• Problems in implementing the temporary admission and drawback systems; thus, they are less able to fulfill their purposes. 
• Additionally, two issues related to these systems stand out:  

1. Determining waste percentages. 
2. Determining the input-output coefficient, which, in turn, determines the amount of duty refund.

• Revamp the duty and fees refund process (refunds of safe custody fees, and other fees associated with withheld cargo and imports released under temporary admission). This should build trust and confidence in the customs and tax authorities among importers and exporters.

Businesses face many problems with the temporary admission system, including:

• The procedures for releasing the letters of guarantee are lengthy and complex.
• Customs duties are imposed on imported factors of production, especially equipment and machinery, that are used in the manufacturing of export products. 
• Exporting is complex and time consuming.  It usually takes a year to conclude an export operation—from the time the bank guarantee is issued to the release of the shipment for exporting; this issue is compounded by the fact that these procedures are lengthy, and usually go beyond the grace period granted to investors (the period of time immediately after the arrival of the imported raw materials, during which investors should export their products).

• Adopt the system of risk management for customs control. Under this system, businesses with an established solid reputation as importers, as well as reputable suppliers and customs brokers would be cleared through the green clearance track (no inspection). At the same time, take necessary and adequate protective measures, and in the case of offences, impose punitive measures, including having offenders go through the red clearance track (inspection).  
• The Customs Authority should consider entering into arrangements with companies that have solid track records of fulfilling the customs requirements on time—whitelisted companies; the arrangements should contain stringent penalty clauses that are to be applied in case the company fails to abide with the rules and regulations.
• Amend Article 98 of the Customs Law No. 66 of 1963, as amended by Law No. 172 of 2018, concerning the temporary admission system. The amendment should include the following:

1. Extend the life of the temporary admission permit to four years.
2. Eliminate the requirement that importers submit a letter of guarantee, submitting an insurance policy should suffice. 
3. Eliminate the penalties imposed on surplus raw materials that were not used in production, paying customs duties on the surplus should suffice.
4. In collaboration with the Industrial Control Authority, simplify and facilitate the setting of input and output coefficients the waste percentages, and fix the rates to ensure fair treatment among exporters.

• The provisions of the Customs Law dealing with container handling services are outdated, thus, the efficiency of container handling operations are severely undermined. This can be attributed to several long-standing operational efficiency shortcomings. Containers are transported from seaports to dry ports under the supervision of the Customs and the police, and the clients bear all fees and the burden of any delays. More so, there are no representatives of the supervisory authorities available in dry ports, so in the event that a customs dispute arises between an importer and the customs authorities in dry ports, the importer is forced to return to the original port to address the issue.

• The Customs Authority and all other relevant agencies should refrain from issuing directives related to import/export activities until they consult with the Agreements and Foreign Trade Sector of the Ministry of Trade and Industry. More so, the new bills of landings should be accepted. 
• The new customs law should take into account all international best practices and adhere to the Revised Kyoto Convention regarding customs control.
• Egypt should accede to the International Convention for Safe Containers (CSC); the new bills of lading should be accepted.  

• The Customs Authority issued Circular No. 5 of 2020, which details the requirements that must be adhered to when importing production inputs; the requirements include submitting the following two documents: 

1. Proof of business activity document (or operating license) from the issuing authority.
2. Gas and electricity bills as evidence of business activity.

• In general, the issuance of abrupt directives by the Customs Authority represents a major hurdle for manufacturers and importers; the subject directives is unjustified, especially that industrial enterprises that import production inputs are already subject to the supervision of other government entities, such as the Industrial Control Authority and IDA. Additionally, the directive undermines earlier efforts by the government, including the introduction of the whitelist.

• A complex and problematic customs valuation system that obstructs importation; having in place an efficient importation system is essential for ensuring the availability of production inputs and equipment and thus enhancing investment.

