• 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.

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 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 website of the Egyptian Customs Authority has its limitations. For example, information regarding the applicable customs fees/duties is available only in Arabic. Thus, foreign companies always rely on third parties for information, especially for preparing documentation that accompanies containers, which in most cases differ from the requirements available online.

• Upgrade and update the content of the Customs Authority website, ensuring that it contains updated procedures and regulations in the English language in order to avoid any possible confusion for foreign investors.
• Ensure that the Customs Authority website includes updated and accurate information regarding all the documents that must accompany the containers.

• 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 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.