ITC BUSINESS SURVEY ON NON-TARIFF MEASURES …ntmsurvey.intracen.org/media/2736/itc_ntm-survey-in-uganda_summar… · ITC BUSINESS SURVEY ON NON-TARIFF MEASURES IN UGANDA ... Company

TRADE IMPACTFOR GOOD

ITC BUSINESS SURVEY ON NON-TARIFF MEASURES IN UGANDA

SUMMARY FINDINGS AND PRELIMINARY RECOMMENDATIONS

DISCUSSION PAPER FOR THE NATIONAL ROUND TABLE ON NTMs IN KAMPALA, UGANDA, 26 OCTOBER 2016

The designations employed and the presentation of material in this document do not imply the expression of any opinion whatsoever on the part of the International Trade Centre concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

This document has not formally been edited by the International Trade Centre.

ITC SURVEY UGANDA – SUMMARY FINDINGS AND PRELIMINARY RECOMMENDATIONS

iii

Foreword

The following synthesis presents a summary of the report “Uganda: Company Perspectives on Non-tariff Measures (NTMs)”. The final version of the report is being drafted and will be finalized pending the results of the ITC stakeholders’ workshop on 26th October 2016 in Kampala, Uganda. The report is the outcome of a business survey on NTMs conducted by the International Trade Centre (ITC) in Uganda. This survey was implemented in partnership with International Development Consultants Ltd and local experts, with the support of the Ministry of Trade Industry and Cooperatives (MTIC). The report was prepared with the collaboration of Ms. Jacquiline Pimer, ITC consultant. The report aims to shed light on NTMs issues faced by the private sector in Uganda, towards the improvement of the business sector in the country.

ITC SURVEY IN UGANDA – SUMMARY FINDINGS AND PRELIMINARY RECOMMENDATIONS

iv

Contents

Foreword iii Introduction 1 1. Survey methodology and implementation in Uganda 1

1.1. Survey methodology 1 1.2. Survey implementation in Uganda 2

2. Challenges related to non-tariff measures 4 2.1. Companies’ perspectives of NTMs 4 2.2. Burdensome NTMs to export 6 2.3. Burdensome NTMs to imports 13

3. Preliminary recommendations 17 1. Product requirements and conformity: compliance and expense 17 2. Import clearance and border control: transparency and clean up 18

Table 1. Principal categories of NTM-related trade obstacles for exporters 6 Table 2. Agencies involved in domestic POs experienced by exporters in Uganda 12 Table 3. Principal categories of NTM-related trade obstacles for importers 13 Table 4. Agencies involved in domestic POs experienced by importers in Uganda 16 Table 5. Matrix of preliminary recommendations 17 Figure 1. Overview of surveyed companies 2 Figure 2. Characteristics of interviewed companies 3 Figure 3. Share of surveyed companies affected by burdensome NTMs, by activity 4 Figure 4. Share of surveyed companies affected by burdensome NTMs, by sector, size and

destination/origin markets 5 Figure 5. Type of NTM-related obstacles for exporters 6 Figure 6. Type of burdensome NTMs to export by sector 8 Figure 7. Burdensome NTM cases by export market 9 Figure 8. Reasons making NTMs burdensome to exports 10 Figure 9. Type of procedural obstacles faced in Uganda 11 Figure 10. Types of procedural obstacles faced by exporters 12 Figure 11. Type of NTM-related obstacles for importers 13 Figure 12. Reasons making NTMs burdensome to imports 15 Figure 13. Types of procedural obstacles faced by importers 15 Figure 14. Types of procedural obstacles faced by importers 16


1

Introduction With the advent of the regionalization of supply chains and the widespread reduction of global tariff levels, non-tariff measures (NTMs) have emerged as growing obstacles to international trade for importers and exporters.

Although the sound use of NTMs to ensure consumer health, environmental protection or national security is legitimate, evidence suggests that countries are resorting to NTMs as alternative mechanisms to protect domestic industries. They are increasingly being dealt with when negotiating regional and bilateral trade agreements and many practitioners consider them as having surpassed tariffs in their trade-impeding effect.

NTMs particularly concern small and mediums enterprises (SMEs) in developing and least developed countries (LDCs), which struggle with complex requirements. Firms in these countries often have inadequate domestic trade-related infrastructure and face administrative obstacles. Therefore, NTMs that would not normally be considered as very restrictive can represent major burdens in LDCs. In addition, the lack of export-support services and insufficient access to information on NTMs put pressure on the international competitiveness of SMEs. Hence, both NTMs applied by partner countries as well as domestic burdens have an impact on market access and keep firms from seizing the opportunities created by globalization.

The ITC survey reports present results from large-scale company surveys on NTMs and related procedural obstacles (POs). They provide detailed qualitative impact analysis to address key stakeholders’ concerns, evaluating all major export sectors and trading partners, and covering around 30 developing countries in scope.

The ITC survey allows companies to directly report the most burdensome NTMs and the way in which these impact their business. Exporters and importers deal with NTMs and other obstacles on a day-to-day basis. Therefore, they know best the challenges they face, rendering a business perspective on NTMs indispensable. At the government level, an understanding of companies’ key concerns with regard to NTMs and POs can help define national strategies geared to overcome obstacles to trade.