• Adhere to the Customs Valuation Agreement (“improving” invoice prices), as the valuation of goods for customs purposes is one of the biggest obstacles facing importers, especially those included on the whitelist. 
• Adopt a customs risk management system and an import risk analysis scheme, under which source countries are classified based on specific risks identified.
• Establish clear operational mechanisms for the inter-entity committee (includes the five relevant entities) to ensure that release of shipments is not disrupted in the event that a member of the committee is absent. 
• Consolidate customs transactions and ensure the electronic connectivity in all customs outlets in Egypt, and that all transactions are conducted electronically.
• Establish a timeframe for carrying out the reviews that take place after the release of goods (conceivably 2 weeks from the date of release), as the importing company may have sold the goods and collected their money during that period.
• Misr Technology Services should develop electronic connectivity between customs outlets to reduce the time required for the release of cargo.
• Use an AI program to create a whitelist of companies, using a number of variables, including credibility, reputation, the history of its business dealing, the country of origin, the type of imported goods, the category of good, whether fully-manufactured goods or production inputs, and the importing entity.

• A whitelist including 75 companies was created; while a positive step, it should be expanded to include all companies, so that blacklisting companies is the exception rather than the rule. It is also important that the criteria used for creating both lists be revisited, as many of them are hard to meet.

The drawback system poses a series of challenges, including: 

• A large number of required documentation and the multiplicity of entities involved in the process.
• The difference in opinions between the manufacturing exporters and customs officials regarding the mechanisms for determining the rates at which drawback could be granted.
• The delayed payment of drawback claims (sometimes it can take up to two years).  

• Introduce an online notification system, whereby importers, companies, and factories, receive timely expiration alert notices once they log onto the website using the client identification number. The system should allow clients sufficient time to renew and resubmit their documents as required in Customs Handbook No. 46. 
• Ensure that companies and factories are duly notified via registered mail of any additional fees or duties, which were determined by the audit department upon reviewing previously cleared cargo. 
• Provide the relevant customs broker with a photocopy of the claim notification. More so, allow the customs broker to review and discuss the claim with the audit department, and have them sign a statement indicating that they will notify the concerned business of the claim to avoid the unnecessary escalation of the situation; this will help businesses avoid the risk of an administrative order of attachment in the event they fail to address the claim as they may not be aware of any pending claim.

The New Customs Law No.207 of 2020 was issued, and among the most important features of it are the following:

• The law added to the places that judicial police officers have the right to enter the headquarters of exporters and natural and legal persons related to customs operations, including those located in economic zones of a special nature and free zones.
• Increasing the period of commitment to keep papers and documents to five years instead of three years previously, and in the subsequent review, it is permissible (in addition to reviewing the documents) to review the goods themselves, if any.
• Taxes and fees due may be recalculated.
• Fees have been imposed for services for the single window, prior inquiry, work outside official working hours or outside the customs office, and any other actual services provided by the Authority.
• Customs exemptions have become part of the articles of the Customs Law and not a separate law.
• The previous letter of guarantee was canceled before the recent amendments to the value of the customs tax, and it became a condition for exemption that the importer deposited with the Authority a guarantee of other various taxes and fees, and that the re-export takes place within one and a half years from the date of release, and it may be extended for periods exceeding one year.
• In the temporary release, the text has not yet specified the customs tax rates for machinery, equipment, devices and containers.
• Shipping lists – The text obliges the captain or agent of Al-Malhi to register in the manifest all the goods transported by sea and to sign this list, and if the goods are prohibited items, they must be recorded in the list with their real names, and the carrier or agent must ensure the identity and name of the recipient of the goods before shipment, and the recipient's acceptance of shipment, and the carrier or agent is obligated to re-ship the prohibited goods in the event that the data provided by him is incorrect and the person concerned does not progress to complete Customs procedures, if the carrier or agent does not return the shipment, it shall be executed at his expense under the supervision of the Authority.
• Pre-clearance – The law allows the importer or agent to take pre-customs clearance procedures and pay the taxes and fees estimated initially before the arrival of the goods to the territory of the republican customs tariff, and that the final settlement is made after the arrival of the goods in accordance with the window at the time of release.
• The Authority may inspect the goods to match them with the explanations contained in the statement and may inspect all or part of the goods or not inspect them.
• In the event of a dispute between the Authority and the person concerned, the text did not specify the mechanism for selecting the chairman of the arbitration committee, and we have previously suggested that this be by agreement between the arbitrators of the person concerned and the Authority.
• With regard to the penalty for smuggling, there is a double fine and penalty, a conflict in the periods of imprisonment and the restriction of freedoms.
• What is collected from fines and compensation shall be in favor of the Authority, and the goods - the object of the crime - and the means of transport, tools and materials used in smuggling shall ensure the payment of fines and compensation in the event of the occurrence of the crime from its owner or representative, and it would have been better that the collection of fines be for the benefit of the State Treasury until it is deliberately done with those dealing with the Authority to increase the proceeds of the its income to be disbursed as rewards to its employees. 

