, of duties and VAT which have
occurred as a result of incorrect classification of goods.
• Your goods may be delayed and/or seized.

Note:

From the definitions above, we can generate the key differences between
Harmonized System and customs tariff nomenclature.

Harmonized System Customs tariff nomenclature

1. It has 3 columns It has 5 columns

2. It has no rates It has rates

3. It operates worldwide It operates region wise

4. It is coding up 6 digits Codes extend beyond 6 digits

5. It has no additional notes It has some additional notes

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IMPORTANCE OF CLASSIFICATION

Tariff classification is a very important process because it enables governments:

• To levy Customs duty and taxes on imported goods

• To provide reliable statistics on international trade
• To monitor trade in controlled goods e.g. Narcotics, ozone layer depleting
chemicals, both endangered flora and fauna and so on
• Determine the origin of goods in international trade, (Due to change of tariff
headings)

THE USEFULNESS/ USES OF THE HARMONIZED SYSTEM NOMENCLATURE

The Harmonized system (HS) has the following usefulness:

• As a basis for customs tariffs

• As a basis for the collection of international trade statistics

• As a basis for rules of origin

• As a basis for the collection of internal taxes

• As a basis for trade negotiations (e.g. the WTO schedules of tariff

concessions)

• As a basis for transport tariffs and statistics,

• As a basis for the monitoring of controlled goods (eg wastes, narcotics,

chemical weapons, ozone layer depleting substances, endangered
species.) and

• As a vital element of core customs processes related to customs

controls; customs clearance procedures including risk assessment;
information technology and compliance.

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USERS OF THE HARMONISED SYSTEM NOMENCLATURE

The Harmonized system nomenclature is useful to the following stakeholders:

• Customs and Excise Department

• Importers/Exporters
• Manufacturers
• Bankers
• Chambers of commerce
• Trade statisticians

EAC-COMMON EXTERNAL TARIFF

The East African Community (EAC) established the Common External Tariff (CET)
on imports from the rest of the world (ROW) which is categorized in three tariff
bands, that is:

• 0% tariff rate charged on imported raw materials

• 10% tariff rate charged on imported intermediate goods

• 25% tariff rate charged on imported finished goods

Note:

There is fourth tariff band which has some 58 tariff lines of sensitive products such
as those charged at the rate higher than 25%

Usually this tariff band is marked by SI in the column of tariffs in the first
schedule of the Tariff book. These goods include;

i) Maize – 50%

ii) Milk – 60%

iii) Wheat grain – 35%

iv) Sugar – 100% or 200$/MT whichever is higher

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 v) Worn Clothing - 35% or 0.20$/kg whichever is higher

STRUCTURE OF HARMONIZED SYSTEM CUSTOMS TARIFF

A comprehensive harmonized system nomenclature provides a legal and logical

structure which has: -

• 99 chapters
• 21 sections
• 1,244 headings
• 5212 subheadings

Out of 99 chapters mentioned above;

• 96 chapters are in use

• Chapters 77, 98 and 99 are reserved for future use
- Chapter 77 is reserved for internationally possible future use;
- Chapters 98 and 99 are reserved for special use by any contracting nation.
For example, Kenya uses chapter 99 for communication services, while
Canada uses one of the headings in Chapter 98 for goods declared by
returning residents.

Therefore, apart from the description above, the structure of the harmonized
system Customs Tariffs is made of:

i) Vertical Arrangement of goods

ii) Structural Arrangement of goods

VERTICAL ARRANGEMENT OF GOODS

The Vertical Arrangement of goods under the harmonized system Customs Tariffs
is divided into Sections, Chapters, Headings and Subheadings as elaborated below.

a) Sections

Sections are the first distinction of grouping in the Harmonised Commodity

Description and Coding System (HS) covering a broad range of related goods by

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common names in the titles of sections and being identified by Capital Roman
numbers.

Example:

• Section I: Live animals, animal products

• Section V: Mineral products
b) Chapters

Chapters are the next level of subdivision (from sections) in the Harmonised
Commodity Description and Coding System (HS) covering a narrow range of related
goods by common names in the title of chapters. Chapters are always written by
using Arabic numerals with two digits.

