B4

TOPIC: CUSTOMS
Sub-topic covered:
1. Introduction to customs
 Definition of customs
 Sources of Customs laws
 Customs administration in Tanzania
 Types of Customs duties
2. Computation of Customs Duties & Taxes
 Computation procedures of Import duties
 Computation procedures of Excise duties on imports
 Computation procedures of Railway & Development levy
 Computation procedures of Value Added Tax (VAT) on
imports
 Calculation of CIF / Customs value when more than one item
attracting different customs duty rate are included in one
invoice sharing freight costs and insurance
 Duties and taxes payable for returning residents AND other
persons changing nationalities
3. Customs Valuation Methods
 Transaction value of imported goods
 Transaction value of identical goods
 Transaction value of similar goods
 Deductive value method
 Computed value method
 Fall back method
4. Importation Procedures
 Entry procedures
 Examination procedures
 Valuation procedures
 Clearance and release procedures
Continue to next page…..
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 Continue from previous page….
5. Exportation Procedures
 Outright exportation
 Temporary exportation
 Re-exportation
 Entry procedures
 Examination procedures
 Valuation procedures
 Passengers clearance procedures
6. Prohibitions & Restrictions
 Prohibited goods
 Restricted goods
 Reasons for Prohibitions & Restriction
7. Warehousing
 Bonded warehouse
 Customs warehouse
 Government warehouse
8. Smuggling
 Forms of Smuggling
 Reasons for smuggling
 Problems associated with smuggling
 Ways to prevent smuggling
 Powers of Customs officer to prevent smuggling
9. Customs Offences
10. Customs Union
 Stages of economic integration
 Features of customs union
11. Rules of Origin
 Wholly produced goods criteria
 Material content criteria
 Value added criteria
12. Recovery Measures to collect unpaid Duties

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SUB-TOPIC 1: INTRODUCTION TO CUSTOMS
CUSTOMS: Are duties and taxes that are imposed by Central Government on imports of goods
into Tanzania and export of goods from Tanzania.
They are collected from the importer or exporter but its burden is borne by consumers.

SOURCES OF CUSTOMS LAWS

1. The East African Community, Customs Management Act, 2004 (EAC-CM)
2. The East African Community Customs Regulation 2010
3. The East African Community, Customs Management, Rules of Origin.
4. The Value Added Tax Act, 2014.
5. Excise Management and Tariffs Act, Cap 143.

CUSTOMS ADMINISTRATION IN TANZANIA

 Customs are administered by Customs and Excise Department under TRA
 The Department has the following functions:
(1) Revenue functions:
i.e. To collect government revenue in order to finance government expenditures.
(2) Non-revenue functions:
e.g.
 To prevent importation and exportation of restricted and prohibited goods.
 To promote exportation and discourage importation.

TYPES OF CUSTOMS DUTIES

The types of customs duties and taxes administered by the Customs and Excise department are:

(1) IMPORT DUTY

This is the duty imposed on customs value usually COST, INSURANCE and FREIGHT (CIF
value) of goods imported.
The following rates are applicable;
(i) Zero rate; for capital goods e.g. Plant & machinery
(ii) 10% rate; for semi-finished goods e.g. Spare parts
(iii) 25% rate; for finished goods e.g. motor vehicle

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(2) EXCISE DUTY ON IMPORTS
This is imposed on few selected items each at its own rate.
Examples of goods chargeable to excise duty are:-
 Beer,
 Cigarettes,
 Soft drink,
 Saloon cars,
 Station wagon cars,
 Wine,
 Petroleum products etc.

(3) VAT ON IMPORTS:

This is imposed (charged) on all imports except those exempted.

(4) RAILWAY & DEVELOPMENT LEVY

This is imposed on all imports for the purpose of promoting railway transport in Tanzania.
It is imposed at 1.5% of the CIF value.

(5) FUEL LEVY

This is imposed on importation of petroleum products.

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SUB-TOPIC 2: COMPUTATION OF CUSTOMS DUTIES AND TAXES
Customs duties are charged either on advalorem basis (i.e. charged based on the value of the
item) or on specific basis (i.e. charged based on physical measurement e.g. as per kg, litre,
volume, height etc.) is fixed amount per specific measurement.