Recommendations Related to the New Law:

• The law must clearly define what is meant by a container.
• It is not permissible to enter the premises of shipping companies without prior judicial authorization because this article gives customs officers unlimited powers.
• Reduce the period of commitment to papers and documents.
• Not Recalculating the taxes and fees due.
• Cancellation of special fees for single window services, as this fee contradicts with the Investment Law, which stipulates that no administrative authority may issue general regulatory decisions that add financial or procedural burdens related to the establishment or operation of projects subject to the provisions of this law, or impose fees or fees for services on them or amend them, except after taking the opinion of the Authority's Board of Directors and the approval of the Council of Ministers.
• Determining the customs rate on machinery and equipment.
• The legal text should specify the mechanism for selecting the arbitration committee in the event of a dispute.
• Elimination of double fines and penalties.

• The Egyptian Customs Authority has requested from some of the industrial and commercial multinational investing and operating enterprises in Egypt to pay the differences from the customs and other fees paid on raw materials and production inputs that are imported to manufacture its products in Egypt and the finished imported products in order to sell them in the local market on the basis that these payments and paid revenues is part of the value of customs equipment. Hence, the customs and other fees should be paid for it,, even though that the larger portion of the established contracts in that regard with the main company HQ which states that the payments and revenues that is paid to it are payments correlated to the production and utilization of the trademark about the sold products in Egypt and it has nothing to do with the raw materials or production equipment imported through the foreign enterprise in Egypt; there are no payments given to the main enterprise, thus, these payments are not included in the category of the value of customs’ products.
• The value base for customs products value for commercial enterprises included payments for finished products that are imported from trade agreement states which are exempt from customs and the requests included the payments for products manufactured in the enterprises’ factories in Egypt (not established in the free zones).
•  Assuming that enterprises accept the application on the raw materials, the bases used by the Egyptian customs were flawed as they included local cost elements such as workers’ wages, and local raw materials
• These requests are issued to companies retroactively for a period of five years after the companies announce the results of their businesses, distribute the profits, and pay the taxes due for those years which causes companies to bear additional burdens that were not previously taken into account, and of all this, it leads to an increase in the cost of production in Egypt compared to other countries which affects the competitiveness of the Egyptian product. Taking into account the ease of the business climate in those countries, also, some of the foreign companies’ operation in Egypt were under administrative seizure and its bank balances got frozen, which led the companies to resort to the judiciary to lift the seizure which in turn reflected an undesirable image of the business climate in Egypt.
   

• Not adding those amounts paid from royalties and licenses for the use of technological right included in the cost elements upon which the customs value for raw materials and imported production inputs are added/calculated to, according to the Egyptian Customs Law and its Executive regulation as well as the international Agreement on Value for Custom Products.

• Customs clearance is a very lengthy and redundant process in Egypt. Whereas customs processing time does not exceed two days in neighboring countries, such as Turkey and the United Arab Emirates, it ranges from two to five weeks in Egypt.

According to the World Bank Group's Doing Business 2018 Report:

• The customs clearance process for exports in Egypt consumes 136 hours at a cost of $100 per container, whereas it consumes 37 hours, 20 hours, and 33 hours, in Morocco, Turkey, and UAE respectively; in OECD countries, the processes consume about 2 hours at a cost of $35.4 per container.
• The release of imported shipments takes up to 505 hours at a cost of $1,554 per container in Egypt. In contrast, the cost per container reaches $344 in Morocco, and $126 and $961 in Turkey and UAE respectively. In OECD countries, the process takes about 3.5 hours at a cost of $25. 