Example:

• Chapter 01: live animals,

• Chapter 06: live tree and other plants;
• Chapter 10: cereals
c) Headings

Headings are subdivision of chapters; they cover a specific group (family) of related
goods by specific descriptions (names) of the goods covered therein.

Each heading is identified by 4-digit code like 03.07; whereby the first two digits
(03) indicate the chapter number and last two digits (07) indicate the position of
that heading within that chapter. Thus, heading number 03.07 is the seventh
heading in chapter

d) Subheadings

Subheading is a subdivision of a heading which is represented by dash (-).

Generally speaking, please take note that dashes under subheadings are
structured as follows: -

• A one dash (-) is a subdivision of the heading

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 • A two dash (--) is a subdivision of the one dash within the same heading.

• A three dash (---) is a subdivision of the two dash within the same heading

• A four dash (----) is a subdivision of the three dash within the same heading

STRUCTURAL ARRANGEMENT OF GOODS

This structure is based on nature, materials, functions, degree of manufacture

(processing) and other miscellaneous criteria of the goods. This include:

a) Arrangement by Nature

Live animals, animal products………………. section I

Vegetable products…………section II

Minerals …...section V

b) Arrangement by related materials

Plastics/ Rubber and articles thereof ------ section VII

Wood and articles thereof ------ section IX

Textile and articles thereof ----- section XI

c) Arrangement by related functions

Machinery ------ section XVI

Transport equipment ----- section XVII

Arms and ammunitions ---- section XIX

d) Arrangement by degree of manufacture

Prepared edible animal or vegetable fats and oils ---- section III

Prepared food stuffs ----- section IV

Pulp of wood, papers and articles thereof - --- section X

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GENERAL INTERPRETATIVE RULES (GIR) OF THE HARMONIZED SYSTEM

There are six of these rules, known as the general rules for the interpretation (GIR),
which are applied in hierarchical fashion i.e rule 1 takes precedence over rule 2,
rule 2 over rule 3, etc.

Rule 1

The titles of sections, chapters and sub-chapters are provided for ease of
reference only; for legal purposes, classification shall be determined according
to the terms of the headings and any relative section or chapter notes and
provided such headings or notes do not otherwise require, according to the
following provisions.

Explanation of rule 1

Rule 1 of the General Interpretative Rules (GIR) of the Harmonized System states
that the titles of sections, chapters, and sub-chapters are there only for
convenience and ease of reference. For legal purposes, the classification of a
product should be determined based on the terms of the headings and any section
or chapter notes related to that product.

For example, let's say you want to import a traditional African drum into your
country. The Harmonized System has a specific code (92.09) for musical
instruments, but it also has sub-headings for different types of musical
instruments. You would need to determine which sub-heading applies to your
drum based on the terms of the heading and any relevant chapter or section notes.
Then you can determine the applicable tariff rate and any other regulations that
may apply to that specific sub-heading.

Rule 2
(a) Any reference in a heading to an article shall be taken to include a
reference to that article incomplete or unfinished, provided that, as
presented, the incomplete or unfinished article has the essential
character of the complete or finished article. it shall also be taken to
include a reference to that article complete or finished (or falling to be

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 classified as complete or finished by virtue of this rule), presented
unassembled or disassembled.

(b) Any reference in a heading to a material or substance shall be taken to

include a reference to mixtures or combinations of that material or
substance with other materials or substances, any reference to goods
of a given material or substance shall be taken to include a reference to
goods consisting wholly or partly of such material or substance. The
classification of goods consisting of more than one material or substance
shall be according to the principles of rule 3.

Explanation of rule 2 (a & b)

Rule 2(a) of the General Interpretative Rules of the Harmonized System states that
if a heading describes a specific article, it includes both the complete or finished
article as well as any incomplete or unfinished versions of that article. This is true
as long as the incomplete or unfinished article has the essential character of the
complete or finished article.