ADVALOREM BASIS:
Customs duties are calculated using the following procedures if they are assessed using
advalorem method.

1. Calculate import Duty

Import Duty = Import duty rate x customs value (CIF)
CIF is calculated as follows;
 Cost (FOB price/Free on board) ***
 Add: Freight ***
Cost & Freight (C & F) ***
 Add: Insurance (I) ***
CIF / Customs value ***

2. Calculate excise duty

Excise duty = Excise duty rate x  [CIF + Import duty]

3. Calculate Railway and Development levy

Railway & Development levy = Rate x CIF value
= 1.5% x CIF value

4. Calculate Value Added Tax (VAT) on imports:

VAT on imports = VAT rate x  [CIF + import duty + excise duty + Railway & development
levy + other charges]

Question 1

Question 2

Question 3

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CALCULATION OF CIF / CUSTOMS VALUE WHEN MORE THAN ONE ITEM
ATTRACTING DIFFERENT CUSTOMS DUTY RATES ARE INCLUDED IN ONE
INVOICE SHARING FREIGHT COSTS AND INSURANCE
Step 1: Calculate the total FOB of all items imposed
Step 2 : Calculate total CIF
Step 3 : Calculate CIF to FOB ratio
i.e. Ratio = Total CIF Value
Total FOB value
Step 4 : Multiply the ratio obtained in step 3 to the FOB price of each item to get
CIF value for each item
Step 5: Calculate the duties & taxes payable on the each stem.
Note: If insurance cost is not given use 1.5% of C&F

Question 4

Question 5

DUTIES AND TAXES PAYABLE FOR RETURNING RESIDENTS & OTHER

PERSONS CHANGING NATIONALITIES
These persons are liable to pay taxes with the following exceptions: -
 Wearing apparel
 Household effects (domestic equipment) should be one and used
 One motor vehicle
The vehicle must be owned at least 12 months abroad and should not be sold before expiry
of two years
 Wine & spirit but not more than one litre
 Perfume but not more than ½ litre in total
 Cigarette but not more than 250mg.

Question 6

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SUB-TOPIC 3: VALUATION OF IMPORTED GOODS
Custom valuation is a process applied to determine the value of imported goods liable to
advalorem duties.
Note: Advalorem basis is a method of charging duties based on value
- Under the 4th schedule of the EAC – Customs Management Act, 2004 there are six methods
of customs valuation which are to be applied in a sequential order as follows:
Method 1 : Transaction value of imported goods
Method 2 : Transaction value of identical goods
Method 3 : Transaction value of similar goods
Method 4 : Deductive value method
Method 5 : Computed value method
Method 6 : Fallback method

METHOD 1: TRANSACTION VALUE OF IMPORTED GOODS

Transaction value is the price actually paid or payable plus the following if not included in the
price paid or payable.
 Cost of containers and packing costs
 Selling commission & brokerage except buying commission
 Cost of Assists (i.e. material sent by the importer to the exporter to be used to
manufacture goods to be imported).
 Royalties and licence fee
 Any subsequent proceeds that accrue directly or indirectly to the seller.
 The cost of transportation (except air freight), insurance and other related costs.
Note:
Other related costs will include:
 Demurrage charges i.e. cost incurred by the importer to pay the owner of the vessel/ship as
an extra charge for delaying in loading or unloading.
 Primage, this is the percentage added to the freight charges by the shipmaster for taking
extra care in handling the goods.
PRICE ACTUALLY PAID OR PAYABLE
Is the total payment that is made by the buyer to the seller either directly or indirectly.
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Note:
Indirect payment is when the importer is instructed by the exporter to make payments to the 3 rd
party on behalf.

EXCLUDED COSTS FROM TRANSACTION VALUE (i.e. Post importation costs)

The customs value shall not include the following charges or costs;
1. The cost of transport after importation (i.e. domestic transportation costs) e.g. Transport from
Dar es salaam port to Dodoma
2. Charges for construction, erection, assembly, maintenance, technical assistance undertaken
after importation of the imported goods such as plant & machinery.
3. Duties and taxes paid/payable in the country of importation.

