Egypt new Custom Law

The Egyptian President recently approved the bill for the new Customs Law (Law No. 207 of 2020) (the ‘New Law’) to replace the existing Customs Law (Law No. 63 of 1966) (the ‘Old Law’). The New Law which came into force on 12 November 2020, introduced provisions that should improve the customs system in Egypt, and attract foreign investment to Egypt.

However, the New Law includes controversial articles concerning the activities of Carriers (Maritime, Air, and Inland), such as holding the Carrier liable for inaccurate description of cargo, and prohibiting the Carrier from transporting goods imported by traders that are not registered in the customs system. Furthermore, the New Law obliges the Carrier to re-ship the prohibited goods or destroy them at its own expense if the importer/cargo receiver failed to attend to with customs procedures.

Key highlights

Customs officials:

The New Law entails that all papers, records, files and documents related to customs operations must be retained for five years starting from the date of cargo’s]. Otherwise, a fine equivalent to the applicable tax on the goods may be imposed. The New Law also allows customs officials to enter the premises of shipping agencies (without the need to obtain a judicial order) to review papers, records, documents and files related to customs operations of the said agencies.

Inland transit goods:

The New Law resonates with the provisions of the Old Law in respect of Inland Transit Goods. However, the New Law holds the Carrier liable for any loss, shortage or alteration of such goods, or for the damage or tampering of the seals while transporting these goods in transit.

Temporary release:

The New Law permits goods to be temporarily released with suspension of the customs duties and other fees due, upon submission of certain guarantees specified by the law. As for the temporary release of machinery, equipment, devices, containers and means of transportation, (except for passenger cars and commercial yachts for work and leasing within the country), customs duty is collected at the rate of 2% of the customs duty due on the date of temporary release for each month or part thereof, and with a maximum of 20% annually, for the duration of its stay inside the country until it is re-exported abroad or it is finally cleared. However, the New Law didn’t specify or exclude the empty containers from the application of the said occasion.

Preclearance:

The New Law introduces entirely new procedures regarding regulations on importation of goods. This is a distinctive feature of the New Law as it obligates the importer or its agent to present the documents related to the goods to be shipped to the country first before undergoing customs administration, so that [the Egyptian Customs Authority (“Customs Authority”)] can mark them with an initial customs Registration Number. The latter Registration Number should be passed to the Carrier by the booking parties, and the Carrier is obliged to impute the Registration Number into the Cargo Manifest and Bill of Lading, failing which the cargo will not be discharged from the vessel it is on. For the time being, we believe that the aforementioned procedures may be quite difficult to implement in practice. Moreover, the necessary mechanisms and frameworks for anticipated implementation have not been established or at least disclosed, especially regarding how the Carrier will be able to validate the Registration Number which will be explicitly provided by the merchant. It’s also worth mentioning that the newly introduced regulations] will indirectly affect the application of Bills of Lading issued “To order”.

Manifests:

The New Law requires the Carrier to mention in the manifest of their means of transport the types of goods registered with these goods’ real names, quantities, the number of their parcels and their marks. It also requires that the Carrier should not ship any goods belonging to importers not registered with the Customs Authority. Moreover, in the event the data provided by the Carrier is incorrect (in cases of prohibited cargoes) and the Consignee did not perform the customs clearance procedures, it will be the Carrier’s responsibility to re-ship the prohibited goods outside the country or to destroy them at the Carrier’s own expense. In this connection, prohibited cargo under the New Law includes goods that are rejected under the regulations.

Additionally, the New Law states the time window that the Carrier or its shipping agent must submit the Discharge Manifests, which is 48 hours prior to the ship’s arrival. The New Law implicitly applies the same period for the Loading Manifests. A failure to comply with the said time window carries a fine of EGP30,000. However, upon the implementation of the New Law, this new provision disrupted supply chain workflow as it does not consider several short voyages between Egypt and from nearby ports/countries (Haifa, Ashdod, Cyprus, Greece, Malta, Turkey, Jeddah) where the trip takes less than 48 hours. The fact which lead to the intervention of the Head of Customs Authority, which is an instruction order issued by the Head of Customs Authority

Sale of goods:

In relation to unclaimed goods whose owners have not released, returned, or transferred them to a free zone, free market, or economic zone of a special nature, Article 66 of the New Law reduced the period by which the customs officials are authorised to sell or dispose these goods to a governmental entity by one month, from four months in the Old Law.

Customs contraventions:

The New Law increased the fine imposed on Ship Captains for violations related to manifests from  EGP30,000 instead of EGP500 in the Old Law.  . Furthermore, the Carrier is now liable for discharging cargoes at yards other than those designated by the Customs Authority, although such operations are generally performed by the Container.

The fine imposed for simple violations such as causing damage to container seals and not following all customs procedures will increase to EGP10,000 from EGP200, in the Old Law. In our opinion, some of the fines of the New Law were excessively increased. The increment in some cases does not take into account that some of these offences are fairly common and could occur by mistake, or are not within the control of the would-be offenders.

Smuggling

The New Law defines smuggling as any act committed with the purpose of fully or partially (i) evading customs tax due or (ii) violating the regulations in force regarding prohibited goods within the 13 prescribed circumstances that are considered smuggling under the presented law.

The New Law sets out a new procedure empowering the Public Prosecution or the Competent Court, at a Minister’s or Customs Authority’s request, to order all entities and persons accused of smuggling cases to cease all commercial activities and dealing with the Customs Administration until a final judgment has been issued by the Court. This raises certain concerns for shipping agencies/Liners, as people/parties accused of smuggling might be pressured to admit liability or guilt in order to avoid any delays or interruption to their business, despite their innocence (given that no liner can tolerate such delays or interruptions for more than a few days)

The revisiting of the New Law was a must to reflect both technological developments and Egypt’s approach to make the country investment-friendly. However, some of the New Law’s articles dealing with Carriers and shipping agents could hamstring their activities. Therefore, we hope that the Executive Regulations will clearly define the Carriers’ role and liabilities, and comply with the international conventions ratified by Egypt.

Al Tamimi & Company’s commentary on the New Law with respect to the Maritime Carriers has been acknowledged by all the Chambers of Shipping operating in Egypt as well as the Egyptian Businessmen Association. We are closely monitoring any developments and we will provide further updates once the Executive Regulations are published.