1. Survey methodology and implementation in Uganda

1.1. Survey methodology The International Trade Centre (ITC), in collaboration with Ministry of Trade, Industry and Cooperatives (MTIC), implemented a survey from August 2015 to August 2016 in order to assess perspectives of the business community in Uganda on NTMs. The survey provides an understanding of trade obstacles that are faced by the companies as well as identifying obstacles related to cross boarder trade procedures. The objective of the survey is to provide data that will assist the government of Uganda and the private sector to work together in ensuring an enabling environment with less or no barriers to trade and increased export competitiveness by the traders.

Prior to the start of the survey, based on information provided by the Uganda National Export Promotion Board (UNEB) and the MTIC, ITC compiled a business registry of exporting and importing companies in Uganda containing information such as contact details, location and major exports or import products of Uganda. This registry was made up of over 700 Ugandan companies participating in international trade and was used as survey samples with which interviews were conducted to make up the findings of this study.

The interview process itself consists of two steps; the first referred to as ‘phone screening’ involving screening of exporting and importing companies through a telephone interview. Phone screening aimed verifying the company’s main sector activity, the trade destinations or sources and most importantly whether the company experienced difficulties with NTMs. At this stage of the interview, companies are selected based on stratified random sampling and those that express NTMs challenges are asked if they would be willing to participate in the study. As per NTM survey sampling methodology, phone screen


2

interviews are designed to cover a representative share of Uganda export sectors (excluding arms and minerals).

The second steps involves a detailed face-to-face interview with those companies that reported having experienced obstacles to trade and are willing to participate in the survey. In this second interview session, these companies are questioned about the specific nature of the problems they faced. Typically, survey respondents are general managers or the company’s employee responsible for the export and import process. All responses from the companies are treated with utmost confidentiality, and only synthesized information on survey results is thus shared with the Ministry of Trade Industry and Cooperatives (MTIC).

1.2. Survey implementation in Uganda The Kampala-based company International Development Consultants Ltd. implemented the survey on behalf of and under the guidance of ITC. Project managers and interviewers underwent an in-depth 5-day training on the survey methodology, the questionnaires and the interview process.

Out of the registry 730 companies were contacted and 493 completed the telephone-screening phase representing a participation of 68%. Of these, 226 companies reported to having faced difficulties dealing with Uganda or partner countries’ regulations in the past year (figure 1). Among the affected companies, 204 companies participated in a detailed face-to-face interview, signifying a 90% participation rate for all companies that cited burdensome NTMs.

Figure 1. Overview of surveyed companies

Source: ITC NTM Survey in Uganda, 2015-2016.

Figure 2 below details characteristics of phone-interviewed companies by company size, location, sector, and destination/origin markets. Sectors are divided into agri-food, low-tech and medium-tech classifications. Agri-food comprised 62% of all exporters interviewed while low-tech manufacturing sectors comprised 24% and medium-tech manufacturing sectors made up only 7% of the respondents. Interestingly for importers, medium-tech and agri-food were almost similar in response rate with 44% and 42% respectively and low-tech manufacturing companies response rate at only 14%.

With regard to company size1, small enterprises made up most of the respondents at 69%, large companies at 13% followed by micro-sized companies at 10% and lastly medium sized company at 8% respondents. 72% of the companies interviewed were located within Kampala city. The World Bank Enterprise survey (2013) on characteristics of firms in Uganda confirms that almost half the companies (49.8%) are located in Kampala city and that the majority of the companies 63% are categorised as small.2

Meanwhile the most frequent destination market for exporting companies interviewed was the East African Community (EAC) i.e. Kenya, Tanzania, Rwanda and Burundi at 36%, followed closely by Europe which

1 According to the national definition, micro enterprises have less than 10 employees; small enterprises have 11 to 100; medium enterprises have 101 to 200; and large enterprises have above 200 employees. 2 https://www.enterprisesurveys.org/data/exploreeconomies/2013/uganda Enterprise Survey (Last accessed 20 October 2016)

113

126

341

49

54

81

42

46

71

0 100 200 300 400 500

Interviewed by face-to-face

Facing burdensome NTMs

Interviewed by phone

Exporting companies Exporting and importing companies Importing companies

https://www.enterprisesurveys.org/data/exploreeconomies/2013/uganda


3

has long been a traditional export destination for exports from Uganda at 29%. Asia comes third with 13% of exports followed by the COMESA region excluding Kenya, Rwanda and Burundi. Exports to the rest of the world and other African countries account for 6% and 2% respectively.

Figure 2. Characteristics of interviewed companies

Sector Exporters Importers

Agri-food

Fruit and nuts 41

8 Vegetables and other edible vegetable products 20 Coffee and coffee substitutes 39 Spices 34 Other fresh food 86 Processed food 71 13

Low-tech manufacturing

Wood, wood products and paper 36 13 Textile and clothing (incl. leather) 28 14 Miscellaneous manufacturing 29 22

Medium-tech manufacturing

Chemicals 16 20 Transport equipment 8 18 Machinery and electronics 4 29


Micro 10%

Small 69%

Medium 8%

Large 13%

Company size

Kampala 72%

Others 28%

Location

69%

24%

7%

Exporters

Agri-food

Low-tech manufacturing

Medium-tech manufacturing

14%

42%

44% Importers

36%

13% 2%

29%

14% 6%

Destination

EAC

COMESA except EAC

Other African countries

EU28

Asia

Rest of the World

12% 3%

5%

18%

53%

9%

Origin


4

Among exporters, the next most represented are agri-foods exporters such as fresh foods, processed foods, vegetables and other edible vegetable products, and spices. On the other hand imports affected most include the chemicals at 55%, followed by textiles as shown in the figures above.