Question 7

Question 8

Note:
 Discounts:
Quantity or trade discount should be deducted when computing customs value.
However, cash discount is not allowed unless the discount is offered prior to the valuation of
imported goods.

CONDITIONS FOR THE USE OF TRANSACTION VALUE METHOD:

(1) The buyer and seller should not be related.
The following are regarded as related;
 Members of the same family
 Employer & employee
 Parents & subsidiary
 Partners in partnership business
(2) There must be evidence of sale for export
e.g. commercial invoices, sales contract, Bank remittance slip etc.
(3) There are must be no restrictions on disposal of goods by the buyer other than restrictions
required by law.
e.g. the requirement to inspect the goods before resale or use

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 (4) There are must be no condition on the selling price in which the value cannot be
determined e.g. the seller establishes the price on the condition that the buyer will also
buy other goods in a specified quantity in the future.
(5) Any subsequent proceeds should be included in the customs value.

Question 9
Question 10

METHOD 2: TRANSACTION VALUE OF IDENTICAL GOODS

 It is used if method 1 has failed.
 Under this method the customs value of the item imported is determined by referring to the
customs value of the identical item.

 IDENTICAL GOODS:
Are the goods that are the same in all aspect including physical characteristics, quality and
reputation, produced in the same country as the imported goods being valued and produced by
the same producer of imported goods being valued.
Example of identical items;
 A white Toyota Prado car (4000 CC) made in 2008 imported from ABC Car manufacturing
company of Japan by Mr. James
 A white Toyota Prado car (4000 CC) made in 2008 imported from ABC Car manufacturing
company of Japan by Mr. Steven
Note:
Where identical goods produced by the same producer are not available, identical goods
produced in the same country by the different producer may be taken into consideration.

METHOD 3: TRANSACTION VALUE OF SIMILAR GOODS

This method is used when method 1 and 2 have failed.
Under this method the customs value of the imported item is determined by referring the customs
value of similar goods.

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 SIMILAR GOODS
Are goods that are;
 closely resemble with goods being valued in terms of characteristics and component
materials,
 It can perform the same functions and are commercially interchangeable with the goods
being valued,
 Produced in the same country as goods being valued, and
 Produced by the same producer (e.g. Toyota IST & Toyota Raum)

Note:
Where similar goods produced by the same producer are not available/found, similar goods
produced by different producer in the same country can be considered.
- Example of similar goods;
 A Goodyear tyre size 14/145
 A Dunlop tyre size 14/145
 A Michelin tyre size 14/145
Note:
If there is more than one transaction value of identical or similar goods, the lowest of such value
should be used.

Question 11

METHOD 4: DEDUCTIVE VALUE METHOD

This method is used when the previous three (3) methods have failed.
Under this method; the Customs value is determined by starting with the selling price of identical
or similar item that are sold in the country of importation, less certain specified expenses
incurred after importation.
These expenses are: -
 Cost of transport of insurance and other associated cost incurred in a country of
importation.
 General expenses, profit & commission
 Customs duties & other taxes payable in the country of importation.
Note:
Selling price per unit to be taken is at the greatest number of units to be sold.
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Hence: Customs value =
 Selling price at the greatest quantity sold ***
Less: Post-importation cost & profit
 Transportation & Insurance costs ***
 General expenses, profit & commission ***
 Duties & taxes paid *** (***)
Customs value ***

Question 12

METHOD 5: COMPUTED VALUE METHOD

This method is used when the previous four (4) methods have failed.
Under this method; the customs value is calculated as the sum of:
 Costs of materials and other processing costs
 Amount of profit and general expenses for sale of goods in the country of exportation
 The cost of transport, insurance and other related costs from the country of exportation to
the country of importation

Question 13

Question 14

METHOD 6: THE FALL BACK METHOD

This method is used when the previous five (5) methods have failed.
Under this method the value of the imported item is determined by going back (falling
back) to the five (5) previous methods and select the method that gives at least the reasonable
value to both parties.
The value can also be determined by using other values which would be agreed by both parties
(i.e. Tax-payer & Tax Authority).