Rule 2(b) of the General Interpretative Rules of the Harmonized System states that
if a heading refers to a specific material or substance, it includes mixtures or
combinations of that material or substance with other materials or substances.
Additionally, if a heading refers to goods made from a particular material or
substance, it includes goods made wholly or partially from that material or
substance.

Rule 3

When by application of Rule 2 (b) or for any other reason, goods are,
prima facie, classifiable under two or more headings, classification shall
be effected as follows:
(a) The heading which provides the most specific description shall
be preferred to headings providing a more general description.
However, when two or more headings each refer to part only of

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 the materials or substances contained in mixed or composite
goods or to part only of the items in a set put up for retail sale,
those headings are to be regarded as equally specific in relation
to those goods, even if one of them gives a more complete or
precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or
made up of different components, and goods put up in sets for
retail sale, which cannot be classified by reference to 3 (a), shall
be classified as if they consisted of the material or component
which gives them their essential character, insofar as this
criterion is applicable.
(c) (When goods cannot be classified by reference to 3 (a) or 3 (b),
they shall be classified under the heading which occurs last in
numerical order among those which equally merit
consideration.

Explanation of rule 3

Rule 3 of the General Interpretative Rules of the Harmonized System provides

guidelines for classifying goods that could be classified under multiple headings:

(a) If goods can be classified under two or more headings, the heading that provides
the most specific description should be used for classification. However, if two or
more headings refer to only a part of the goods, they should be considered equally
specific, even if one provides a more precise description.

(b) If goods are mixtures, composite goods made of different materials or

components, or goods put up in sets for retail sale and cannot be classified using
the above rule, they should be classified based on the material or component that
gives them their essential character.

(c) If goods cannot be classified using the above rules, they should be classified
under the heading that occurs last in numerical order among those that equally
merit consideration.

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 Rule 4
Goods which cannot be classified in accordance with the above rules
shall be classified under the heading appropriate to the goods to which
they are most akin.

Explanation of rule 4

Rule 4 states that if a particular item or product cannot be classified using the
previous rules (Rule 1, Rule 2, and Rule 3) of the GIR, then it should be classified
under the heading that is most similar or closely related to the nature and
characteristics of the goods.

Rule 5
In addition to the foregoing provisions, the following rules shall apply in
respect of the goods referred to therein:
(a) Camera cases, musical instrument cases, gun cases,
drawing instrument cases, necklace cases and similar
containers, specially shaped or fitted to contain a specific
article or specially shaped or fitted to contain a specific
article or set of articles, suitable for long-term use and
presented with the articles for which they are intended,
shall be classified with such articles when of a kind
normally sold therewith. this rule does not, however, apply
to containers which give the whole its essential character.

(b) Subject to the provisions of rule 5 (a) above, packing

materials and packing containers presented with the goods
therein shall be classified with the goods if they are of a
kind normally used for packing such goods. however, this
provision is not binding when such packing materials or
packing containers are clearly suitable for repetitive use.

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Explanation of rule 5

Rule 5 of the General Interpretative Rules of the Harmonized System provides

guidelines for classifying certain containers and packing materials that are
presented with goods.

Rule 5(a) states that containers such as camera cases, musical instrument cases,
and gun cases that are specially designed or fitted to contain a specific article or
set of articles and are intended for long-term use should be classified with the
articles they contain if they are typically sold together. However, if the container
itself gives the whole its essential character, then it should be classified separately.

Rule 5(b) states that packing materials and containers presented with goods
should be classified with the goods if they are typically used for packing such
goods. However, if these materials are clearly suitable for repetitive use, then they
can be classified separately.

Rule 6
For legal purposes, the classification of goods in the subheadings of a
heading shall be determined according to the terms of those
subheadings and any related subheading notes and, mutatis mutandis,
to the above rules, on the understanding that only subheadings at the
same level are comparable, for the purposes of this rule the relative
section and chapter notes also apply, unless the context otherwise
requires.