2. Challenges related to non-tariff measures This section gives an aggregate overview results from the phone screen (PS) interviews, while the next sections narrow down the discussion to the results of the face-to-face (FTF) interviews for both exporters (section 2.2) and importers (section 2.3). While PS interviews broadly indicate the presence or absence of NTMs-related obstacles to trade, FTF interviews discuss these issues in detail.

2.1. Companies’ perspectives of NTMs The phone screen survey results show that of all companies interviewed 46% are affected by burdensome NTMs while 54% recorded not to be affected by obstacles to trade related to NTMs. Figure 3 below highlights that more importing companies face burdensome NTMs (65%) than the record of companies exporting (37%) while companies that do both importing and exporting face more burdensome NTMs at export with a rate of 53% than at import with 28%.

Figure 3. Share of surveyed companies affected by burdensome NTMs, by activity


Figure 4 shows that the medium-tech manufacturing companies face more obstacles to both export and import, with 43% and 61% respectively, than the other sectors. They are closely followed by agri-food sectors with 42% exporting and 38% when importing. For this sector, exports seem to face more burdensome NTMs than imports although the margin of difference is not significant.

If agri-food is less affected in proportion, it gathers most companies facing problems in numbers. This sector is indeed the most important in Uganda as shown in Figure 2. Looking into subsectors reveals a wide variety of perception among exporters of agricultural products. Indeed 62% of coffee exporters encounter NTM-related problems (the highest share among all subsectors) compared to only 24% of exporters of fruits and nuts. Spices and processed food are also two export subsectors which are more affected by NTMs than others.

In terms of company size, micro importing companies are the most affected by NTMs (75%) – this is expected given their more limited capabilities in dealing with obstacles to trade. However surprisingly the exporting micro companies face the least NTMs recorded in the survey while the large exporting companies face the highest burdensome NTMs at 53%.

Exporting companies to other African countries, especially from the Democratic Republic of Congo, record the highest percentage of burdensome NTMs at 75% while importing from Europe, which is the second biggest trading partner for Uganda, records the highest burdensome NTMs. Even with existing regional

37%

53%

28%

65%

0%10%20%30%40%50%60%70%

Exporting companies Exporting and importingcompanies

Importing companies

Burdensome NTMs when exporting Burdensome NTMs when importing


5

trade agreements to reduce NTMs within the EAC and COMESA, the percentages recorded are rather high especially with the EAC that has 43% for exporters and 39% for importing companies.

Figure 4. Share of surveyed companies affected by burdensome NTMs, by sector, size and destination/origin markets


61%

31%

38%

43%

33%

42%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Medium-techmanufacturing

Low-techmanufacturing

Agri-food

75%

44%

50%

29%

19%

39%

47%

53%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Micro

Small

Medium

Large

29%

45%

63%

38%

40%

39%

44%

35%

37%

75%

37%

43%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Rest of the World

Asia

EU28

Other African countries

COMESA except EAC

EAC

Burdensome NTMs when exporting Burdensome NTMs when importing


6

2.2. Burdensome NTMs to export Under this section we highlight results of the FTF interviews conducted with those exporters facing challenges when complying with NTMs. In particular the section will provide a summary of the burdensome measures according to the products affected, the reason why the measures were found to be burdensome by the exporter and the government agencies involved in the compliance procedure.

What NTMs are burdensome?

Figure 5 presents the breakdown of the major NTM-related obstacles to trade for Ugandan exporters. Technical requirements, conformity assessment and export certification appear to be the most burdensome measures faced by the Ugandan exporter. The main problematic measure applied by Ugandan regulators concern export certification. The two other requirements are of minimal effect to the exports leaving the biggest burden in the trading partners’ regulations the main ones being technical regulation, conformity assessment and the need to prove rules of origin of the product.

Figure 5. Type of NTM-related obstacles for exporters


Table 1. Principal categories of NTM-related trade obstacles for exporters Key NTMs Specific NTMs Breakdown Classification

1. Technical requirements

Product characteristics 4%

Product requirements and conformity assessment

Fumigation 5% Labelling and packaging 5% Import prohibition for SPS reasons 5% Others 6%

2. Conformity assessment

Product Certification 11% Inspection requirement 4% Testing 4% Others 3%

3. Export certification Certification required by the exporting country 20% 4. Rules of origin Rules of origin and related certificate of origin 13%

Import clearance and formalities

5. Entry formalities Customs clearance 4% Pre-shipment inspection 2%

6. Other import measures

Safeguard, customs valuations, advance payment, quotas 3%

7. Export taxes and charges Export taxes and charges 4%

8. Other export measures Export inspection, licensing, clearance 9%


25%

21%

13% 5% 3%

20%

4% 9% Technical requirementsConformity assessmentRules of originEntry formalitiesOther import measuresExport certificationExport taxes and chargesOther export measures

Patners' regulations

Ugandan regulations


7

In addition to figure 5, Table 1 above summarizes NTMs according to ranking of prevalence, subchapter (and their percentage breakdown) and NTM classification. Clearly, product requirements and conformity assessment makes up majority of the obstacles to export – exactly 67%. Testing for SPS and TBT requirements and certifications are usually cited as costly in terms of time, effort and money. These originate both from partner countries importing the goods, and from Uganda regulating agencies exerting their mandates for public health and safety through complex technical export clearance documentation and testing. Of the 8 key measures identified, certification required by the exporting country is the most burdensome measures faced by the Ugandan exporters; the second most burdensome being the product certification under the conformity assessment procedures of which both measures are similar in nature and a requirement of the trading partners rather than of Ugandan regulator.

