UNIT 7: EXAMINATION /VERIFICATION AND DELIVERY OF IMPORTS

Topics to be covered;
a) Legal provisions
b) Objectives of examination
c) Stopping of Single Administrative documents (SAD)
d) Scales of examination of various types of goods
e) Methods of extent of physical examination
f) Effecting alterations
g) Writing examination accounts
h) Examination accounts rough books
i) Electronic accounts
j) Re-packaging in customs area
k) Office management and offence reports
l) Procedure for release of goods
m) Treatment of containerised cargo
Legal provisions

Sec 34 of the EAC-CMA: the law stipulates that all goods and passengers coming into or being brought
into the partner state must go through specified areas and ports

The person in charge of the means of transport, owners of the goods and passengers must report to the
customs proper officer, fill prescribed forms, declare and sign and answer relevant questions.

Passengers and owners of goods and vehicles must remain in the customs areas until they are allowed by
the proper officer to unload or otherwise remove goods from the area particularly after payment of duties
thereon.

Objectives of examination

According to Section 41 of the EAC CMA, goods entered and delivered to a proper officer by the
importer may in the presence of the owner be examined by the proper officer to take account and
determine the accuracy of the entry made. The objective of the examination is to ;
► Check for concealment and under declaration of goods
► Check whether the goods are properly classified
► Check for any restricted or prohibited items
► Check to confirm country of origin of the goods especially those declared to be originating from
country which enjoys a preferential rate of import duty
► Ascertain the quality and quantity of the goods declared helps in confirming the value of the
goods declared.

Stopping of Single Administrative documents (SAD)

A Customs Bill of Entry is a declaration made by the Trader to Customs in relation to the clearance of the
traders’ goods which are involved in international trade.

In accordance with the EAC-CMA, the declaration is done using form C17 A. Another commonly used
name for a Customs Bill of Entry is the SAD (Single Administrative Document). This name came as a
result of the C17 A replacing the various forms initially used to declare goods for the various Customs
regimes.

The declaration of goods to Customs on form C17 A is done electronically through the DTI (Direct
Trader Input) by licensed Customs Agents.

The Single Administrative Document (SAD) is the declaration used for all Customs clearance regimes
including; imports, exports, warehousing, etc. The SADs selected for the blue and green lanes are
released automatically by the CMS while the red lane are automatically assigned to an examination
officer for physical examination.

The following functional note provides registered users of the ASYCUDA World (AW) system with the
information necessary for the completion of an ‘Import’ SAD. The processing of SADs at the DPC links
with the sub-processes of cargo examination, query amendment and office management.

Import SADs declarations include: Importations for Home consumption, Temporary Importations, Re-
importations, Importations in Warehouse. The processing of SADs is one of the primary processes for the
customs department.

Processing the SAD:

► The SAD is either received at the DPC manually or for online processing, the SAD is auto
allocated or manually assigned to an officer.
► The document check officer receives and checks the selectivity risk criteria of the declaration to
ascertain the risk indicators and analyses all documents attached in support of the declaration and
verification.
► The officer confirms the correctness and accuracy of the applicable customs value, duties
payable, tariff classification, preferential treatment and performs other necessary scrutiny in line
with procedures, departmental instructions and any other guidelines.
► When the declaration on the SAD is found satisfactory, the officer approves, makes review
comments or remarks in the inspection act and reroutes to green in the CMS or releases the
declaration and this ends the document checks.
► In the case of Single customs territory declaration where a PEV is required, upon uploading on
the VA, the process resumes.
► Where the declaration does not conform, the officer raises a query with details of the non-
conformity to be rectified or any additional information required, the officer raises a query.

Scales of examination of various types of goods

All declarations that are submitted to customs are subjected to risk management procedures inbuilt in the
ASCUDA world. The scale of examination depends on the risk lanes triggered by the system.

Types of Lanes
Red lane: Declarations that trigger the red lane undergo the physical inspection. This means that the
importer must produce the goods for physical inspection. The red lane involves physical examination and
documentary check for all the accompanying documents.

The proper officer checks for origin of goods, description of goods, quantity of goods and the value.

Yellow lane: Declarations that are selected for yellow lane undergo a documentary scrutiny to confirm
that the declaration conforms to the basic customs standards like valuation, classification, origin,
preferential treatment, goods description and required documents.