Explanation of rule 6

Rule 6 of the General Interpretative Rules of the Harmonized System states that
the classification of goods within a particular heading should be based on the
terms and related subheading notes of the subheadings within that heading. This
means that only subheadings at the same level can be compared when classifying
goods within a heading.

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In addition, the relative section and chapter notes also apply, unless the context
indicates otherwise. This means that any notes related to the specific section or
chapter should be considered while classifying goods.

CLASSIFICATION PROCEDURES

Classification of goods starts by identification of a commodity to be classified. This

is achieved by answering the following five questions:

1. What is the commodity?

2. What is it made of? (materials)
3. What is its usage/function?
4. At what stage/degree of manufacture it is?
5. In which group does it belong?

AFTER HAVING IDENTIFIED THE COMMODITY

• Look for possible section which covers the group of goods in relation to a
particular commodity to be classified;

• Look for a possible chapter in which the commodity is grouped;

• Consult legal notes and General Interpretative Rules (GIR) to find specific
heading and subheading in which the commodity is classified.

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 CHAPTER 5

CUSTOMS VALUATION OF IMPORTED/EXPORTED GOODS

INTRODUCTION
For the purposes of this chapter, the following concepts are necessary to take into
an account.

1. Value
This is the evaluation of a thing with reference to is usefulness to society, the
amount of work needed to produce it and the relationship between supply and
demand.
Value has the following characteristics:
- It is a measure of the desirability of something.
- It is a measure of the capacity of an object to be exchanged or sold.
- It is measurable
- It may be objective or subjective
- It is judgment issue
- It represents the quality of a thing

2. Customs value

This is the value of goods for customs purposes.

3. Customs Value of Imported Goods

This is the value of goods for the purpose of levying ad valorem duties of customs
on imported goods. It is used to calculate ad valorem duties and taxes at the time
of importation.

4. Customs duties

These are taxes or fees levied by a government on goods that are imported or
exported across its borders.

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Key Objectives of Customs duties include, but not limited to: -
- Protecting domestic industry
- Raising revenue
- Facilitating duty/revenue collection
- Encouraging /restricting the importation of certain goods

Bases used to establish Customs duties: -

a) Ad valorem duties
These duties represent a percentage of the customs value. They are levied
proportional to the value of goods.
E.g 5% of value of imported Maize

b) Specific duties
These duties are levied according to the cost per unit, weight, volume or
quantity. Goods are levied according to the nature of the goods imported
E.g. 1 currency unit per kg of Maize

c) Composite duties
These duties make use of the combination of ad valorem and a specific
duty. Here, goods are levied by considering the value and nature of the
goods imported.
E.g. 5% of the value for 1 currency unit per kg of Maize

5. Customs Valuation
This is the procedure applied to determine the value of imported goods for the
purpose of levying ad valorem customs duties. The main aim of customs
valuation is for tax and duty assessment.

However, a part from tax and duty assessment, customs valuation rules are
used by customs authorities in their non-revenue measures including: -
- It important on determining Import quotas
- It is important in collecting and compiling trade statistics accurately
- It is important for the application of rules of origin

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 - It is applied in making tariff preferences
- In some states, it is used in collecting internal taxes

CUSTOMS VALUATION SYSTEMS

There are almost four customs valuation system. In each system, there is a basis
of customs valuation that was highly applied to. Consider them below.

1. Article VII of GATT 1947

This is one of the Customs valuation system which was stipulated for Valuation
for Customs Purposes. It emphasized fair valuation of imports for customs
purposes in determining any liability for duties.

The basis of Customs value according to Art. VII of GATT 1947

- Basis for Customs value was on “actual value” of imported goods on

which duty is assessed or of like goods.
- Actual value; i.e. the price at which, at a time and place determined by
the legislation of the country of importation

2. Brussels Definition of Value (BDV) 1950s-1970s

This is another Customs valuation system which was entered into force in July
28, 1953. By then, each member nation was obliged to incorporate the text of the
BDV in its national tariff laws. The system was accepted by all main GATT
Contracting Parties, with exception of US, Canada, Switzerland, India & Brazil.

