Customs Authority, European automotive companies at loggerheads over tariff exemptions

Ahmed Amer
5 Min Read

Several European automotive companies that operate in Egypt have claimed that the Egyptian Customs Authority has yet to implement the exemption for imported service parts.

The customs exemptions were set to go into effect at the start of 2016 under the framework of the EU-Egypt Association Agreement. The association agreement provides for a complete customs exemption for six classes of service parts, while an additional two other classes will see a deescalating tariff rate that will approach a full exemption.

An official source at a German automotive company operating in Egypt told Daily News Egypt that the Custom Authority announced that it would provide customs exemptions for six classes of service parts; however, the German company has still been subject to custom tariffs.

The manager of the agreements department in the Customs Authority, Ali Galal, confirmed to Daily News Egypt that the exemption had been in effect since 1 January. He explained the continued enforcement of the tariff by indicating that only those companies that possess valid certificates of origin will be granted the exemption.

According to the customs authority, the exemption will be applied to service parts, such as safety and security glass composed of tempered glass. The current tariff on these items is 10% of the stated value.

For the additional two classes of service parts that have not received a full exemption, the tariff rate has been reduced by 85%, and a full exemption will be applied by the beginning of 2017.

In 2013, the customs authority exempted 14 classes of service parts in accordance with the EU-Egypt Association Agreement. The most prominent among those items exempted were rubber tires, as well as clutches, brakes, and airbags.

The Customs Authority granted an exemption to European cars with an engine displacement of 1300cc or less at the beginning of 2016, a source in the Ministry of Finance told Daily News Egypt.  The decision falls under item 4 of the EU-Egypt Association Agreement, the implementation of which began in 2008.

The source also explained that item 5 in the agreement includes provisions for a reduced tariff rate for European cars with an engine displacement that exceeds 1300cc. However, this reduction will not come into effect until 2019.

The source in the finance ministry explained why the government focuses on certificates of origin. Although there are several Asian and US automobile companies operating in Egypt, much of the production occurs in European countries. Thus, they are subject to the EU-Egypt Association Agreement.

The source in the finance ministry claimed that the discrepancy between government institutions and automotive manufacturers – both European and Egyptian – is rooted in misinformation regarding the period of implementation and the attendant procedures and regulations governing enforcement. Egyptian automobile companies expected that the agreement would remain effective, with the possibility for a revision that would lessen the privilege provided to European companies.

Other parties were unaware that the Customs Authority’s 2008 decision would be divided into several phases, with the most prominent one stipulating a 10% reduction in the tariff rate for imported cars to be implemented in two classes. The first category includes cars with an engine displacement between 1300cc and 1600cc, while the second category applies to cars with an engine displacement between 1600cc and 2000cc. Those cars with an engine displacement below 1300cc will receive an annual reduction of 15%.

At the time of the enforcement, the Customs Authority did not expect to see the introduction of 1200cc turbo engines onto the market.  According to Galal, the government did not expect to provide a reduced tariff to European cars in this class.

The Customs Authority will provide full exemptions for cars of European origin by 2019, reducing the government’s ability to collect tariff revenue and insulate the Egyptian automotive market.

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