If the officer is not satisfied, the goods may be subjected to physical examination and therefore goods re-
routed to Red lane.

Blue lane: Declarations that are selected for blue usually limited to customs accredited clients known as
the Authorised Economic Operators (AEO) are released but subjected to post clearance audit.

Customs will satisfy themselves as to accuracy and authenticity of the declaration through reviewing
relevant books, records, business systems and commercial data during the post clearance audit.

Green lane: Declarations not selected for the above three lanes are automatically directed to the green
lane for final release. These goods may be subjected to some level of scrutiny depending on the decision
made by the customs officer.

Procedure for release of goods

► Goods are declared to customs on a SAD by a licensed Customs agent through ASYCUDA
► Selectivity done by triggering the system and clearance lane selected. A declaration, may be
selected red. yellow, blue or green
 Red lane is for declarations that require 100% physical examination
 Yellow lane is a declaration for physical examination compliant traders and document
check is only required.
 Blue lane declaration is for AEO and easily traceable traders and post clearance audits
required
 Green for compliant traders and no physical examination of cargo and no documentary
check is required.
► The DPC ensures correct taxes are assessed
► The declaration is released in the system
► Goods are exited at the place of physical location of goods.

The release of goods triggers the following under Single customs territory:
► Upon release, a release message or notification is sent to customs system of first point of entry
and port authorises who then commences the cargo removal process.

► The customs officer of the destination partner state validates exit of goods and generates an exit
note (1st tier exit) for the respective truck, exit note is transmitted to the customs system of the
first port of entry
 ► After generation of the exit note, the loaded cargo is armed with RECTS seal where required and
the goods are released.

► The customs officer of the partner state of the first port of entry then generates C2 and released
the truck, wagon out of the port or CFS or ICD.

► PEV upload triggers the query management sub process

Methods of extent of physical examination

The physical examination of goods and the search of commercial means of transport is undertaken to
verify the nature and/or the relationship between the goods/means of transport and the documents
presented.

If the document review indicates that the movement is satisfactory, and no discernible risks are present a
physical examination is not normally necessary.

If the documents however indicate the need for a physical examination of the goods, the extent of this
examination will depend on the type of goods and the suspected Customs offence.
There are two levels of physical examination.
The first, summary examination, includes examining the outside of containers and of packages for marks
and numbers compliance, checking the integrity of any seal, and verifying other details on the goods
declaration, where possible without opening the containers or packages.

A second, detailed examination, may also be carried out on occasion. This involves opening the
container or packages and examining the goods themselves in order to verify their description on the
goods declaration as to value, origin, classification and duty rate.

The level and nature of the physical examination of goods should be determined by
► The information available on the consignment,
► The Customs procedure under which the goods are declared,
► Provisions in international agreements, and any special nature of the goods (e.g. perishable
cargo, live animals, dangerous goods, jewels, antiques, works of art, etc.).
► Other factors which can influence the decision are urgency and location, as well as the resources
available to conduct the examination.
► Regarding commercial means of transport, Customs should consider the type of the
means of transport and the purpose of the stay in the Customs territory.

In order to increase efficiency in physical examinations, many administrations use modern technical
equipment such as scanners or other specialized detection devices, so called non-intrusive inspections
techniques (NII).

The use of this type of techniques must be effectively deployed and must be based on selectivity and
risk assessment and where appropriate based on random controls.

Effecting alterations
This is where the taxpayer changes incorrect information on an entry to the correct information for
example change of value of items.

Legal provisions regarding alterations,

According to Section 65(2) EAC CMA, where goods have been deposited in a bonded warehouse then
except with the approval of the proper officer, such goods shall not be moved or interfered with in any
way nor shall any alteration be made in the marks or any package,

Any officer that contravenes the provisions of the act commits an offence is liable on conviction to a fine
exceeding USD 1000 or forfeiture for the altered goods,

Goods imported for temporary use and exempt from duty allowed in the partner state shall not be
modified, sold or altered. A person who sells, alters or modified any part of the goods commits an offence
and is liable on conviction to a fine equal to 20% of the dutiable value and the goods liable to forfeiture.

A master of a vessel or aircraft in which any lock or mark placed on any place or goods is opened, broken
or altered commits an offence and any such goods are liable to forfeiture.

