CAIRO: After being notorious for its greedy revenue collection and hindrance to trade, the Egyptian Customs Authority has now embarked on new reforms that will help it evolve into a facilitator of trade.
By adopting the Account Management Service program, the Customs Authority has been able to eliminate bureaucracy at its ports by simplifying goods clearance procedures and significantly reducing clearance time from what used to take several days to less than 24 hours.
“By its nature, customs, specifically imports, are a very transactional type of business. When goods come into the country, they get inspected to collect revenue and customs duties and to also ensure that they are not hazardous or illegal, said George Atalla, principal at Booz Allen Hamilton (BAH) corporation.
In the past – before actual implementation of the program – once goods reached Egyptian ports, traders had to grapple with lengthy procedures as well as plow through paperwork and heavy documentation, which caused a huge delay to their businesses.
Now, the Customs Authority has implemented an account-based program, whereby it builds a database that traces behavior and activities of traders, their history of compliance with the law and its procedures, their punctuality in paying customs tariffs, and so on. Compliant traders are provided with incentives and privileged treatment which certifies their goods can be immediately released from ports.
“The program aims to build a good relationship between the Customs Authority and importers. Authorities try to understand the nature of importers’ businesses and which types of goods they bring into the country, and thus develop a better understanding with the importing community, Atalla added.
BAH, a worldwide management and strategy consultancy firm, designed the program for the Egyptian Customs Authority in June 2005 and launched it in October of the same year. It became fully operational in June 2006.
“We then turned it over to the Customs Authority, and it is still running very well. Numbers of [participants] are going up, and traders are very satisfied with it, he said.
Not only does the program make traders’ lives easier, but it also facilitates work for the Customs Authority by allowing it to focus its entire resources on violators.
Account-based processes are particularly effective when trade volumes are in the hands of few importers. “In Egypt, approximately 500 large importers are responsible for nearly 80% of the value of imports to Egypt. So, if 300-400 out of these are compliant, then you [Customs Authority] basically solved more than half of your problems and can now dedicate the rest of your resources towards [catching] violators.
For its part, the Customs Authority is making an active effort in trying to attract more traders towards joining the program by confirming that those who apply will receive the “star treatment and their goods will be released on the same day instead of sitting around for 20 for inspection.
“It’s a different way of thinking. Instead of acting upon the [notion] that everyone is guilty till proven innocent, I’ll let the system identify complaints and help them remain compliant [all the way]. I’m going to prove to them that the more compliant they are, the better service they get, stated Atalla.
Once traders commit themselves to this program, they have to maintain clean records and remain compliant year after year.
Every now and then, Atalla explained, customs authorities randomly inspect participants’ goods and make sure their activities are consistent with their records. “This is what we refer to as Post-Release Audit, which promotes a habit of maintaining good records.
Participants who end up violating the law will be kicked out of the program and will have to suffer consequences of not being able to re-apply for two years.
Besides facilitating trade and reducing clearance time as well as numbers of violators, the program also has potential to increase volumes of trade.
“Reduction of clearance time allows ports to receive more and more goods. This is called acceleration through port. So, instead of receiving, say, a million containers, a port can receive two million, he explained. “Assuming that the country enjoys a growing economy, whereby people have more money to buy more imported goods, the program will actually increase volumes of trade and allow more goods into the country.
Such a scenario is already taking place at Egypt’s ports, nowadays. “In Egypt, foreign trade figures are growing year after year. So, volumes of trade are increasing while number of ports remains the same. Therefore, it becomes [imperative] to implement such a system to be able to handle more and more shipments.
Despite being involved in modernization projects in Egypt for the last 25 years, BAH Group inaugurated its office in Egypt in 2005. “It has come at a time when we felt that things are changing in Egypt and that more reforms are being implemented on both a public and private level. We felt we could help the government with some of these reforms.
Egypt is the first country in the Middle East where BAH introduced the Customs Account Management Service program, as a first step in launching it across several countries in the region.
Their initial engagement in Egypt began by helping the Ministry of Finance set up its large Tax Payers Center, an entity entrusted with resolving tax disputes efficiently and transparently. BAH has also marked its print on other public sector modernization projects in areas including transportation, telecom, and trade.
