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EXPRESS DELIVERY TANGLED IN RED TAPE
BY FREDERIK RICHTER
The byzantine and opaque customs system was an early
target of the reform-minded Nazif government, which slashed tariffs
by 40 percent in September 2004, revamped tariff bands and, earlier
this year, announced executive regulations for long-overdue legislation
that unifies the myriad of customs decrees dating back to the 1960s
in a single document. The tariff cuts have been widely hailed by
the local and international press, yet for companies operating in
the thick of it, there is still much more that can be done.
“I have great respect for what they are doing,” says David
Ogden, managing director of Egypt Express, the exclusive local agent
of international courier giant Federal Express (FedEx), “They
are making improvements by cutting tariffs, but what about going
two or three levels deeper? What about process improvement, training
and developing standards? Unfortunately, that’s not being done.”
Perhaps more than any other sector, the courier industry, which
revolves around express international mail and package delivery,
depends on streamlined and transparent customs procedures. Multinational
express delivery services such as DHL, FedEx and the Middle East’s
own Aramex ship everything – from homemade cookies to microchips
– all over the world. Clients often demand door-to-door service
to or from Egypt within 48 hours, so every second counts.
Companies that Business Monthly spoke to complained that customs
officials are often unaware of the sweeping legal changes that Egypt’s
customs system has undergone in recent years, preferring instead
to apply haphazard and capricious regulations that “work in
their favor.” Egyptian customs officials, they say, fall short
of expectations in both efficiency and accountability.
While Ogden says 90 percent of Egypt Express’ shipments are
cleared within a few hours of arrival, it is the remaining percentage,
often with high intrinsic value, that causes headaches. Sometimes,
courier companies tell Business Monthly, these shipments are delayed
because they require approval from various ministries, particularly
in the case of pharmaceuticals or foodstuffs. Other times, media
such as films or books must be reviewed by censors before clearance
is granted. And sometimes it is just a matter of a cranky individual
customs inspector nitpicking the mounds of paperwork.
Customs Authority chairman Galal Aboul Fetouh insists customs reform
is ongoing. He says a comprehensive training program is being implemented
in cooperation with international organizations such us the World
Trade Organization (WTO), the World Customs Organization, the EU
and USAID to upgrade the skills and performance of customs inspectors,
and is “70 percent complete.” New technology, including
software that replaces piles of paperwork and allows companies and
customs officials to communicate online, is being installed at Egyptian
ports to minimize the interference of Egypt’s 18,000 customs
officials in the clearance process.
However, Zak Saleh, general manager of TNT Egypt, says that despite
the Customs Authority’s huge staff, less than 20 customs officials
are responsible for clearing the 15,000 courier shipments that arrive
in Egypt each day. Each of these officials would have to clear 750
consignments a day to keep things running smoothly – an improbable
volume for the authority’s current technology infrastructure.
While customs authorities in other countries use IT networks to
check and clear incoming shipments, “this remains impossible
in Egypt.”
Saleh declined to estimate how much the Customs Authority’s
inefficiency is costing the courier industry, but said the damage
goes beyond the reputation of the express delivery companies. Business
opportunities are lost and production is interrupted when vital
documents and spare parts are delayed or damaged in customs.
Aboul Fetouh says new customs legislation has helped to standardize
the clearance process by unifying thousands of old decrees into
a single document, reducing the window of opportunity for overzealous
or corrupt officials. Previously, customs paperwork included several
tariffs for each product and the choice of tariff was at the discretion
of the customs officer. On the new customs forms, however, only
one tariff is valid for any particular product.
Samer Gharaibeh, regional manager of Aramex International, argues
that while the new law is designed to work in favor of importers,
the problem lies in its implementation. “We don’t feel
that the people who implement the law have a full understanding
of the purpose of the new law,” he says. “Improvement
will happen [only] if the implementation of the legislation works
in parallel with the purpose of the law and we improve the level
of trust between customs officials and the market.”
Maged Fakhry, country director of UPS SCS, a freight forwarder and
customs broker, is equally unconvinced. “We hear a lot of talk
about improvements, but we would also like to see something practical,”
he says, adding that the freight forwarding industry is able to
operate in Egypt only because it has long experience tackling knotty
customs regimes in other countries. He laments the lack of communication
between Egyptian customs authorities and the business community.
Ogden prescribes more input from courier and freight forwarding
companies. “If customs would reach out and ask for private
sector involvement, the private sector would actively jump on that
chance,” he says. “If you reach out to companies who have
that knowledge you can transfer this expertise and integrate these
processes without jeopardizing any control systems.”
One succcessful example of public-private cooperation, he says,
is the ongoing project between the National Postal Authority (Egypt
Post) and Egypt Express, which included the joint construction of
a new clearance station at Cairo International Airport – in
which all authorities involved in the clearance process will be
represented. Egypt Post and Egypt Express worked together with the
Customs Authority to set the rules and guidelines for clearance
procedures, and helped to train customs officials that will work
in their shared clearance facility.
Yet the Customs Authority appears reluctant to take on additional
projects. TNT Egypt’s Saleh says courier companies are already
contributing to the costs of clearing shipments through customs,
yet their offers to finance additional clearance resources –
such as larger facilities, more customs inspectors or extended working
hours – have been rebuffed. Thus companies that don’t
maintain their own customs clearance facility must fight for limited
resources in the busy government-run warehouse at Cairo International
Airport.
Aboul Fetouh admits he is reluctant to factor the private sector
into the control process. He says the Customs Authority must oversee
all control functions because – as he sees it – many companies
are trying to evade customs, which casts doubt on their qualification
to serve as partners in reforming control procedures.
The customs chief acknowledges that old habits die hard and some
of his staff are reluctant to adopt a new mind set. But their days
are numbered. “There are still a number of people resisting
change, but we’re after them,” he insists.
Yet he also points the finger at customs brokers, who serve as intermediates
between customs officials and importers. Simplified customs procedures
have made their services dispensable, he asserts, suggesting that
some brokers are reluctant to give up their cash cow.
Egypt’s commitments to the WTO as well as a number of bilateral
and multilateral trade agreements call for internationally-harmonized
and transparent customs procedures. El Fetouh says customs reform
is on track and new technology and services should improve clearance
times. He cites a plan to introduce pre-arrival clearance stations,
facilities where consignment documents are presented to customs
officials while the consignment is en route, thus giving the officials
a chance to identify critical goods before they arrive. According
to El Fetouh, three stations in Cairo, Alexandria and Suez are already
operating and another station is under construction in Port Said,
with plans to eventually open one in every port.
UPS’ Fakhry acknowledges that improvements are taking place,
but criticizes the slow pace at which they are being introduced.
“Things here take so much time,” he sighs.
Ogden concurs, pointing out that when it comes to delivering mission-critical
documents and packages, time is the most precious commodity. “What
our customers buy is time,” he says.
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