A licence while manufacturing under bond shall not affect without permission of the commissioner any
alteration in shape, position or capacity to a building room, place or plant and a person that contravenes
the provisions commits an offence

According to section 195 of the EAC CMA, a person who wilfully removes custom seals from any
ship ,aircraft ,vehicle ,train without authority and who wilfully alters ,defaces, obliterates or imitates any
mark of an officer or any package commits an offence and is liable on conviction to imprisonment not
exceeding 3 years or a fine of USD 2500.

According to section 134; where any practice or method of procedure of the customs approved by the
commissioner or arising from a ruling by the directorate or the customs Co-operation Council relating to
the classification or enumeration of any goods for the purposes of the liability to duty is altered with the
result that less duty is thereafter charged on goods of the same class or description ,no person shall
become entitled to any refund of any duty paid before such alteration took effect

According to section 203 of EAC CMA, a person who except by the authority of an officer moves, alters
or in any way interfered with any goods subject to custom control and on conviction shall be liable to
imprisonment for 3 years or a fine not exceeding USD 10,000

Procedure for alterations;

► The taxpayer should have the necessary documents to support the declaration
► The amendment is done on the entry itself according to the box that needs to be altered
► An entry will become inactive in the ASYCUDA world system after 21 days, so an amendment is
recommended before expiry of life span
 ► The agent is mandated to update the taxpayer on the status of the entry in the ASYCUDA world
system.

Writing examination accounts/verifications accounts used in customs

The examination account must in addition to being written on the copies of entry, should be recorded in
the landing account.

The landing account book is noted with a copy of the shortage and breakage voucher filled together with
LAB.

A copy of the cargo receipt is sent to the officer of the bonded warehouse immediately after the goods are
released.

With the introduction of the ASCYUDA world, manual systems are phasing out. The warehouse stock
management uses the Tariff specification code to identify goods entering in out of the warehouse.

Examination accounts rough books

The proper officer on inspection of the records and physical stocktaking finds that goods are missing, and
the operator cannot give satisfactory explanation to the proper officer, the operator shall be liable to a
penalty equivalent of twice amount the duty payable

Electronic accounts
The EACCMA mandates self-assessment by the importer or exporter.

Custom formalities or procedures may be carried out by use of information technology

According to Section 188 of EACCMA, a person who wishes to be registered as a user of customs
computerised system may apply in writing to the commissioner who may grant the application or reject
the application.

A person shall not access, transmit to or receive information from a customs computerised system unless
that person is a registered user of the system.

Where the taxpayer fails to comply with a condition of registration, acted in contravention of any
conditions under the regulations and has been convicted of an offence, the commissioner general may
cancel the registration.

Re-packaging in customs area

According to section 40 of the EACCMA, the proper officer may permit goods to be repacked, skipped,
bulked, sorted, lotted or packed on any approved place of unloading or on a sufferance wharf or in a
transit shed or in a customs area.

Samples can be drawn by the owner

Under section 47 of EACCMA, goods in the custom area can change ownership provided the form is
permitted and signed by both parties, the owner and intended owner.

Offence management and Compounding offences

Offence management starts when it is confirmed that an offence has been committed.

The case officer secures the goods /exhibits, issues a deposit note, seizure notice, extracts a statement
from the offender and compiles the offence file for further management (Compounding, prosecution or
handover to the relevant authority)

It is important to note that any offence is a potential court case and should be handled diligently.

The case officer seizes goods and deposits in the gazetted customs warehouse where applicable and the
offender issued with a copy of the deposit note.

In case of an Intellectual property Rights (IPR) violation by the case officer, the goods involved are
secured by depositing in the gazetted customs warehouse

The officer issues a notice of seizure to an offender. the notice highlights details of seized goods and
reasons for seizure.

The case officer obtains a statement from the offender.

The case officer makes a case report and makes recommendations for either compounding, prosecution or
handing over to relevant authorities,

The case officer draws product samples in the presence of the client or their representative and submits to
the line manager

The manager submits the draw product sample to the brand owner /guard for product authentication.

If any IPR violation is confirmed, the goods are seized, and offence management process takes over.

Compounding offenses

In case of compounding, the officer issues Form C35 acceptance and settlement of offence to offender for
signing.