For what concerns other types of measures the highest burden lies with the obtaining of certificate of origin to export to the main trading partners i.e. Europe, EAC and COMESA. Rules of origin (RoO) are a major requirement for the Ugandan products to access the markets at preferential terms. In addition to that, companies complaint about other import requirements such as pre-shipment inspection, customs clearance and taxes.

The analysis of the survey should be interpreted with caution because the majority of the respondents are under the general perception that any requirements such certification, testing, labelling and packaging is something that is mandatory albeit their difficulty in implementation. Some respondents cited in their experiences for instance, that the Ministry of Agriculture mandates certifications for agri-foods while others cited a partner country. They therefore did not consider them to be barriers to trade or burdensome since they were part of trade procedures.

Furthermore, the survey sample size includes mainly successful exporting and importing firms for whom procedures have become routine or they have found a way through the burdensome challenges. It is therefore critical to note that technical requirements and procedures such as labelling and/or packaging requirements are often very costly for exporters, but the effort required to develop, produce and apply them can be taxing for smaller and newer firms, especially in the agri-foods sector. Even with clearance and customs procedures the obstacles lie with implementation and costs of delays to the exporters.

Which sectors are affected?

The main concerns for the agri-food exports like fish, oil-seeds and fruits, vegetables and coffee is the conformity assessment and technical requirements of SPS and TBT as well as export certification. Conformity assessments are the main concern for the agriculture sector in particular spices, fruits and vegetables. In addition, agri-food exports suffer from export certification requirement which is a particular burden for coffee and spices.

The lack of readily available testing laboratories and local facilities requires that the conformity assessments done in Uganda are conducted either with UNBS whose laboratories are based in Kampala or at the facilities at the international airport in Entebbe for fresh products being export by air. Save for the delays of between 5-7 days to obtain to sample, test the products and acquire the certification that they are safe for human consumption; the conformity assessment is quite costly for exporters in turn increasing the cost of production and export as well as the price of the product.

The Ministry of Agriculture Animal Industries and Fisheries in Uganda requires that for any export of farm product, a phytosanitary certificate must be obtained. This certificate is only issued in Entebbe at the Ministry's head quarters only when the cows are physically inspected, this means that we have to transport the animals to Entebbe which is very expensive.

An exporter of live animals

Export tax clearance is a very long process and sometimes you can fail to clear in one day because you may get the papers after 5.00pm yet banks close before 5.00pm. The fish products are perishable and cooling facilities are very limited.

An exporter of fresh fish

We have to have the certificate of conformity to ensure that goods are safe for human consumption. The process for all the above is very expensive and time consuming, being foodstuff this delay causes delay and a loss to the company. There are delays in ascertaining the quality of the product and it cost an estimated 200$ each time of testing.

An exporter of sugar


8

Figure 6. Type of burdensome NTMs to export by sector


Technical requirements by the partner countries seem to also affect the manufacturing sector. But of notable importance is the RoO certificate that is a major NTM obstacle for the manufacturing sector. Uganda’s trading partners that offer concessions require proof that the exports entering in at a preferential tax rate actually originate from (or a specified percentage) Uganda. This local content requirement guarantees access to the Uganda’s main markets the EAC and EU. It is important that this benefit is acquired with ease rather than the cost that it has inadvertently become for exporters.

Which export markets are affected?

Figure 7 below looks at the incidence of burdensome NTMs by export share. Remarkably, the most burdensome share of NTM-related measures lies within the East African Community EAC. The EAC is the main destination market for Ugandan products at 36% of total exports and yet also has the highest share of NTMs at 34% and this even with the existence of trade agreements, Customs Union (CU) and Common Market Protocol (CMP) that seek to reduce tariff and non-tariff barriers amongst Partner States Uganda

22%

25%

10% 6% 1%

27%

3% 6%

Agriculture

Technical requirementsConformity assessmentRules of originEntry formalitiesOther import measuresExport certificationExport taxes and chargesOther export measures

33%

11% 21%

4%

7%

3%

7%

14%

Manufacturing

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Miscellaneous manufacturing

Wood, wood products and paper

Processed food and agro-based products

Other fresh food

Oil-seeds and oleaginous fruits

Spices

Fish, fresh, chilled or frozen

Fruits and vegetables

Coffee and coffee substitutes

Technical requirements Conformity assessment Rules of originEntry formalities Other import measures Export certificationExport taxes and charges Other export measures

It takes 7 days alone to obtain a Rules of Origin certificate from the Ministry of Trade.