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RESTRICTION /CONDITIONS OF USING FALL BACK METHOD:
Under this method the customs value should not be determine using:
1. The selling price of goods in the country of exportation
2. The selling price of goods for export to other countries
3. The higher of the two alternative values
4. The minimum customs value
5. Arbitrary value – value that has no base / source

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TOPIC 4: IMPORTATION PROCEDURES
Definition
Importation means to bring or cause something to be brought into the partner states from a
foreign country.
There are four (4) main procedures in which a person is required to go through importation.
These are:
(i) Entry
(ii) Examination
(iii) Valuation
(iv) Clearance & release

STEP 1: ENTRY PROCEDURE

This involves furnishing by the owner or agent of the goods, the full particulars of the imported
goods in a prescribed form i.e. Import Declaration Form (IDF).
The form is attached by supporting documents such as:-
 Invoices
 Bank remittance slips
 Sale contracts (if any) etc.

 TYPE OF ENTRY:
These are five (5) types of entry:

1. ENTRY FOR HOME USE / HOME CONSUMPTION

This entry is used when the imported goods are to be cleared on payment of full duties and taxes.

2. ENTRY FOR WAREHOUSING

This entry is used when the imported goods are to be stored in bonded warehouse before are
cleared.
This enable the importer to look for customers / market for goods / of goods imported, thereafter
pays duties and taxes.

3. ENTRY FOR TRANSIT

Transit is the movement of goods from a foreign country through our territory / country to other
foreign destination / country.

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This entry is when the goods are passing Tanzania territory to a foreign destination.

 TYPES OF TRANSIT

(i) Through transit

In this, goods are transported through our country after they have been entered for transit
purposes to another foreign destination.

(ii) Inward transit

In this, goods are transported through our country and then cleared at the point of exit from our
country.

(iii) Outward transit

This is when goods pass through our country to an office of exit for exportation procedures.

4. ENTRY FOR TRANSSHIPMENT

Transshipment is a customs procedure in which goods are unloaded from imported vessel and
then loaded to exporting vessel to a foreign country.

 TYPES OF TRANSSHIPMENT

(i) Direct transshipment

In this, ships/vessels are entered /enclosed along side each other and goods are moved directly
from incoming vessel to the outgoing vessel.

(ii) Indirect transshipment

Under this, importing vessel unload the goods at the port and exporting vessel picks them for
exportation.

5. ENTRY FOR EXPORT PROCESSING ZONE (EPZ)

EPZ is an area where small manufacturers located in that area are allowed to import plants,
machinery, equipments and material free of duty, for manufacture of goods to be exported.
Note:
The following goods may be imported without entry:
 Personal baggage’s of passenger (personal belongings of travelers) or member of crew
 Diplomatic bag
(i.e. is a bag or container in which mail is sent to and from foreign embassies).

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 Diplomatic bags are protected by law, so that they are not opened by anyone except the
official or embassy they addressed to.
 Human remains
(i.e. a deceased human body or any portion of a deceased human body).
 Mail bags and postal articles
 Coins, currency and notes (not exceeding the prescribed amount).

STEP II: EXAMINATION PROCEDURE (i.e. Physical verification)

Under this stage, the customs officer makes physical verification of the imported goods if they
agree with entry form with regard to quantity, value etc.
Also, the goods are checked to find whether are not prohibited or restricted.

STEP III: VALUATION PROCEDURE

In this stage, the goods imported are valued for custom duty purposes or other use e.g. statistics
purpose.

STEP IV: CLEARANCE & RELEASE PROCEDURE:

After the duties and taxes as well as port charges have been paid, the agent is allowed to remove
the goods from the port after being given a gate pass.

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TOPIC 5: EXPORTATION PROCEDURES
Exportation means the movement of goods from one country to another.
In accordance with EAC-Customs Management Act 2004, the term export means to take or
cause something to be taken out of partner states.

 CATEGORIES / TYPES OF EXPORTATION

1. Outright exportation
This is when the goods are exported permanently i.e. are for consumption in the foreign
countries.