The basis of Customs value according to BDV:

- This is another Customs valuation system which was Based on

“normal price” (i.e. value at the place of importation.)
- Based on “open market price” (not actual prices & without enough
basis) i.e. the value based on price for which the goods would
command if sold in accordance with specified terms.
- Used a single standard, applicable to all goods irrespective of terms of
the contract, sale, or arrangement

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 - Allowed arbitrary uplifts, assigning unrealistic value to the product i.e.
Customs officials, applying a method of valuation that allows arbitrary
uplifts, assigning a value to the product, twice that amount.

3. Tokyo Round Valuation Code: (1973-1979)

This is another Customs valuation system which was entered in 12 April 1979. It
was an arbitrary valuation system that has the same trade restrictive effect on the
duty payable for a good as an increase in the tariff therefore this was a
dissatisfaction worldwide. The system was tackled during the Tokyo Round as one
of the non-tariff barriers to trade. It led to “Agreement on Implementation of Art.
VII of GATT”- also referred to as Tokyo Valuation Code. In 1981 it resulted, agreed
upon to give effect to the basic principles of Art. VII of GATT. However, this system
achieved to create a uniform, fair and neutral system of valuation.

The basis of Customs value according to Tokyo:

- Based on “positive concept” of valuation i.e. basis on the “Price Actually
Paid or Payable (PAPP)”
- In case of absence of PAPP, the use of five alternate methods

4. Uruguay Round (1986-1994)

This is another Customs valuation system which was entered in January1, 1995
that intended to establish new customs valuation agreement or complete overhaul
of existing Tokyo Round Code. It led to the establishment of the World Trade
Organization (WTO). Also the Tokyo Valuation Round Code was replaced by WTO
Agreement on Customs Valuation (ACV)B. Essentially ACV is same as Tokyo
Valuation Code with some minor changes to the code & application is mandatory
for all WTO Members. ACV provisions incorporated in national legislation of WTO
Member for implementation. Enshrined in EACCMA, 2004, as revised in 2010 (Sec.
122 & 123 read with 4th Schedule).

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The basis of Customs value according to Uruguay Round (ACV)

- Greatest reliance on Transaction Value (to the greatest extent possible,

based on the transaction value (>90% of world trade)
- Uniformity in valuation
- Fairness and neutrality (thus preclude use of arbitrary or fictitious
Custom values)
- Simple & equitable criteria consistent with commercial practices

COMPARISON OF 2 MAJOR VALUATION SYSTEMS

Brussels Definition of Value WTO Agreement on Customs Valuation

(BDV) (ACV)

1. Notional Concept- based on 1. Positive Concept-based on PAPP

assumptions (assumed
prices)
2. Arbitrary administration 2. Fair; Uniform; Neutral system
3. Lacking transparency 3. Conforming with commercial realities
4. Not responsive to the 4. Preclude use of arbitrary and
current international fictitious values
trading environment

LEGAL FRAMEWORK ON CUSTOMS VALUATION

The WTO Agreement on Customs Valuation (ACV) is composed of the following:

Provisions of ACV:

o Preamble
o Contains 24 Articles
o General Introductory Commentary

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Parts:

o Part I : Rules on Customs Valuation A.1~17

o Part II : Administration, Consultations & Dispute Settlement A.18~19
o Part III : Special and Differential Treatment Art.20
o Part IV : Final Provisions A.21~24

Annexes:

o Annex I: Interpretative Notes: -general notes/notes to articles

o Annex II: Technical Committee on Customs Valuation
o Annex III: Special Provisions (derogations) for Developing Countries

METHODS OF VALUATION

1. Transaction Value Method (Article 1 & 8)

2. Transaction value of Identical Goods Method(Article 2)
3. Transaction value of Similar Goods Method(Article 3)
4. Deductive Value Method(Article 5)
5. Computed Value Method(Article 6)
6. Fallback(Article 7)

1. TRANSACTION VALUE METHOD - ARTICLES 1 & 8

This is the primary method of valuation and involves determining the customs
value of goods based on the price actually paid or payable for the goods when sold
for export to the country of importation adjusted in accordance with the provisions
of Article 8 provided.