• Set targets to reduce the customs clearance time for imports and exports by 2021, to be on par with developed countries: from 505 hours to 24 hours for imports and from 136 hours to 24 hours for exports; and eliminate financial penalties associated with delays.
• Introduce a customs risk management system and an import risk analysis scheme, under which source countries and goods are classified based on specific risks identified.
• The Ministry of Finance should sign a protocol agreement with the World Bank to develop the customs systems and facilitate cross-border trade in line with international best practices; this will increase the confidence of foreign investors in Egypt. 
• The issuance of a final release permit should suffice to lift any reservation that may be placed on the shipment. This can be achieved by consolidating the efforts of the General Organization for Export and Import Control (GOEIC) and the various ministries; the issued consolidated final release permit, approved by GOEIC, should allow the importer to take the shipment out of his warehouses, regardless of its geographical location. 

Delays in customs clearance result in many challenges, including:

• Disruption of production, undermining the ability of industrialists to meet deadlines and diminishing the efficiency of working capital. Ultimately businesses incur significant losses due to late delivery penalties that they have to payout. 
• Burdening businesses with excessive storage fees, as trucks wait long in ports awaiting loading.

Several factors contribute to customs clearance delays, including:

• The procedures for inspecting, appraising, reviewing, and examining cargoes are laborious and lengthy.  
• The opening and full inspection of export containers in the customs area, with no consideration given to putting into effect the whitelist, which includes exporters with a solid track record of fulfilling the customs requirements on time. 
• Prolonged cargo clearance processes in airports, particularly with the introduction of one-stop shops (the process can take up to 3 months), noting that fees can reach LE 1,300 per shipment.
• Fees for laboratory analysis fluctuate, even when the volume/quantity of the sample remains fixed.
• In some instances, the Customs Authority will stop doing business with some inspection companies without notifying importers. 
• Many spaces that are designated for cargo examination are located outside the customs area, which prolongs the time period for sample examination.
• The severe shortage of ultrasonic testing equipment, and the reliance on the manual examination and inspection, which entails opening the containers.
• The insufficient number of laboratories in customs points to carry out all kinds of analysis and testing.
• The continued reliance on traditional paper-based processes, rather than adopting digital communication methods for interacting with clients or other government entities. 
• The less than adequate digital interconnectivity across the various customs points, especially in remote areas, which results in delays in cargo release. 
• For cargoes that require a permit from the Ministry of Health, the Customs Law does not provide for a specific time frame for completing the sample inspection. In some instances, the inspection takes up to 25 days due to strikes by workers of the Central Laboratories (affiliated with the Ministry of Health) in the Port of Alexandria. As a result, samples are sent to Cairo for analysis, which leads to the accumulation of samples awaiting analysis, and thus delays in the clearance process.  
• Due to the poor coordination among the different competent entities, customs officials sometimes issue arbitrary decisions to halt the clearance of shipments, which disrupts work.  

The following examples illustrate the problem:

• The release of shipments containing materials used in the manufacturing of cosmetics came to a halt in border customs points until the payment of the health stamp tax (retroactivity, going back to 2015). This decision was based on a decree issued by the Ministry of Health; however, the said decree did not pertain to cosmetics, but rather pharmaceuticals, and had no legal basis.
• Customs officials suspended export shipments of tea bags for weeks, on account of an internal circular concerning tobacco, which had nothing to do with tea.
• An examination of frozen corn shipments intended for human consumption came to a stop in response to a letter from the commercial representation office in Spain, the country of origin; the letter noted injuries in the corn crop, however, without providing any scientific evidence.

• The Prime Minister issued Decree No. 20 of 2019 forming a ministerial committee to monitor the implementation of the single-window system. The system, which aims at facilitating trade and improve the investment climate, is implemented by the Ministry of Finance.
• The Minister of Finance issued Decree No. 74 of 2019, which stipulates that an Egyptian company, MTS Logistics, shall implement, manage and operate the national single-window system in accordance with the contract concluded with the Customs Authority. The implementation framework for the single-window system was released.
• The plan, including the timetable, for developing and implementing customs applications for the national single-window system for foreign trade was released.
• A study prepared by the Ministry of Planning and Administrative Reform on rationalizing imports and developing exports included the following two key recommendations:

1. Continue with the efforts to prevent smuggling at customs points and harshen the penalties against smugglers.
2. Accelerate electronic connectivity between the Customs Authority, GOEIC, and IDA to reduce the time and cost of transactions.