2. Temporary exportation
This is when the goods are exported outside the country for special purposes and then they will
be brought back.
e.g. when the goods are exported for exhibition or entertainment.

3. Re-exportation
This is when goods are imported temporarily and then they will be exported after the end of the
intended activity. e.g. exhibition and entertainment

EXPORT PROCEDURES
There are 4 main procedures;
(i) Entry
(ii) Examination
(iii) Valuation
(iv) Loading

STEP I: ENTRY PROCEDURE

Before the goods are loaded to an aircraft/vessel, they must be entered in a prescribed form
showing particulars of goods to be exported.

 TYPES OF ENTRY
(i) Export entry of domestic goods free of duty
(ii) Export entry of domestic goods liable for duties
e.g. raw cashew nuts, raw hides and skins, leather

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(iii) Entry for goods subject to duty drawback
i.e. refund of duty paid on importation of raw material used to process the finished goods
that has been exported.
Note:
The following are the goods which may be exported without the entry:
 Personal baggage’s
 Goods intended for sale to passengers in a aircraft/vessels
 Mail bags and postal address

In summary:
Entry procedures is a process of furnish the particulars of goods to be exported and then
lodged that particulars for goods to be examined if they matched with physical goods for
control purpose.

STEP II: EXAMINATION PROCEDURE

This involves checking or verifying documents versus physical goods to ensure that;
 the goods are not prohibited,
 the goods are not restricted,
 duty drawback (if any) is correctly claimed etc.

STEP III: VALUATION PROCEDURE

This involves valuing goods for duties and taxes purposes and other purposes such as trade
statistics.

STEP IV: LOADING PROCEDURE FOR EXPORTATION

After goods have been entered and examined, and duties have been paid (if any), they are
allowed to be loaded in an aircraft or vessel for an exportation.
Note:
The value of export is determined as the sum of;
 the cost of the goods
And
 Transport cost and all other charges to the point of loading

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 PASSENGERS CLEARANCE PROCEDURE
Under EAC-Customs Management Act, on arrival of the passengers who has a baggage should
go to the baggage room where he/she is required to read the public notice which will require the
passenger to decide whether to pass through a green channel or a red channel.

- Green channel: is a part of exit where the passenger arrives with baggage (goods) in which
the quantity does not exceeding allowable quantity.
- Red channel: is a part of exit where the passenger arrives with buggages (goods) exceeding
allowable quantity.

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TOPIC 6: PROHIBITIONS & RESTRICTIONS
The custom department has responsibility to protect the society and economy of the country.
Hence it should enforce the laws in respect of prohibitions and restriction.
Definition:
1. PROHIBITED GOODS
These are goods which importation, exportation or carriage coast-wise are not allowed at all.
Note: Carriage coast-wise means movement of goods within partner states.
Example of prohibited goods;
 Narcotic drugs
 Tear gas
 Used tires
 Seditious publications
 Pornographic materials

2. RESTRICTED GOODS
These are goods which importation, exportation or carriage coast-wise is allowed but after
fulfillment of certain conditions regulating their importation, exportation or carriage coast-wise.

Example of restricted goods;

 Fire arms
 Ammunition
 Livestock
 Charcoal
 Timber etc.

REASONS FOR PROHIBITIONS AND RESTRICTIONS

1. For security reasons. e.g. Importation of fire arms
2. For health reasons. e.g. Importation of Narcotic drugs
3. For social reasons. e.g. Importation of pornographic materials
4. For economic reasons e.g. To protect home infant industry
5. For political reasons e.g., seditious publications.

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TOPIC 7: WAREHOUSING
Warehousing is the practice / business of storing, holding or handling goods in a warehouse.

