Topic 1,
Sub-Topic 1
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Exemption, Duty Remission, Drawback, Refund and Rebate
Exemption, Duty Remission, Drawback, Refund and Rebate
Exemption of Duties and Fees
The 5th schedule to the Act provides for general and specific exemptions. Specific exemptions cater for the following:
- The presidents,
- Partner States Armed forces
- Commonwealth and other governments
- Diplomatic and first time arrivals
- Donor Agencies with bilateral or multilateral agreement with Partner States
- International and regional organizations.
- The war graves commission
- Disabled, blind and physically handicapped persons
- Rally drivers
- Goods and equipment for use in Aid funded projects
Exemption of Duties and Fees
- General exemptions provide narrative explanations for the importation of the following:
- Aircrafts operations
- Container and Pellets
- Deceased person’s effect
- Fish, crustaceans and molluscs
- Passengers Baggage and personal effects
- Samples and Miscellaneous Articles
- Ships and Other vessels
- Preparation for cleaning diary apparatus
- The complete list with the conditions for exemption is found in the fifth schedule
Duty Remission
- Section 140 of the EACCMA 2004, empowers the EAC Council to grant remission of duty on goods imported for manufacture of goods for export or for home use in case of an urgent national need.
- The procedure for approval of goods, for which remission may be granted, is provided for in the East African Community Customs Management (Duty Remission) Regulations (EACCMRR) 2008.
- EACCMRR 2008 regulation 6 provides that the remission of duty granted shall be valid for a period of twelve months from the date of the publication of the grant in the Gazette.
Duty Remission Application Procedure
- An application for remission of duty shall be made to the Council through the Commissioner in a specified form (Form R 1) in the Schedule to Remission Regulations.
- Upon receipt of an application for remission, the Commissioner shall forward the application to the Committee established to oversee remission applications for its comments.
- The Commissioner shall after receiving the comments forward the application together with his or her comments to the Council.
- The Council may for reasons to be communicated to the applicant reject or approve an application for remission under the Regulations.
East African Community Customs Management (Duty Remission) Regulations 2008
Arrangement of Regulations
Regulation Title
- Citation and commencement.
- Interpretation.
- Goods on which remission may be granted.
- Duty Remission Committee.
- Application for remission of duty.
- Publication of goods and manufacturers.
- Conditions attached to remission of duty.
- Entry and bond for goods imported.
- Cancellation of bond.
- By-products scrap or waste from process of manufacture
- Transfer, etc. of goods.
- Commissioner may authorize re-exportation.
- Maintenance of books and records.
- Powers of a proper officer.
- Revocation of grant.
Refunds of Duty
- Refund of duty is the payment of import duty or part of it, previously paid on imported goods which has been damaged or pillaged during the voyage or damaged or destroyed while subject to Customs control.
- The refund also refers to the payment of import duty or export duty paid in error.
- A refund claim may be effected where the commissioner is satisfied that:-
- The description, quality, state and condition of the goods; for which a refund is claimed, was not in accordance with the contract or that the goods were damaged before delivery out of Customs control or the goods with consent of the seller are returned unused or destroyed
- The goods for which a refund is claimed, were damaged or pillaged during the voyage or damaged or destroyed while under Customs control. A refund in this case will be proportional to what has been damaged, pillaged or destroyed
- Import or export duty was paid in error
- A claim for refund must be presented to the Commissioner within twelve months from the date of payment of duty.
Circumstances under which refund may arise include:
- Double lodgements where two entries are lodged and paid for to clear the same cargo
- Valuation dispute where a higher value led to over payment
- Tariff dispute where an issue under dispute led to overpayment
- Short landing whereby less quantities are received
- Payment under protest
- Undelivered cargo
- Goods imported are not in accordance with the contract of sale and if returned to the seller
- Goods are damaged or destroyed while under Customs control
- Goods are damaged or pillage during voyage
Duty Drawback
- Duty drawback is a refund of all or part of any import duty paid in respect of goods exported.
- This is a facility adopted within revenue administration to facilitate trade and encourage production of goods for export using imported inputs.
- During importation the manufacturer will pay duties for the imported inputs and will claim a refund when the final goods are exported or used in a manner or for a purpose prescribed as a condition for granting a duty drawback.
- The goods under duty drawback are subject to Customs control as per section 16 of EACCMA.
- Sections 138 to 139 of the EACCMA 2004 provides for conditions under which duty drawback can be allowed:
- The goods should be entered in a prescribed form and manner; and produced for examination by proper office prior to exportation.
- A person claiming drawback should Complete and subscribe a declaration on a prescribed form.
- For goods exported or put on board any vessel/aircraft for use as stores the conditions include that:
- The goods have been exported or put on board as stores.