An exporter of wood


9

being one of the founding states. The EU, which is the 3rd biggest export market for Ugandan exports has the second highest share of burdensome measures at 25% compared to the 21% export share.

Of notable importance is the COMESA market, which by share of export is the second largest market for Ugandan products at 24% and attractively has one of the lowest shares of NTM at 3%. The other 3 specified markets i.e. Other Africa, Asia and North America all have a higher share of NTMs to their share of trade; 1% exports to 10% burdensome measures, 9% exports to 16% burdensome measures and 2% exports to 9% burdensome measures respectively.

While the share of burdensome NTMs is lower than the share of export in most Africa partners, the relation is the opposite in the rest of the world notably Europe, Asia and Norther America were the share of NTMS in this region is higher than the share of trade.

Figure 7. Burdensome NTM cases by export market


In figure 7 above we underline the perception of FTF respondents of what they consider to be the most burdensome measures according to the export markets. To begin with the main export market the EAC, 24% of exporters thought Export certification was most burdensome and followed closely by 20% for conformity assessment. The lower levels of complaints for technical requirements may be attributed to the fact that the EAC is gradually harmonising the standards relating to SPS and TBT. Some commonly traded goods within the EAC already have EAC harmonised standards thus accounting for less disintegrated technical requirements for Uganda to conform to. Secondly, exports to the European Union faced their biggest export obstacles in technical requirements at 29%. Majority of exports from Uganda to Europe are agri-food products that are subject to very high SPS and TBT regulations within Europe.

36%

24%

1%

21%

9%

2% 6%

34%

3%

10%

25%

16%

9%

4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

EAC COMESA(exc. EAC)

Other Africa EU (28) Asia North-America Other

Share of exports Share of NTM cases

0% 20% 40% 60% 80% 100%

Other

Asia

EU (28)

Other Africa

EAC

Technical requirements Conformity assessment Rules of originEntry formalities Other import measures Export certificationExport taxes and charges Other export measures


10

Why are NTM measures perceived as obstacles?

The NTMs survey gathers information on the reasons why NTMs are perceived as obstacles, both for their regulatory aspect and their associated procedural obstacles (POs). For Ugandan exporters, the vast majority of NTMs applied by both partner countries and the Uganda government are perceived as procedural or caused by POs or a combination of a regulatory problem and POs (figure 8), implying that the difficulty is in the implementation of NTMs rather than the regulation itself.

Figure 8. Reasons making NTMs burdensome to exports


Looking further at the reasons for burdensome NTMs from a sectoral perspective, we observe that when the regulation is applied by Uganda, the biggest burdens are purely procedural. The relatively lower procedural levels related to export taxes are due to the fact that few or no charges / taxes are imposed on exports from Uganda. It is also interesting to note that under ‘Export Certification’ a 71% of the burden lies in procedure and yet there is no purely regulatory obstacles to the sector. Again this is related to the fact the ‘Export Certification’ are a requirement by the export markets despite the fact that they are implemented by Ugandan regulators.

Technical requirements applied in the export market have the highest number of regulatory obstacles at 46%. All the other measures experience the least number of regulatory obstacles but more procedural obstacles instead. It is clear that POs make up the highest number of NTMs are attributable to POs regardless of whether it is applied by Ugandan regulators or the export market / partner country.

The next figure focuses on the procedural obstacles faced by the various exporters. In particular the two most complained of obstacles are delays and unusually high fees and costs as shown in figure 9 below. The limited or inappropriate facilities are burdens that relate to export standards and certification specifically in areas such as technical requirements, conformity assessments and export certification all of which relate to the product quality and proof of standards of the export products itself. The biggest obstacle relating to inappropriate facilities is with the conformity assessment requirement that as a scientific process requires expensive laboratories especially for agri-food exports. These conformity assessments often need to be conducted in country before reaching the export destination and with the lack of or inappropriate facilities it is difficult for the texts to be adequately accomplished.

5%

20%

29%

9%

9%

46%

41%

60%

29%

29%

14%

42%

24%

28%

55%

20%

71%

43%

86%

48%

67%

26%

Other export measures

Export taxes and charges

Export certification

Other import measures

Entry formalities

Rules of origin

Conformity assessment

Technical requirements

Uga

nda

Partn

er c

ount

ry

Regulatory obstacles Combination of regulatory and procedural obstacles Procedural obstacles


11

Figure 9. Type of procedural obstacles faced in Uganda


When we turn our attention to the delays, it is the highest obstacle in origin certificates of as well as the export certificates. Recently (July 2016), the Ministry of Trade Industry and Cooperatives mandated the Uganda Revenue Authority as the issuer of RoO certificates, this move was considered to be trade facilitating and amongst other objectives it was to cut the delay period for obtaining the certificate of origin for exporters. Albeit this trade facilitating measure deriving from a protocol from the East African Integration, it applies to all exports products and for all export destinations. It is however important to note that not enough time has passed for to track the efficiency achieved by this legal amendment.

Of critical importance is the obstacle relating to informal payments. Despite the fact that the informal payments account for the lowest obstacle to export and only in export certification or other export measure, it can be noted that the objective of these informal payments is as a result of the massive delays experienced at export related procedures and are typically required to expedite the approval ad certification processes relating to export.

Where procedural obstacles take place?