• Duplication in the inspection of imported goods is burdensome; cargo is inspected twice: once in the country of origin, before shipping, and again, upon arrival in the receiving port; a practice which is superfluous and results in wasting time and resources. 
• Regulations allow a company to avoid obtaining a pre-inspection certificate by registering in the whitelist register of GOEIC, however, the registration process is complicated and time-consuming. 
• Customs officers challenge the invoice submitted by the importer even though it was approved by the Chambers of Commerce in the country of origin. Even though importers provide all the required supporting documents as proof of the true value of goods (e.g., the authenticated formal contract with the supplier, the supply orders), the dispute continues, and eventually, the invoice values are adjusted upwards “invoice price improvement”, especially for raw materials imported from outside the EU.
• Decree No. 394 of 2019 imposes fines for late submission of required documents to Customs, however, it does not impose any fines on Customs for clearance and release delays. 

• Review and amend the inspection-relevant provisions in the laws and regulations to align with the WTO Agreement on Pre-shipment Inspection. Destination inspection should be performed at random, in accordance with accepted random sampling techniques. Specifically, amend the relevant provisions of the Agriculture Law No. 53 of 1966 to align with Article 83 of the Executive Regulations of the Import/Export Law Regulations (issued via Ministerial Decree No. 770 of 2005) to eliminate duplicity of efforts in the import inspection process. In this regard, it should be noted that Decree No. 991 of 2015 perpetuates the system of duplicative inspection by mandating that any inspection company be barred (for a period of six months) from doing business with the competent government entities if the results of the random inspection of the tested sample differ from the results stated on the inspection certificate provided by the company (in the event the situation recurs; the company is to be barred permanently). 
• Reevaluate the reference prices of imported raw materials and other goods to combat evasion of customs duties, and periodically update them in coordination with the chambers of industry across the industrial sector.  Correcting reference prices will help reduce opportunities for evasion, restore balance to the market, and promote fair competition.
• Approve the adoption of the whitelist scheme for dealing with commercial invoices. Invoices submitted by companies included on the list should be accepted and fully recognized without the need for reverting to the use of reference prices. In the instance a company commits a violation, it should be penalized and fined, and removed from the list. 
• The Minister of Finance should issue a decree obligating the Customs Authority to set a maximum time frame for completing all customs-related transactions; the decree should also obligate it to pay penalties to the importer in the event the maximum time frame is exceeded due to bureaucratic hurdles.
• Activate the inspection-related provisions of the Executive Regulations of the Import/Export Law, which mandate a single inspection of goods. In this regard, approving the inspection and review certificate issued either by a foreign entity accredited by the International Accreditation Federation or by an Egyptian or foreign entity that has accredited laboratories specializing in the required tests for each commodity, approved by the competent minister, or carrying out an inspection in the laboratories of GOEIC should suffice.
• Revisit the implementation procedures contained in Ministerial Decrees 992 of 2015, 43 of 2016, and 44 of 2019  , which set out the requirements for registering foreign manufacturers and companies before exporting specific products to Egypt. While a number of companies have fulfilled all the registration requirements two years ago, to date, they remain unregistered. The decrees in themselves are consistent with international agreements and the World Trade Organization, however, the implementation mechanisms are deficient, leaving behind many companies, including ones with a solid global reputation for high quality, unable to register despite fulfilling all requirements. Thus, if the factory has a solid quality control system in place, then a certificate confirming the existence of this system, issued by an accredited entity should suffice; this is consistent with Section 1 of Article 2 of Decree No. 43 of 2016, which states: “…….A certificate confirming that the manufacturer has a quality control system, issued by a body recognized by the International Laboratory Accreditation Cooperation (ILAC) or the International Accreditation Forum (IAF), or by an Egyptian or foreign governmental entity approved by the minister responsible for foreign trade.” 

Thus in this regard, the following is recommended:

• Ensure the proper application of the provisions of Decree No. 43 of 2016; submitting a certificate from an accredited international company attesting the adoption of a quality control system should suffice; obtaining a quality certificate should not be required.
• GOEIC should directly register companies that meet the requirements; there is no need to issue a ministerial decree to that effect.  
• Publish a list of companies that meet the quality systems in the Egyptian Gazette.

• The procedures involved in transferring samples between GOEIC and its central laboratories, as well as the analysis procedures are sometimes slow.