Thus;

Customs Value (CV) = Transaction Value (TV) = Price Actually Paid or Payable (PAPP)
+Sale for Export+ Article 8 Adjustment+ Article 1 Conditions

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Conditions provided under Article 1 for this method to apply:

This Article has almost 4 conditions to consider: -

1. No restriction on disposition or use of goods (Art 1.1 (a) (i))

Exceptions:

The first condition of Art. 1 does not apply in the situation where: -

o Imposed or required by law or by the public authorities in the country of

importation.
o Limit the geographic area in which the goods may be resold
o Do not substantially affect the value of the goods

2. No Conditions or Considerations- (Art. 1.1 (b)

o The sale or price is subject to some condition or consideration for which
a value cannot be determined with respect to the goods being valued

3. No Proceeds of Subsequent Resale- Article 8. (Art. 1.1 (c))

o Part of the proceeds of any subsequent resale, disposal or use of the goods
by the buyer will accrue to the seller and an appropriate adjustment
cannot be made

4. No Relationship between the buyer and seller- Provided in paragraph 2. (Art.

1.1 (d))
o No relationship that influence price
o If the buyer and seller are related, and the transaction value is not
acceptable

The scope of relationship between the buyer and seller is provided in Article
15 (4). The article provides that: For the purposes of Customs Valuation,
persons shall be deemed to be related if: -

(a) Officers or directors of one another’s business;

(b) Legally recognized partners in business;

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 (c) Employer and employee;
(d) Any person directly or indirectly owns, controls or holds 5 percent or more
of the outstanding voting stock or shares of both of them;
(e) One of them directly or indirectly controls the other;
(f) Both of them are directly or indirectly controlled by a third person;
(g) Together they direct or indirectly control a third person;
(h) Members of the same family.

Sale for Export:

o Sale in question must be one for export to the country of import.

o A transfer of ownership (sale) resulting in the exportation of the goods to
the country of importation.
o Evidence of Sale may include: sales contract, commercial invoices, bank
remittance slips & export list…
o Demonstration of actual international transfer of goods, which result in
an export of the goods to the country of importation
o If goods have been sold for domestic market of country of export or for
export to a third country, those sales cannot be used to establish the
transaction value
o Transaction value, cannot be used if there is no sale for export to the
country of importation.

Examples of imports when there is no sale are:

o Free of charge shipments; (gifts, donations, charities)

o Goods imported on consignments;
o Goods imported by intermediaries, who do not purchase the goods;
o Goods imported by branches;
o Leased goods;
o Goods supplied on loan;
o Waste or scrap for destruction;
o Goods which are the subject of barter or exchange

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Price Actually Paid or Payable (PAPP)

- Total payment made or to be made by the buyer to or for the benefit of the
seller for the imported goods. (Interpretative Notes)
- The payment need not necessarily take the form of a transfer of money. (may
be made by way of letters of credit or negotiable instruments
- Payment may be made directly (i.e. Made directly by Buyer to Seller) or
indirectly (i.e. Settlement by buyer of a debt owed by seller to a third party)
- All payments actually made or to be made as a condition of sale of the
imported goods, by the buyer to the seller, or by the buyer to a third party
to satisfy an obligation of the seller. (para.7, Annex III)

2. TRANSACTION VALUE OF IDENTICAL GOODS METHOD - (ARTICLE 2)

This method is used when the goods being valued are sold for export to the same
country and at the same time as identical goods. The customs value is based on
the transaction value of such identical goods. If customs value cannot be
determined by transaction value to appraise the imported goods, then the next best
substitute is the transaction value that customs authorities accepted in a prior
(previous) transaction involving like goods.