Overall, the disparity between the prevalence POs experienced in Uganda in contrast to partner countries is disconcerting (figure 10). Breaking down POs by country of occurrence and type shows that the vast majority of perceptions of delays (41%), unusually high fees (26%), limited / inappropriate facilities (22%) all mostly occur internally in Uganda; while in Partner countries the highest challenges recorded are still delays (13%) and unusually high fees and charges as well as Arbitral behaviour (both at 8% each). The only recorded problem in transit is the unusually high fees which may likely be attributed to the fact that Uganda is landlocked and requires access to the sea through neighbour countries mainly Kenya at the Mombasa port.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other export measures

Export taxes and charges

Export certification

Rules of origin



Uga

nda

Partn

er c

ount

ry

Delays Unusually high fees and charges Limited/inappropriate facilitiesArbitrary behavior of officials Informal payment Administrative burdensOthers

Uganda Revenue Authority inspects vehicles on arrival. The vehicles are supposed to be inspected from URA yard. However the importer may have a consignment of 50 new cars and does not want to risk by driving the cars to the yard. Ideally URA must send an official to inspect the cars at legal rate of 12,000 UGX per vehicle. URA will send an official who will demand for 20,000 UGX per vehicle. The importer has no choice but to pay.

An importer of motor vehicles


12

Figure 10. Types of procedural obstacles faced by exporters


Table 2 below shows the relevant government agencies for each PO, as well as the incidence of NTMs attributed to being under their jurisdiction. The most cited institution is the Ministry of Agriculture Animal Industry and Fisheries (MAAIF) causing the highest delays in export processes. The MAAIF is responsible for mainly providing standard certification for agri-food products which has been reported as one of the key problem for exporters.

Table 2. Agencies involved in domestic POs experienced by exporters in Uganda

Procedural obstacles Agency

Del

ays

Unu

sual

ly h

igh

fees

an

d ch

arge

s Li

mite

d/in

appr

opria

te

faci

litie

s Ar

bitra

ry b

ehav

ior o

f of

ficia

ls

Info

rmal

pay

men

t

Adm

inis

trativ

e bu

rden

s

Oth

ers

National Bureau Of Standards Ministry Of Agriculture Animal Industry And Fisheries Uganda Revenue Authority Ministry of Trade Industry and Cooperatives Uganda Coffee Development Authority National Agricultural Research Organisation Uganda Export Promotion Board Entebbe Airport Dairy Development Authority Entebbe Handling Services National Roads Authority National Chamber Of Commerce And Industry Not specified

Source: ITC NTM Survey in Uganda, 2015-2016. Legend: The different intensities of red, yellow and green indicate the frequency of a procedural obstacle occurrence at a particular public institution. Red indicates highest frequency while green indicates the lowest frequency. Blank cells indicate non-occurrence of such combinations.

0% 10% 20% 30% 40% 50% 60%

Others

Administrative burdens

Problems with international recognition

Informal payment

Arbitrary behavior of officials

Limited/inappropriate facilities

Unusually high fees and charges

Delays

In Uganda In transit countries In partner countries


13

The Ugandan National Bureau of Standards (UNBS) is also shown to contribute to the obstacles especially with the limited laboratory and testing facilities that inadvertently cause delays in the technical requirements and certification of medium and low manufacturing exports. An additional complaint is that the UNBS charges for certification are quite high for exporters.

As a general trend several agencies impose the most delays in the export process; these include the MAAIF, UNBS, Uganda Revenue Authority (URA) and National Agricultural Research Organization (NARO). The perception of high fees and charges and prevalence of delays directly corresponds to compliance with conformity assessments and technical requirements as the perceived overall biggest issues for exporters.

In spite of the survey findings the 2016 World Bank Enterprise Survey (WBES) highlights bribery and corruption as the highest constraint to export trade of Uganda. In the survey these constraints are reflected as informal payments meant to facilitate the speedy implementation of export processes; again the majority of these informal payments are found within the MAAIF and attest to the reason for the highest delays for processing certificates.

2.3. Burdensome NTMs to imports In contrast to figure 6 on NTM relating to exports that had highest burdens on technical requirements, conformity assessments and export certification, the main two burdens to imports are conformity requirements and charges and taxes each at 36%. Entry formalities also contribute considerably to burden to imports but the last 4 areas including export measures (from partner countries), transit requirements, and technical requirements recorded quite low effects to imports.

Figure 11. Type of NTM-related obstacles for importers


Complimentary to figure 11, Table 3 lists the NTMs according to ranking of prevalence, subchapter (and their percentage breakdown) and UN classification. Inspection requirements record as the highest obstacle faced by importers at a 22% rate followed by product certification and customs valuation each at 13%. Another notable obstacle at 11% is the internal taxes and charges levied on imports, which were not a burden to with exporters.

Notably, unlike for exporters where technical requirements presented one of the highest burdens to trade, importers did not have the same issues with import prohibition and authorization for SPS and TBT. In fact the burden recorded is one of the lowest for importers, partly due to the fact that majority of imports are manufactured good while agri-foods made the highest exports.

4%

36%

11%

36%

7% 5%

3% Technical requirements


Entry formalities

Charges and taxes


Transit requirements

Export measures

Ugandan regulations

Patners' regulations

An exporter of groundnuts to Turkey noted that a lack of texting facilities causes 3 days delays to have products tested at the UNBS and obtain certification for his exports.

