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Is URA hounding out small clearing agents?

By Patrick Kagenda

Small import/export clearing firms form the backbone of local clearing and forwarding business in most countries. So to survive in the competitive international trading environment “” both against bureaucratic red-tape and well-resourced multi-nationals, they have always naturally found strength in numbers by operating under umbrella bodies.

In Tanzania, small clearing firms are grouped under the Tanzania Clearing and Forwarding Association (TCFA) while in Kenya they operate under the Kenya Clearing and Freight Forwarding Association (KCFFA). In Uganda, it is the Uganda Clearing and Forwarding Agents Association (UCIFA) “” and recently its off-shoot, Uganda Freight Forwarders Association (UFFA).

Normally, the umbrella bodies recommend the licensing of clearing firms to the national tax body; in Uganda’s case URA (Uganda Revenue Authority). URA however also licenses firms outside the main local clearing association, UCIFA. While this was seen as good practice aimed at giving other firms that do not subscribe to associations a chance to do business, URA’s decision as of February 1 to revise the bonds has created suspicion about the ultimate objective of the tax body.

Sections of the clearing agents that spoke to The Independent claim that some senior URA officials who allegedly own clearing firms are pushing for these stringent measures to technically knock out some of the old small firms, thus creating business for themselves.

The contention, apparently, revolves around measures recently introduced by URA requiring all clearing agents to execute new General Customs Bond Security of a whopping Shs One billion which some of them contend is a veiled attempt to drive them out of business.

In a letter to one of the local clearing and forwarding firms that The Independent has seen, URA wrote thus: “Permission to have the above bond executed has been granted on condition that you can demonstrate that you have the financial capability of paying the otherwise due taxes equivalent to the bond should the insurance company executing the bond fail to honor our claims.”

The letter demands that the firm avails the following documents as a pre-condition: audited accounts for the years 2006-2008, bank statements, financial statements, evidence of ownership of properties by the company, and declaration of directors’ assets and directors’ returns.

Several clearing agents are however contesting some of the requirements, especially that touching on directors personal assets, and the size of the bond security (Shs One billion) saying they are redundant.

“What do directors’ returns, directors’ assets, and company assets have to do with bonds that are covered by the insurance. Put simply, by asking for these documents, URA is saying that it has lost confidence in the insurance companies. If this is the case then let them do away with the insurance companies they appoint to issue us bonds and ask us to declare our assets as security for bonds,” a clearing agent told The Independent on condition of anonymity for fear of victimisation.

Another agent said: “What URA is doing is asking for double coverage from the insurance and the clearing firm. URA has failed to differentiate between ownership of property by the company itself and the properties of the companies’ individual directors. This could be a sign of ignorance on the part of the commissioner for customs or a way of knocking us out of business,” he said, adding that even then, insurance companies that execute bonds are appointed selectively by URA. The issue of the bonds is a three-some affair involving the clearing agent, URA, and the insurance company. The insurers charge 1% of the bond sum of a consignment.

URA’s commissioner for customs Nicholas Kanabahita under whose docket customs bond security falls declined to talk to The Independent on the matter.

The new requirements that came into effect on February have disorganised not just the clearing firms but importers who have suffered huge demurrage and associated losses since their small agents cannot clear their goods. For example, a private importer who arrived at Busia border point on February 2 with his newly imported car from Japan had to spend two days at the border instead of the usual two to three hours trying to find an agent to clear his car for Kampala. He ended up spending Shs 400,000 in bribes, accommodation, etc instead of the normal Shs 120,000 for the import paperwork and agent’s fees. The Independent has established that indeed many vehicle importers have several units still stuck in Malaba and Busia awaiting bond clearance.

Now some clearing agents are accusing URA of shifting business to big multinational forwarders and shipping lines like Transami, Maersk, Safmarine, and Interfreight, to name a few, effectively giving them a foothold in the local clearing market.UCIFA chairman Omar Kasim, whom some agents have accused of “betrayal and politicising the clearing industry”, however dismisses his colleagues’ fears as baseless.

“URA has come up with a procedure to ensure accountability of the bonds. These people complaining are the irresponsible lot that has raised the rate of dumping goods in the country. They don’t follow up the cargo to see whether it has reached its destination. All they mind about is clearing it into the country and when it never gets out they even don’t report to URA,” he said.

He says when he took over UCIFA; there were 213 members who have since dropped to 112. Those [who dropped out] are issued licences directly by URA and he thinks it is some of them who are raising these complaints because they want “unprofessional” work. Mariam Sebunya, secretary of the 63-member Uganda Freight Forwarders Association (UFFA) too was dismissive, saying “if the other clearing agencies feel oppressed by URA, they should take the government body to court for redress”, adding; “We have a criteria and code of conduct we follow. The customs department of URA works in accordance with the East African Customs Act. If URA brings anything unfair, it should be taken to court, either the East African Community court or the Ugandan courts.”

But as officials of local clearing bodies dismiss opposition to the new rules as baseless, many of their members are crying foul and could soon be out of business. This will spell doom for small importers who will have to pay higher service fees to big clearing agents therefore increasing the cost of doing business and eating at their bottom line.

 

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