- Under Art.2, customs must attempt to find a prior(previous) importation

involving goods that are “identical” to those under review (being valued)
- If none is found, customs must proceed to Art.3 and widen the scope of its
search to prior imports of “similar” goods
- Where customs is able to find prior imports of identical or similar goods,
- Customs has to apply the transaction value that it accepted for such
imports

- Goods produced in the same country as the goods being valued

- The same in all respects, including:

o Physical characteristics

o Quality

o Reputation

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3. TRANSACTION VALUE OF SIMILAR GOODS METHOD - (ARTICLE 3)

This method provides that if identical goods are not available for comparison under
the previous method then this method is used. It involves valuing the goods based
on the transaction value of similar goods that are sold for export to the same
country and around the same time. Goods produced in the same country as the
goods being valued

- Are not alike in all respects, but;

o Have like characteristics

o Perform the same function

o Are commercially interchangeable

Conditions for Articles 2 & 3

- Transaction value: for identical/similar sold for export to the same
country of importation
- Time factor: identical or similar goods exported at or about the same
time
- Commercial level and quantity:
- Wherever possible, use same commercial level and substantially the
same quantity, if not, adjustments can be made
- Where more than one transaction value for identical or similar goods
is found: -the lowest value will apply
- Where costs and charges of Art. 8.2 are included in transaction
value, an adjustment can should be made to take account of
significant differences arising from differences in distances and
modes of transport.
- Not regarded identical/similar unless they were produced (includes
grown, manufactured and mined) in the same country as goods
being valued

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 - Identical/similar goods produced by a different person (includes a
legal person) should be taken into account (used) only when there is
no identical or similar produced by same person as goods being
valued.

4. DEDUCTIVE VALUE METHOD – ARTICLE 5

This method is used when the customs value cannot be determined using the
transaction value method. It involves deducting the cost of transport, insurance,
and loading or unloading from the price actually paid or payable for the imported
goods.

The allowable Deductions from unit price are:-

o either commissions or profit & general expenses

o costs of post importation transport & insurance
o costs and charges of Article 8.2, as appropriate
o customs duties & taxes payable in country of importation

5. COMPUTED VALUE METHOD – (ARTICLE 6)

This method provides that when the customs value cannot be determined using
the above methods, this method is used. It involves calculating the customs value
based on the production costs, profits, and general expenses incurred in the
country of origin. It is build up value (sum) of:

o cost or value of materials and fabrication

o other processing employed in producing the imported goods
o amount for profit and general expenses
o cost or value of Article 8.2 expenses

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6. FALLBACK METHOD– ARTICLE 7

This method is considered as the method of last resort. This method is applied
where the above 5 methods prove failure.

The basis for value is:

- Use of reasonable means consistent with the principles and general provisions
of the Agreement and Article VII of GATT
- Data available in country of importation
- Previously determined customs values (Interpretative Note to Article 7)
- Flexible application of Articles 1 to 6, respecting the sequential order

The following cannot be used as basis for value under Fallback:

o Selling price in the country of importation of goods produced in that

country
o The higher of two alternative values
o Price of goods on the domestic market of the country of exportation
o Cost of production other than a computed value under Article 6
o Price of goods sold for export to a country other than the country of
importation
o Minimum values (except for the situation provided for in Annex III)
o Arbitrary or fictitious values

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 CHAPTER 6

IMPORT AND EXPORT PROCEDURES

IMPORT PROEDURES

Import procedures refer to the set of activities and requirements that must be
followed in order to legally and successfully import goods into a country. There are
four key procedures governing importation. These include:

i) Entry
ii) Examination
iii) Valuation
iv) Clearance and release

ENTRY

An entry refers to a customs declaration that is submitted to the customs

authorities of a country by an importer or exporter. The purpose of an entry is to
provide detailed information about the goods being imported or exported, including
their description, quantity, value, and origin. This information is used by customs
officials to assess the appropriate duties and taxes, verify compliance with trade
regulations, and prevent illegal trade practices such as smuggling or money
laundering. The entry may also include other relevant documents such as bills of
lading, commercial invoices, and packing lists. Section 33 of the East African
Customs Management Act (EACCMA) provides for it.