An exporter of fresh groundnuts


14

Table 3. Principal categories of NTM-related trade obstacles for importers

Key NTMs Specific NTMs Breakdown Classification 1. Technical requirements

Import prohibition and authorization for SPS/TBT reasons 4% Product

requirements and conformity assessment

2. Conformity assessment

Product Certification 13% Inspection requirement 22% Others 1%

3. Entry formalities Pre-shipment inspection 6%

Import clearance and taxes

Other entry formalities 4%

4. Charges and taxes

Customs valuations 13% Internal taxes and charges levied on imports 11% Services charges (e.g. inspection and storing fees) 8%

Other taxes and charges 4%

5. Other import measures

Advance payment of customs duties 5% Other 2%

6. Transit requirements Transport and storage fees 5%

7. Export measures Export clearance 3%


As already noted above, two of the keys NTMs record the highest obstacles each at a total of 36% (see figure 11). The charges and taxes are particularly burdensome and distinctively not related to the characteristics of product imported, i.e. product requirements and conformity assessment but relate to import clearance and taxes. Customs valuations account for a higher cost even higher than the formal taxes and charges on imports; moreover there is an additional services charge relating to inspection and storage ranking at 8%. These charges and taxes are evidently an additional cost to the importer and therefore more burdensome than the product requirements and conformity assessment.

The secondary obstacles arise from other import measures such as a requirement of advance payment of customs duties; transportation and storage also relating to the fact that Uganda is a landlocked country facing high transport costs in general.

Why are NTM perceived as obstacles?

Similar to the exporters whose biggest obstacles lay with procedures, the importers also face the POs as their main obstacles to trade. Figure 12 shows most burdensome import measures to be either procedural or a mix of procedure and regulatory requirements.

The most sever obstacle appears to be in charges and taxes at 70%, followed 56% for transit requirements involving storage and transport fees. Technical requirements account for the highest regulatory obstacle 29% but notably less than the POs at 43%. A second similarity to exporters, importers cite delays as the most common obstacle faced in their trade processes.

In Uganda all the loaded vehicle carriers must pass through a weighing bridge along the highway to ensure weight limits. In case the vehicle carrier is above the weight limit the importer is penalised. At the weigh bridges, at times there is heavy traffic of trucks to be weighed, this makes the entire process very slow yet it is compulsory for all loaders to pass through the weigh bridges.

An importer of Motorcars


15

Figure 12. Reasons making NTMs burdensome to imports


Figure 13 reveals that conformity assessment (20%), entry formalities (20%) and charges and taxes (16%) are the measures causing the most delays in import trade. The difference between exporters and importers however, is that importers are more willing to make informal payments to expedite their trade process than exporters do.

Figure 13. Types of procedural obstacles faced by importers


Importantly, what differentiates importers from exporters however is the increased need for expedience in “facilitating” trade procedures to avoid the demurrage and storage fees incurred by having arrived cargo sit idly at the port. Figure 13 also reveals that when it came to import charges and taxes, traders were concerned first about the arbitral behavior of officials and second about the informal charges incurred in importation.

Where procedural obstacles take place?

Figure 14 tabulates the overall frequency of occurrence of import-related POs, citing that delays (24%) are the biggest complaint in Uganda. It is however important to note that even in partner countries, delays rank highest in the obstacles at 16% followed by the unusually high fees and charges at 9%.

8%

29%

100%

44%

69%

30%

75%

69%

29%

56%

23%

70%

25%

31%

43%

Export measures

Transit requirements


Charges and taxes

Entry formalities



Regulatory obstacles Combination of regulatory and procedural obstacles Procedural obstacles

0% 20% 40% 60% 80% 100%

Other importmeasures

Charges and taxes

Entry formalities

Conformityassessment

Technicalrequirements

Delays Informal payment Arbitrary behavior of officialsShort deadlines for completion Unusually high fees and charges Others


16

Figure 14. Types of procedural obstacles faced by importers


Only three areas are cited to have obstacles in transit countries, i.e. informal payments at 10%, unusually high fees and charges at 4% and delays at 3%. Majority of the obstacles are all within Uganda the most troublesome being delays (24%), informal payment (15%) and arbitrary behaviour of officials (13%).

Table 4 below highlights the key agencies involved in import processes in Uganda. Quite clearly the URA is the responsible for most of the import related obstacles to trade with the highest being long delays, informal payments and arbitrary behaviour of officials.

Table 4. Agencies involved in domestic POs experienced by importers in Uganda

Procedural obstacles Agency

Del

ays

Info

rmal

pa

ymen

t

Arbi

trary

be

havi

or o

f of

ficia

ls

Shor

t dea

dlin

es

for c

ompl

etio

n

Unu

sual

ly h

igh

fees

and

ch

arge

s

Oth

ers

Uganda Revenue Authority National Bureau Of Standards Entebbe Handling Services National Roads Authority Ministry Of Agriculture Animal Industry And Fisheries Ministry of Works And Transport Ministry of Health National Agricultural Research Organisation Not specified

Source: ITC NTM Survey in Uganda, 2015-2016. Legend: The different intensities of red, yellow and green indicate the frequency of a procedural obstacle occurrence at a particular public institution. Red indicates highest frequency while green indicates the lowest frequency. Blank cells indicate non-occurrence of such combinations.