 TYPES OF WAREHOUSES
(1) Bonded warehouse
(2) Customs warehouse
(3) Government warehouse

1. BONDED WAREHOUSE
Means a place licensed by the Commissioner General for the deposit and storage of dutiable
goods.
 TYPES OF BONDED WAREHOUSE:
(i) General bonded warehouse
i.e. This stores the goods of any person

(ii) Private bonded warehouse

i.e. This stores the goods of licensee only

 CONDITIONS FOR BONDED WAREHOUSES LICENSING

(i) The person must apply to the Commissioner General the licence for the bonded
warehouses.
(ii) The person must deposit a bond of TZS 400 million for private warehouses and TZS 800
million for general warehouses.
(iii) The building / warehouse shall provide security for 24 hours
(iv) The premises shall provide an office accommodation to customs’ staffs.
(v) The premise shall comprise with secured wall, roof and a concrete floor
(vi) The premise shall contain special storage facility/equipment
(vii) The premise shall have water & rat proof
(viii) The premise shall have ventilation and light
(ix) The premise shall have computer and internet connectivity
(x) The operator shall have proper accounting records i.e. to records goods arrived, stored and
issued
Note: A licence is not transferable

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 2. CUSTOMS WAREHOUSE
Means any place approved by the Commissioner General for the deposit of:-
 Unentered goods
 Abandoned goods
 Detained or seized goods

 SALE PROCEDURE FOR CUSTOMS WAREHOUSE GOODS AND CONDITIONS

FOR AUCTION SALE
Normally goods deposited in a customs warehouses must be removed within 30 days from the
day of entry.
If not removed the Commissioner General shall give the notice stating that the goods will be sold
by the public auction if not removed within 30 days from the date of notice.

 CONDITION FOR AUCTION SALE

(i) Before bidding, the Commissioner General announces that making a bid; implies the
acceptance of the conditions of sale.
(ii) If there is any discrepancy between the quantity stated in the documents and the actual
quantity, the Commissioner General is not liable.
(iii) No warranty is given with respect to quality
(iv) The highest bidder shall be the purchaser and no withdraws.
(v) A non-refundable deposit equal to 25% of the price should be paid immediately, and the
balance should be payable within 48 hours.
(vi) The goods shall be removed from the customs warehouse within 5 days; failure for that,
the purchaser is liable to pay rent and shall be responsible with any risk arising

 APPLICATION OF THE SALE PROCEEDS

The proceeds shall be applying in the following order;
(1) To pay duties and taxes payable
(2) To pay expenses of sale and removal (if any) including actioner commission.
(3) To pay warehouse rents and other customs charges
(4) To pay port charges
(5) To pay freight and other charges.

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Note:
- The remaining balance (if any), shall be paid to the owner upon application within 12 months
provided that, the person do not have any tax liability to the government
- Failure to apply for the balance; the balance should be paid to Customs Revenue Account.

GOODS NOT ALLOWED TO BE WAREHOUSES

Examples:
 Fireworks
 Ammunition
 Perishable goods
 Matches
 Chalks
 Dried fish

OTHER TERMINOLOGIES RELATED TO WAREHOUSE

1. Transit schedule
Is a building appointed by the Commissioner General in writing for deposit goods under customs
control.
2. Sufferance wharf
Is any place other than approved place of loading or unloading at which the Commissioner
General allows the goods to be loaded.

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TOPIC 8: SMUGGLING
Smuggling means importing, exporting or carriage coast-wise of goods secretly or illegally with
intention to avoid tax or laws that regulate importation, exportation or carriage coast-wise.

 FORMS OF SMUGGLING
1. Outright avoidance of customs control e.g. escaping customs control (i.e. control point) by
using bush ways
2. Under-declaration of goods i.e. declaring of less quantity
3. Under-valuation of goods i.e. giving goods lower value
4. Misclassification of goods
5. Falsification of document
6. Cheating the country of origin of the imported goods

 REASONS FOR SMUGGLING

1. Higher import duties.
2. Difficult import procedures
3. Available or non-availability of goods in one part of the border

 PROBLEMS ASSOCIATED WITH SMUGGLING

1. Loss of government revenue
2. Collapse of local industry
3. Unemployment
4. Lost of lives
5. Increased insecurity

 WAYS TO PREVENT SMUGGLING

1. Lower import duty
2. Simplify importation procedures
3. Increase production as a long-term solution i.e. each partner state increase production as a
long-term solution
4. Increase TRA efficiency

