By Ahmed Amer
The legal conflict between German automotive companies and the Egyptian Customs Authority (ECA) after the application of indicative prices on cars at the beginning of the year is ongoing, with the ECA still enforcing the decision.
Last week, a number of German automotive companies in Egypt filed a lawsuit in the State Council against the Ministry of Finance regarding the issuance of indicative prices. The companies demanded the cancellation of the decision by the authority to apply these prices on cars.
The application of indicative prices was a sudden decision enforced from 1 January 2015, and is ongoing. It led to a halt in imports of German cars, which were not permitted to enter the market.
Some German companies confirmed that the ECA is still applying the decision, even after they presented all the documents which proved the validity of the receipts and stamps by the mother company. The authority also still requests that the companies form investigation committees to prove the validity of their documents.
Some agents for the companies created a file on the incident, which will be presented and discussed in President Abdel Fattah Al-Sisi’s next visit to Germany. Some of the agents will accompany Al-Sisi, as they along with businessmen working with the German companies.
The conflict broke out when the ECA quarantined hundreds of imported cars in the customs port and refused to release them. This took place after the change in the indicative prices on imported products at the start of the year.
The decision was taken regardless of the fact that the automotive industry has the biggest share of imports. This led the authority to revise its pricing policy and evaluate cars as per their models and specifications. The indicative prices will be applied depending on the cars prices from the mother company.
With the new prices applied, some importing companies started to file complaints against the ECA, saying that these prices are “false”. They considered them as buying prices from inside the country of origin, while the prices given to automotive agents from the mother company are different.
Some automotive agents stated that the new indicative prices decided by the authority, in some cases, exceed a 50% increase compared to the buying price.
According to the agents, the authority should have first discussed with the importing companies the decision and informed them of the new customs calculation. The authority should not have put agents in such a position and accused them of manipulating the market unjustly.
The ECA neglected several factors in the decision, some of which are the technical specifications for these cars, which are sometimes different than the specifications offered to Egypt, the agents added. Some of the prices given to the agents are also different from the prices given by the mother company and its marketing map.
The German-Arab Chamber Of Commerce sent a letter to the Ministry of Finance expressing its concerns over the authority’s decision to raise indicative prices by almost 30%.
The chamber said this decision will lead to a price increase on consumers, which means that not everyone will be able to buy these cars. The decision will also force investors to exit the market.
Head of the Trade Agreements Sector at the Ministry of Trade and Industry Saied Abdallah said that indicative prices for cars cannot be decided by the ECA. This could only happen through applying the agreement within Article 7 of the GATT Agreement, which concerns customs evaluation. This agreement, thus, gives the authority the right to re-evaluate and re-price commodities coming from abroad according to what it deems is convenient.
He added that the customs evaluation agreement calls on the customs authorities to determine the value based on the price paid or payable, based on the plea of the deal importer through the presented bill, which is evaluated by customs. The authorities also have the right to refuse the deal’s value when they have reason enough to raise doubts about the sincerity or accuracy of the value announced by the importers or the documents they present.
To protect the interests of importers, the customs authorities must provide them with the opportunity for justification, either through correspondence or direct dialogue between the parties. If the customs authorities are not satisfied with the justifications provided, it shall inform the importers in writing of the reasons for non-acceptance of the value of the deal announced.
Abdullah pointed out that the agreement determines the discretion granted to the customs authorities in determining the value of duties when the value of the deal is unacceptable through six methods. When determining the value on the basis of these methods the customs authorities must consult the importers and take their views into account.
The second method is the ECA placing guiding prices by using Egyptian Commercial Representation Offices abroad to inquire about the price of the car in the country of origin. Shipping and transportation expenses are therefore added to figure out the cost of the car upon its agent in Egypt before payment of customs.
The ECA explained that such a procedure is primarily for the protection the country and the citizens from what they called “the greed of importers” and the reduction of manipulation in the bills. ECA Chairman Magdy Abdel Aziz said that most bills come with forged values far from the truth.
He pointed out that more than 90% of the automotive importing companies submit false bills where the prices are sometimes50% less than the announced prices of these cars in the country of origin. This is what pushed the authority to take this position to reduce fraud and recover the rights of the state and the right of the citizen in the first place.
Abdel Aziz also explained that this procedure did not come by chance or due to intransigence, as alleged by some. In the beginning, the ECA formed a committee to fact check the submitted bills and found them to be false. It accordingly sent letters to Commercial Representation Offices in the countries imported from, to examine the validity of these letters. The response said the bills were true and issued by the parent company.
Investigations showed manipulation by some international companies and their representatives in Egypt. The ECA wrote again to the commercial representation offices demanding the provision of selling prices for individuals in the country of origin and tax and custom rates imposed on these cars. Based on the response of the Egyptian commercial representation offices, these prices were recalculated, cutting off customs and tax rates imposed by the country of origin, in addition to shipping and transportation prices.
Abdel Aziz revealed that the authority issues these guiding prices in accordance with the powers of law and international conventions which allow them not to accept the bills. He said: “The strange this is that the price difference was 40% more than what the importer presented, and thus the authority stopped the delivery procedures of the cars from customs.”
According to the law, the ECA demanded the sending of the bills and amending them; it also received some automotive companies and held discussions with them. Some companies complied with the requests of the authority, while others refused such procedures and began to address multiple entities to pressure the authority to retreat from this decision.
The ECA Chairman emphasised that the authority has no intention of retreating from the guiding prices, especially after the discovery of importers’ multiple manipulations. He added that the right of the country and the right of the citizen are the priorities of the ministry and the authority. He considered this step the beginning of launching a correction system for Ministry of Finance and the ECA.
Regarding the authority’s position on the complaints filed against it by some companies, Abdel Aziz asserted that he reviewed all complaints and the authority responded to them according to law. He added that he will not be subject to the companies’ policies of pressure now.
“We are moving in accordance with the legal rules and the procedures set forth by international agreements” said Abdel Aziz.
“Whoever wishes to discuss any procedure should visit us to discuss the possibility of helping him according to the law and whoever has a right will get it immediately,” he added. “As the authority supports importers and investors, we also protect the country and the people.”