Furthermore, the URA is the only agency responsible for imposing short deadlines for importers and account for the highest rate of unusually high charges and taxes than any other agency recorded. The two other agencies of notable importance are the UNBS and Entebbe Handling Services that both high frequencies in the delays to importers.

The next section condenses the salient points of the discussions above in a single format (Table 5) and indicates preliminary recommendations to address them. These major issues and their proposed solutions are intended for discussion thoroughly during the stakeholder workshop.

0% 10% 20% 30% 40% 50%

Others

Short deadlines for completion

Arbitrary behavior of officials

Informal payment

Unusually high fees and charges

Delays

In Uganda In transit countries In partner countries


17

3. Preliminary recommendations

Table 5. Matrix of preliminary recommendations

Types of burdensome NTMs Obstacles Products, agencies and

markets affected Recommendations / Policy options

1. Product requirements and conformity: compliance and expense How to improve the conformity of exported products? How to overcome the lack of recognition of Ugandan certificates in international markets? How to make local conformity assessment procedures more efficient and less expensive? How to ensure businesses have better access to product standards and conformity assessment procedures? Technical requirements (SPS and TBT related standards) by partner countries Conformity assessments (product certification and testing) by partner countries

• High costs and delays for testing and

certification requirements for both Agri-food (SPS) and manufacturing (TBTs)

• MAAIF, UNBS and Entebbe Handling Services are under staffed hence long delays in acquiring testing and conformity assessments.

• Labelling and fumigation requirements

difficult and expensive for agri-food exporters

• Import prohibition and authorization for SPS/TBT reasons

Mainly Agri-food exports usually for EAC, COMESA and EU markets Agri-food – UNBS, MAAIF and Entebbe Handling Services Manufacturing – UNBS, NEMA

Introduce more testing centres with both the UNBS and MAAIF to avoid delays with conformity assessments. Improve facilities at the Entebbe Handling Centre and increase technical staff to reduce delays incurred by exporters that also affect the quality of the perishable products.

Providing adequate facilities and technical staff in government testing and certification offices

Technical assistance to train extension workers to support agri-food producers in meeting technical requirements in production processes

Simplify and make transparent technical authorization procedures such as conformity assessments and testing as well as the acquisition of SPS and TBT certificates.


18

2. Import clearance and border control: transparency and clean up How to improve the transparency of border inspection procedures? How to streamline border clearance and control procedures? What are the roles and responsibilities of each institution involved in issuing of trade documents (licenses, permits, certificates of origin)? How to simplify the procedures for granting these documents? How to improve transparency on regulations governing such procedures including the eligibility criteria for companies, costs and time?

Transit Requirements (Transport and storage fees) Import / Export Charges and Taxes (customs valuations, services charges for inspection and storage fees, internal taxes) Import/export clearance (pre-shipment inspection, certification and entry / exit formalities) Rules of origin (RoO) by partner countries

• URA involved in most domestic POs,

including delays and high fees for import and export clearance

• Very high costs relating to clearance procedures.

• Customs valuation subject to improper

assessments. • Transit procedures especially for land

transportation and arbitral behaviour of officials cause delays and increased costs of trade.

• Lack of recognition of RoO Certificates

in some countries.

• Long delays at MTIC for acquiring RoO Certificates leading to informal payments or rent seeking to expedite procedures.

Cross cutting, concern all products and markets (EAC, COMESA, EU and Asia) Some Agri-food products and low and medium manufacturing sectors – RoO URA, UNBS, Entebbe Handling Services Agency formerly the MTIC now the URA for insurance of RoO certificates.

Decentralise payment of duties and charges to other intermediaries to cut down on delays.

Increase transparency of costs and inspection procedures at transit and at the boarders to reduce rent-seeking behaviour.

Clear guidelines on product valuation to reduce ambiguity and misuse of authority by field officials during imports are needed.

Capacity building to increase technical officers to speed up the clearance and inspection processes.

Customs and clearance processes should be fully automated to allow for speedy processes of goods in transit. Full implementation of the single window and one stop boarder posts to ease the movement of goods further.

Initiate negotiations with countries that do not recognise Uganda’s RoO certificate and implement mutual recognition agreements including for quality certification.

Provide an online / semi- automated platform for the application and acquisition of RoO certificates to cut down on delays.

FSC is an independent, non-governmental, not for profit organization established to promote the responsible management of the world´s forests.

Printed by ITC Digital Printing Service on FSC paper, which is environmentally-friendly paper (without chlorine) using vegetable-based inks. The printed matter is recyclable.

A free pdf is available on ITC’s website at: www.intracen.org/publications

Street address: ITC, 54-56, rue de Montbrillant, 1202 Geneva, Switzerland

Postal address: ITC, Palais des Nations, 1211 Geneva 10, Switzerland

Telephone: +41-22 730 0111 Fax: +41-22 733 4439E-mail: [email protected]: www.intracen.org

Sponsored by:

Documents

ITC BUSINESS SURVEY ON NON-TARIFF MEASURES …ntmsurvey.intracen.org/media/2736/itc_ntm-survey-in-uganda_summar… · ITC BUSINESS SURVEY ON NON-TARIFF MEASURES IN UGANDA ... Company