• GOEIC and its central laboratories should consolidate their efforts to streamline the sample analysis procedures; the private sector can provide financing for laboratories or modern equipment.

• For releasing cargo, regulations require that certificates be authenticated by the Egyptian embassy in the country of origin, as well as the chamber of commerce of that country.

• Abolish the requirement that import documentation has to be authenticated by the Ministry of Foreign Affairs, as it is superfluous.

• IDA’s instructions regarding the registration of production inputs violate Article 15 of Ministerial Decree No. 835 of 2017, which amended some provisions of the Executive Regulations of the Import and Export Law, which were issued by Ministerial Decree No. 770 of  2005.

• Repeal IDA’s instructions; there is no different customs duty rates for the industry than for trade; only production inputs used in assembly industries are subject to different duty rates, in accordance with the rules regulating them.

• While Ministerial Decree No. 43 of 2016, which amended the rules governing the registration qualified foreign manufacturers prior to exporting their products to Egypt, is aligned with international agreements and the World Trade Organization rules, yet, there are a number of issues with the implementation mechanisms of the decree. For example, Section 1 of Article 2 of the Decree mandates that factories interested in registering must provide, among other documentations, “….. A certificate confirming that the manufacturer has a quality control system, issued by a body recognized by the International Laboratory Accreditation Cooperation (ILAC) or the International Accreditation Forum (IAF), or by an Egyptian or foreign governmental entity approved by the minister responsible for foreign trade.”
• Yet, to date, several companies that have been met the requirements set out in the decree remain unregistered, including a number of companies that adhere to high quality standards in their internal operations, and which enjoy a stellar international reputation.

• Reconsider the implementation mechanisms of Ministerial Decree No. 43 of 2016, which was intended to serve as an interim measure prior to the decision to float the Egyptian pound).
• Ensure the correct application of the quality system-related provisions of the concerned Ministerial decree; providing a certificate from an approved accreditation body should suffice, there is no need to require the submission of the certification of quality. 
• Allow companies, which fulfill the prescribed conditions and procedures of registration, to be directly registered by the General Authority of Export and Import Control, without the need for a ministerial decree to effect the registration.  
• Publish the list of companies that meet the quality system requirements in the Egyptian Gazette. 
• Consider developing a whitelist of international companies, across all sectors, which enjoy a strong reputation; allow these companies to be automatically registered.

• In January 2019, Decree No. 44 of 2019 was issued expanding the list of goods included in Ministerial Decree No. 43 of 2016. The expanded list included bags/suitcases; items for packaging and transporting goods (e.g., containers, boxes, bags, and similar products); shaving and hair care appliances, and telephones.  

• The precious articles and jewelry industry encounters a range of problems with the Customs Authority, the Taxation Authority, banks, and the Assay and Weights Authority. The current practice of calculating fees and dues as a percentage of the value of the product is not reasonable in the case of gold products, where the value is very high and the rate of profit rate (workmanship) is low.

• Restructure the Assay and Weights Authority and bring it back under the umbrella of the Ministry of Trade and Industry. The restructuring exercise should entail reformulating and improving the relationship between the Assay and Weights Authority and the gold manufacturers and traders to combat the rampant fraud prevailing in the market so that the industry can reclaim its credibility and foreign markets.  More so, the effort should include reviewing and reforming the customs regulations that limit the export of precious articles, and raw materials used in the production of jewelry, as well as addressing all bureaucratic obstacles that hinder the industry.

• Domestic manufacturers face unfair competition from imported finished wood products. 

• Ban the importing of fully-finished wood furniture—final products.  

• Cotton-relevant Agriculture Policy 

• Expand the cultivation of short- and medium-staple cotton instead of importing them.
• Continue with cultivating long-staple cotton, taking into account the quantity that can be exported and the needs of the local industry.
• Encourage investment in ready-made garment industries that use long-staple cotton.
• Allow cotton imports from all countries and repeal the decision that limits importing to specific countries.

• Simplify the procedures for mines, quarries, and salterns mineral to export their products; ensure that timeliness of shipping so that exporters do not have to pay delay penalties, which undermines their productive capacity and competitiveness; set a time limit for issuing export approvals, provided that all documents are complete, and in general, review all the conditions and requirements for obtaining export approvals in light of the obstacles faced by exporters.