The officer submits the case file to the immediate supervisor

The supervisor reviews the offence and issues form F68

The super visor computes payable taxes and penalties in the customs management system and issues a
payment slip to the offender
The officer confirms payment of the assessed taxes and penalties from the customs information system,
releases the goods and reconciles the offence, register and closes the case file.

Where the offender objects to the assessed taxes and penalties issued to F68 they may appeal to the line
supervisor.

Where the compounding officer orders for forfeiture of goods or means of conveyance in question, the
process for disposal as per laws takes course and in case of prosecution, the case is forwarded to customs
intelligence and prosecution unit for further management.

Treatment of containerised cargo

In case of container cargo, the stuffing of container at Dock is done under Preventive supervision.
Further, loading of both containerized and bulk cargo is to be done under Preventive supervision.

The Customs Preventive Officer supervising the loading of container and general cargo into the vessel
may give “Shipped on Board” endorsement on the Exporters copy of the Shipping Bill.

Palletization of cargo is done after grant of Let Export Order (LEO). Thus, there is no need for a separate
permission for palletization from Customs. However, the permission for loading in the aircraft/vessel is to
be obtained.

Where a Proper Officer so requires, an importer of goods imported in bulk shall pack the goods into bags
or other packages of even or net weights, before the goods are delivered.

Where any goods which have been entered cannot, on account of their value, size, packing or for any
other reason, be easily examined by the Proper Officer, in a transit shed or a Customs area, and the
importer desires that the goods be examined at his or her private premises, he or she shall apply in
writing to a proper officer, who may in his or her discretion grant the application under such conditions
as he or she may impose.

The applicant for services of an officer at his/her private premises at the discretion of the officer may be
required to provide the necessary transportation or to pay in addition to the fees for attendance an amount
for travelling expenses as the proper officer may consider reasonable.

All the fees payable shall be Customs revenue.

UNIT 8: DETERMINATION OF VALUE OF IMPORTED GOODS AND COMPUTATION OF
DUTY
a) Introduction of Methods of valuation of imported goods
b) Value of exports
c) Computation of ad valorem duty; Computation of specific duty

Introduction of Methods of valuation of imported goods

Customs valuation is a Customs procedure applied to determine the Customs Value of imported goods. If
the rate of duty is ad valorem, the Customs Value is essential to determine the duty to be paid on an
imported good.

Section 122(1) of EAC-CMA, 2004; “where imported goods are liable to import duty ad valorem, then
the value of such goods shall be determined in accordance with the Fourth Schedule and import duty shall
be paid on that value”.

Section 123 (1) of EAC-CMA, 2004; the value of goods for export shall include:
► The cost of the goods; and
► Transport and all other charges up to the time of delivery of the goods on board the
exporting aircraft or vessel, or at the place of exit from the Partner State.
Article VII of the WTO Customs Valuation Agreement (GATT, 1994 Article VII)

International Commercial Terms (INCOTERMS)

Inco- terms or international commercial terms are a series of international sales terms, published by
International Chamber of Commerce (ICC) and widely used in international commercial transactions.
They are used to divide transaction costs and responsibilities between buyer and seller and reflect state-
of-the-art transportation practices.

Inco- terms are standard trade definitions most used in international sales contracts. Devised and
published by the International Chamber of Commerce, Inco- terms are at the heart of world trade

The seven rules defined for any mode of transportation are:

EXW – Ex Works (named place of delivery)
The seller makes the goods available at his premises and the buyer is responsible for uploading.
Maximum obligation is placed on the buyer. This means that the seller has goods ready for collection at
his premises (Works, factory, Warehouse, plant) on the date agreed upon.

The buyer pays all transportation costs and bears the risks for bringing the goods to their destination. If
parties wish the seller to be responsible for the loading of the goods on departure and to bear the risk and
all costs of such loading, this must be made clear by adding explicit wording to this effect in the contract
of sale.
FCA – Free Carrier (named place of delivery)
The seller hands over the goods, cleared for export, into the custody of the first carrier (named by the
buyer) at the named place. This term is suitable for all modes of transport, including carriage by air, rail,
road, and containerized / multi-modal transport.