- The owner, at the time of declaration of the goods for drawback was and continues to be entitled to drawback
- The goods, after having been put on board any vessel/aircraft for exportation or use as stores have been destroyed by accident and/or abandoned to Customs.
- For goods imported for use in the manufacture of goods which are exported, transferred to a free port or transferred to Export Processing Zone (EPZ), the drawback is allowed if the goods exported, transferred to a free port or EPZ are a direct result of the imported goods used in the manufacture of such goods.
- The claim for drawback is presented within twelve months from the date of exportation of the goods or performance of the conditions for which a drawback is allowed.
Learning Activities
- The following information was extracted from a commercial invoice for goods imported by DEF Enterprises Ltd:
Goods Description
Quantity
FOB
Duty Rate
Excise Rate
VAT Rate
Sugar
150 tonnes
6,500
35% or US$ 0.32 per 100 kg
–
16%
Hammers
1000 pcs
500
25%
10%
16%
Fertilizer
2000 tonnes
3,500
25% or US$ 0.23 per 50 kg
–
16%
- Additional information:
- Exchange rate is USD 1: Kshs 101
- The total Insurance and Freight Charges are USD 400 and USD 2,000 respectively.
- All the items are subject to IDF & RDL at 2.0% & 1.5% respectively.
Required:
- Compute the factor (estimate your answer to 2 decimal places).
- Determine the Customs Value for the consignment in local currency.
- Compute the total taxes and other charges payable for the consignment.
- Used White Toyota Hilux, P/UP Double Cabin was imported by MNP Limited, for its operations in Kenya. The year of first registration is July 2016; Year of manufacture is May 2013. Its engine Capacity is 2980cc. The Current Retail Selling Price for a brand new vehicle of a similar model is Ksh 2,700,000. The vehicle is subject to import duty, excise duty and VAT at 25%, 20%, 16%, respectively. The exchange rate is 105 Kshs/USD.
Required:
- Determine the Customs value of the vehicle.
- Advise on total duties, taxes and other charges that are due and payable by the importer if the time of importation is June 2021.
3. MSC Victory arrived at the sea port of Mombasa on 3rd December 20XX and begun to discharge on 4th December 20XX. The importer of a 1×40 ft container landed by this vessel made a Customs entry the following year, on 21st January 20XX but the goods were physically removed from the port on 30th January 20XX.
Required:
- Determine the Customs Warehouse Date.
- Compute Customs Warehouse Rent payable by importer.
4. Mr. XYZ is the owner of 123 Drink Ltd. He engages more with the distribution of various drinks. Recently he scored a deal and become the country distributor of STOUT beer from UK. Being unfamiliar with Customs procedure, Mr. XYZ appoints you as his Customs Agent. On your part you know very well that, as far as VAT is concerned the product is a taxable supply at a standard rate of 18%, 25% Import Duty and 6% exercise duty of 60%. The first consignment was 20 containers each having 3200 cartons of beer. The parking list shows that one (1) carton has 16 cans of 270ml each. The contract price charged to Mr. XYZ is $ 1.65/ lit (C & F). Freight charge is $1,500 while insurance paid for the consignment was $2,000.
Required
- Establish the total quantity in litres imported by Mr. XYZ.
- Compute the Customs value in local currency.
- Compute import duty, exercise duty and VAT to be paid by Mr. XYZ if the exchange rate on the date of entry was Shs .1,210 per one USD.
5. The students from Masai Mara Girls School were on a study tour in Dar es Salaam being hosted by Institute of Tax Administration (ITA) in collaboration with Tanzania Freight Forwarders Association (TAFFA). The students had planned to visit Dar es Salaam Port and other customs areas to gain expertise in various customs issues. On the part of TAFFA, you had been appointed to head the delegates. Miss Kidunducy, one of the talkative students asked,
- “You said most of the goods in customs area are there for the purpose of control. What types of goods specifically should we expect to find in those customs areas?”
- “What can we understand by the term goods being under Customs control?”
- “What is the reporting procedure for a ship coming from Mombasa to the Port of Dar es Salaam?”
Required
Respond to her properly basing your answer on the EACCMA 2004.
Assignment
- Explain the circumstances that may necessitate goods to be deposited to a Transit Shed.
- Explain the various types of goods which may be deposited to a Customs Warehouse.
- Explain the importance of the main supporting documents to an importation of goods by a returning resident.
- Discuss data particulars of an entry that have implications on the determination of Customs value of goods.
- Mr. Banjumni arrives in Tanzania by road at Tunuma Border accompanied by his wife Saadie and two children using a Toyota Hiace with Zambia registration. What Customs procedure will Mr.Banjumni and family adhere to on arrival, if they do not expect to return to Zambia.
- Discuss conditions that must be met for the following persons to enjoy exemption of duties in your country:
- Returning resident
- First Arrival Diplomat
- Physically challenged person