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 POWER OF CUSTOMS OFFICER TO PREVENT SMUGGING (S.149 – S.159) EAC
– Customs Management Act, 2004
1. S.149 – Power to require vessel or aircraft to remain stationery for the period the officer may
require.
2. S.150 – Power to require the vessel to depart from partner states within 24 hours except
local registered vessels.
3. S.151 – Power to patrol freely the vessel
4. S.152 – Power to board the vessel and search
5. S.153 – Power to stop vehicle
6. S.154 – Power to ask questions to a person entering or leaving partner states
7. S.155 – Power to search a person
8. S.156 – Power to arrest incase of any suspected offence
9. S.157 – Power to search a premise
10. S.158 – Power to require police assistance
11. S.159 – Power to require production of books or records

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TOPIC 9: CUSTOMS OFFENCES
An offence means breaking the law or failure to comply with the law.
The following are some offences provided by EAC - CMA, 2004:-
1. Making use of false documents
2. Inducing another person to commit an offence
3. Assuming a character of an officer
4. Wrong declaration of value
5. Wrong declaration of country of origin
6. Not providing food and accommodation to an officer who is checking the vessel or aircraft
for a long period.
7. To impersonalize customs officer
8. Importing or exporting or carriage coast-wise prohibited or restricted goods
9. Refusal to provide accounting records
10. Loading or unloading goods in unapproved places

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Godwin Julius – CPA (T) Contact: 0745707050
TOPIC 10: CUSTOMS UNION
Customs union is the 3rd stage of economic integration.
Note: Economic intergration refers to actions by which group of countries agree to eliminate
barriers to trade.

 STAGES OF ECONOMIC INTERGRATION

1. Preferential Trade Areas (PTA)
In this stage, member countries agree to reduce some barriers among themselves

2. Free trade area

In this stage, member countries agree to eliminate all trade barriers
3. Customs union
In this stage, member countries agree to eliminate all trade barriers, eliminate duty for goods
moving within member countries and impose common external tariff.

4. Common Market
In this stage, there is free trade, common external tariff and free mobility of factors of
production e.g. Labour

5. Political intergration
In this stage, member countries cooperate in all economic and political matters by having
one assembly and one president.

 FEATURES OF CUSTOMS UNION

1. Common External Tariffs (CET) i.e. common set of import duty rate.
2. Duty free for goods moving in member countries i.e. coast-wise trade
3. Common set of customs rules and procedures including documentation
4. Common valuation methods
5. Common coding of goods.

 ADVANTAGES OF CUSTOMS UNION

1. To liberalized trade i.e.to make free trade
2. To Promote efficiency in production because of competition
3. To enhancing cross border investment
4. To promote economic development
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Godwin Julius – CPA (T) Contact: 0745707050
TOPIC 11: RULES OF ORIGIN
Under EAC - Customs Union, goods that originate in one partner states and sold to another
partner state are DUTY FREE.
Hence; the rules of origin are the criteria that distinguish the goods that originate (produced) in
EAC against those produced outside EAC.

There are three (3) main criteria

1. Wholly produced goods criteria
Under this criteria, the goods is said to originate in a partner state if no material from outside
EAC has been used in producing them.
E.g.
 Minerals extracted from the land of a partner state
 Vegetables grown on the land of any partner state
 Animal born and grown within partner state.
2. Material content criteria
Under this, the good is said to originate in a partner state if foreign materials used do not exceed
60% of total materials.

3. Value Added Criteria

Goods will be treated as originating in a partner state if the value added from the process of
production is at least 35% of the total cost of production.
Total cost of production also known as ex-factory cost.
Note:
Value added is the difference between the ex-factory cost and the CIF of the imported materials.

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Godwin Julius – CPA (T) Contact: 0745707050
TOPIC 12: RECOVERY MEASURES USED TO COLLECT UNPAID
DUTIES
Tax payers may financially be unable to pay their tax bills but more often may refuse to pay.
The following are the recovery measures under EAC - CMA 2004:-
1. Sue for unpaid tax to the competent court
2. Detaining goods until taxes have been paid
3. Recovery by creating a charge on the property of the tax payer
4. Sale of charged asset
5. Recovery from third party who is owed by taxpayers

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Godwin Julius – CPA (T) Contact: 0745707050