What hinders use of EAC’s simplified trade regime?

Misinterpretation and low understanding by Customs officials as well as cross-border traders, and corruption, are among major challenges hindering the full utilisation of the East African Community’s Simplified Trade Regime (STR), experts say. Under the EAC Customs Union, the STR is a special provision aimed specifically at small traders who regularly transact in low value consignments. The legal basis of the STR is rule 14 of the EAC Rules of Origin; particularly paragraph four, which provides for use of a regularly updated and circulated Eligible List of Products (ELP) for ease and simplification of intra-EAC trade. “Small traders should understand what are those products being traded and what are those products that qualify under a simplified trade regime. In Rwanda there are about 150 products that enjoy the benefits from a simplified trade regime,” said John Bosco Kalisa, CEO of the East African Business Council (EABC). “This list of such products should be available and displayed at all border posts but, often, it is not.” Under the simplified trade regime, goods of a value less than $2,000 should not be subjected to the rigorous customs procedures such as declaration and others. Lack of awareness Kalisa noted that the simplified trade regime is used because of lack of knowledge and awareness about it. “Sometimes goods that are not supposed to pay taxes or should benefit from the regime are subject to taxes and other charges. Sometimes women resort to smuggling when they should not be smuggling because they can use the proper channel as their goods are exempted from charges,” he said. Kalisa called for the maximum cargo value threshold under the EAC STR to be upgraded to $5,000, up from $2,000, so as to boost trade. Traders are supposed to get a simplified certificate of origin that allows them to benefit from the simplified trade regime. However, Kalisa said, the EABC has received complaints from women saying the tool is being abused and misinterpreted by Customs officials. “In one country, women said that they are charged money to get a certificate. In other countries they are not charged. There is need for harmonized procedures and systems,” he said, appealing for the EAC Simplified Certificate of Origin to be issued “at no cost” across all EAC borders to women small cross-border traders. 85 per cent of corruption cases unreported According to Eng. Pamela Maassay, a member of the East African Legislative Assembly (EALA), 85 per cent of corruption and harassment incidents faced by women cross border traders go unreported. “Small traders face a number of difficulties such as harassment, corruption, including bribery, excessive charges, impounding of goods and difficulties in obtaining passports and visas,” the legislator noted. She said half of the women cross border traders face corruption or harassment, two-thirds spend money seeking out market and trade information while a half have not heard of the simplified trade regime. The lawmaker noted that a simplified trade regime should benefit informal cross-border trade considering that it is among the major activities for self-employed women and youth in the bloc’s informal economy. Studies indicate that 74 percent of informal cross-border trade is conducted by women. Eng Maassay said: “The effective uptake of simplified trade regime by small-scale traders is limited as it usually waives only Customs duties and no exemption for other domestic taxes or other border requirements.” Other challenges affecting the simplified trade regime, the MP added, include misunderstandings between countries, lack of standardised authentication measures for non-complying certificates, limited awareness of the tool’s benefits, delays in cargo clearance, products not listed on the common list of eligible products, and interception of goods by enforcement officers. The challenges also include limitations to single consignments, language barriers (English, Kiswahili), uunavailability of STR documentation, limitations of STR to $2000, and lack of tax differentiation between small and large scale traders. “Addressing the above challenges would seriously enhance the STR and render it more effective,” she noted. Among the mechanisms to address challenges, she suggested capacity building programs, infrastructural improvements, removal and or reduction of tariffs, fees and NTBs, improving dispute resolution mechanisms, publishing and circulating clearance timeframes as well as reviewing the NTB reporting, monitoring and evaluation platform to include reporting on impediments to the simplified trade regime. The legislator also noted that after 15 years of its operation there is a need to carry out a study to assess the simplified trade regime’s effectiveness taking into account the challenges and opportunities including one stop border post operations and improved infrastructure. The study, she said, will also help attain the mandatory requirement of updating the Eligible List of Products (ELP). Women cross border traders speak out Simplifying and translating Customs documents into local languages, frequent holding of joint border trade committees, elimination of non-tariff barriers, Improving the safety and security of women cross-border traders and curbing corruption are among other recommendations raised by women cross-border traders. Doto Mugabushaka, a peanut butter cross border trader at the Kabanga border between Tanzania and Burundi said: “Most women use the porous borders because we do not know how the simplified trade regime works and how we can benefit. We face robbers in these ways. “We want support to access bank loans at low interest rates to boost our cross border trading. We also want support to establish strong cooperatives,” she added. Amida Uwingabire, another Burundian small cross border trader who sells avocados and taro roots (locally known as amateke), among others, said their main challenges include being charged Customs duties yet they are exempted. “We need to be educated in cooperatives on how we can benefit from this simplified trade regime instead of smuggling,” she said. Akankwasa Miria, the chairperson of Katuna women cross border traders’ cooperative added that there is a challenge of policies that are not harmonized. “When we are bringing goods from Uganda to Rwanda using a Ugandan vehicle we pay $76 as road user fees but when we use Rwandan vehicles we do not pay. Rwandans pay according to mileage whereas Ugandan vehicles coming to Rwanda pay a fixed price. That is a challenge; we do not get profits when it is a fixed amount,” she said. Need for tapping into digital trade Richard Niwenshuti, Permanent Secretary in Rwanda’s Ministry of Trade and Industry, said improving physical and soft infrastructure at the borders, harmonizing and easing inspection of standards, supporting small traders to tap into digital trade and consolidating informal associations into cooperatives are some of the solutions. He said more than 1,000 women cross border traders in Rwanda were given smart phones to facilitate cross border trading. “About 90 percent of small and informal cross border traders at Rwanda-DRC borders are women and they need to understand the benefits of a simplified trade regime. The services should be harmonized on borders to facilitate traders and reduce time they spend while crossing,” he said. To roll out STR under COMESA, between Rwanda and DRC, he said, a list of more than 160 products are qualified to start with. “Most of these products are agro-products. As we move to implement the STR, we are negotiating to include manufactured products. It also includes agreeing on harmonization of standards and quality that can help cross border traders,” he said, adding that, so far, close to eight cross border markets are set up. 150,000 women traders to be supported Patience Mutesi, the Rwanda Country Director of TradeMark East Africa, said that 150,000 women including 13,000 from Rwanda involved in cross border trade across the region are set to be supported through capacity building, financial literacy, and business formalization to understand their rights under a simplified trade regime. “Cross border trade is a catalyst for export diversification. Rwanda plans to increase exports by 17 per cent, annually, and you can’t do that by just looking at large scale exports,” Mutesi said. “Over 70 percent of trade that actually happens informally is carried out by women since they are usually excluded from the usual trade.”

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What hinders use of EAC’s simplified trade regime?