TYPES OF ENTRY

There are five (5) types of entry that a person may decide to enter

(a) Entry for Home Consumption

Home consumption refers to the movement of goods within a country, which are
either domestically produced or imported from another country for consumption.
The entry for home consumption is a customs declaration form filed by an importer
or exporter to the customs authorities for goods that are being brought into a

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country for consumption or distribution within that country. This declaration
includes details such as the description of goods, quantity, value, and other
relevant information required by the customs authorities to assess and collect the
appropriate duties and taxes.

(b) Entry for Warehousing

Warehousing is the process of storing goods before they are sold or distributed. An
entry for warehousing is a customs declaration form filed by an importer or
exporter to the customs authorities for goods that are being stored in a bonded
warehouse. A bonded warehouse is a secure storage facility that allows importers
or exporters to store goods without paying customs duties or taxes until the goods
are removed from the warehouse for consumption or distribution.

(c) Entry for Transshipment

Transshipment is the movement of goods from one country to another through a

third country. An entry for transshipment is a customs declaration form filed by
an importer or exporter to the customs authorities for goods that are being
transshipped through a country. This declaration includes details such as the
description of goods, quantity, value, and other relevant information required by
the customs authorities to ensure compliance with trade regulations and to
prevent illicit trade practices.

(d) Entry for Transit

Transit refers to the movement of goods from one point to another through a
country without the goods being consumed or distributed within that country. An
entry for transit is a customs declaration form filed by an importer or exporter to
the customs authorities for goods that are being transported through a country for
another country. This declaration includes details such as the description of goods,
quantity, value, and other relevant information required by the customs
authorities to ensure compliance with trade regulations and to prevent illicit trade
practices.

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(e) Entry for Export Processing Zones

Export processing zones (EPZs) are designated areas where companies can
manufacture goods for export with special tax and customs benefits. An entry for
EPZs is a customs declaration form filed by an exporter to the customs authorities
for goods that are being produced or processed within an EPZ for export. This
declaration includes details such as the description of goods, quantity, value, and
other relevant information required by the customs authorities to ensure
compliance with trade regulations and to provide the appropriate tax and customs
benefits for goods produced within an EPZ.

EXAMINATION

An examination refers to the process of inspecting goods that are being imported
or exported to ensure that they comply with applicable laws, regulations, and trade
agreements. The examination may be conducted by customs officials or other
authorized agencies at various points during the import process, such as at the
port of entry or exit, at a warehouse, or during transportation.

Usually, an examination is done by the customs officer for the purpose of

i) Checking if the goods agree with the entry description

ii) Checking if the goods are not prohibited imports
iii) Checking if the goods are not restricted imports, where if fall under the
restricted the customs officer will intend to assess if all the conditions
have been complied for them to be permitted

VALUATION

This refers to the process of determining the value of goods for customs purposes.
The value of goods is a critical factor in determining the customs duties and taxes
that an importer must pay when importing goods.

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Note:

The valuation, as a key step under this part, covers all the process elaborated
under Chapter 5of this book

CLEARANCE AND RELEASE

This refers to the process of obtaining permission from the customs authorities to
remove goods from the customs custody. This step is done after an examination to
be done by the Customs Officer and where the applicable payments have been
done by the importer.

WAREHOUSING

Warehousing refers to the process of storing goods or products in a designated

facility, typically a warehouse, until they are needed or ready for distribution.
Warehousing is an essential part of the supply chain management process and
helps to ensure that goods are available when and where they are needed.

A warehouse is a commercial building or storage facility used for the storage of

goods, merchandise, raw materials, and finished products. Warehouses are
designed to ensure the safety and security of the goods stored in them.

TYPES OF WAREHOUSE

There are three types of warehouses;

i) Bonded warehouse
ii) Customs warehouse
iii) Government warehouse
 Read the above types

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EXPORT PROCEDURES

These are the steps that need to be followed to legally export goods from one
country to another. The export procedures include the following:

i) Entry
ii) Examination
iii) Valuation
iv) Loading for exportation
 Read them

NOTE

- Visit East African Community Customs Management Act

- Visit the HS Code

- Read Rules of Origin

- Read Other materials relating to customs

- Passing an interview needs a person who is well competent

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