CPT – Carriage Paid To (named place of delivery)

The seller pays for carriage to the named point of destination, but risk passes onto the buyer when the
goods are handed over to the first carrier at a place of shipment in the country of export. The term is used
for all kinds of shipments.
CIP – Carriage and Insurance Paid to (named place of delivery)
The containerized transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the
named destination point, but risk passes when the goods are handed over to the first carrier.
DAP – Delivered at Place (named place of destination)
The seller pays for transportation to the named except for costs related to import clearance and assumes
all risks prior to the point that the goods are ready for unloading by the buyer.
DAT - Delivered at Terminal (named terminal at port or place of destination)
Seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks
up to the point that the goods are unloaded to terminal.
DDP – Delivered Duty Paid (named destination place)
The seller is responsible for delivering the goods to the name place in the country of the buyer and pays
all costs in bringing the goods to the destination including import duties and taxes. The seller is not
responsible for unloading. This rule places the maximum obligation on the seller.

FAS – free alongside Ship (named port of loading)

The seller must place the goods alongside the ship at the named port. The seller must clear the goods for
export. This term is used for bulk heavy-lift or bulk cargo. Suitable only for maritime transport only.

FOB – Free On Board (named loading port)

The seller must load the goods on board the ship nominated by the buyer, cost and risk being divided
when the goods are on board of the vessel. The seller must clear the goods for export. The seller pays for
transportation of goods to the port of shipment, loading costs. The buyer pays costs for marine freight
transportation, insurance, uploading and transportation cost from the arrival port of destination. The
passing of the risk occurs when the goods pass the ship’s rail at the port of shipment. Maritime transport
only.

CFR – Cost and Freight (named destination port)

Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is
transferred to the buyer once the goods are loaded on the vessel. Maritime transport only.

CIF – Cost, Insurance and Freight (named destination port)

This is the same as CFR except that the seller must in addition procure and pay for insurance
for the buyer. Maritime transport only.

Value of exports,
the value of goods for exports includes
 The cost of goods
 Transport and all other charges up to the time of delivery of the goods on board the exporting
aircraft or vessel or at the place of exit.
 Where the cost of goods cannot be determined, the cost of similar or identical goods is used.
 Where the Value of goods cannot be determined then the proper officer may determine the value
of goods.

Computation of ad valorem duty; Computation of specific duty

According to section 120 and section 94, Import duty is paid at the rate in force at the time when the
goods are liable to such duty are entered for home consumption and export duty is paid at the rate in force
at the time when the goods liable to such duty are entered for export.

Given the correct HSC and customs value taxes are calculated using the following formula
Import Duty (ID)=Import duty rate *Customs Value
Excise duty (EXD)= Excise duty value (Import duty +customs value) * Excise duty rate
VAT =VAT value (Customs value+ Import duty+ Excise duty) * 18%
WHT =Customs value * 6%

Quiz:
Please derive a Customs value using the information given below;A customer sells a suit at 2,000,000/=
retail price. Applicable rates of duty at importation are 25% import duty, 18% VAT and 6% withholding
tax. Market exchange rate for a dollar is 2500/=
I. Assume a product z with a CIF of $2000, import duty rate at 25% and excise duty rate of 10%.
The exchange rate at the time of entry was 1$=shs 3650. Compute the taxes payable.
II. Under the East African Community Customs Management Act 2004, where the Customs value
cannot be determined under the transaction value method, mention any four other methods that
can be applied. Explain the following terms as applied in customs:
 Customs value
 Ad valorem duties
 Customs valuation
III. Leather shoe classic purchases some shoes from a shop in Italy at 240 Pounds per pair. Prior to
arrival of the shipment in the country of export the seller raised the shoes to 340 pounds. Leather
shoe classics has its shipment before valuation supported by an invoice of 240 pounds per pair.
What value would you give the shoes and why?
IV. With reference to the East African community custos union, explain the difference between
common internal tariffs and common external tariffs
Moses Mayanja a trader in Kikubo imported a used motor vehicle from Japan in the month of June
2019.The Pajero model 2001 was invoiced at USD 12000 FOB, Tokyo Japan. Shipment costs from Japan
to Mombasa were USD 1000 and Insurance premium of USD 500 on board Mombasa. The transporters
charged shs 2,500,000 to transport the vehicle from Mombasa to Kampala. The exchange rate 1
USD=3700 UGX, import duty 25%/environmental levy 20% for vehicles older than 8 years and Vehicle
registration fees were 2 million. Compute the total tax payable at customs