June this year marked a significant milestone in strengthening bilateral trade ties and facilitating smoother customs procedures between Uganda and China.
The first day of June is the date on which China and Uganda officially launched Authorised Economic Operator (AEO) Mutual Recognition Arrangement (MRA) in Uganda at a ceremony held in the country’s capital Kampala.
The two countries on that day activated the mutual recognition agreement, signed in 2021, to recognise each other’s AEOs. Due to the outbreak of the COVID-19 pandemic, it could not be put into immediate effect.
The AEO, according to James Malinzi, assistant commissioner for customs in Uganda Revenue Authority (URA), is a trade programme, which the customs department in the URA is undertaking to facilitate trade and promote security of international trade.
“The companies which comply with custom laws and regulations under AEO-MRA benefit from customs preferential treatments, such as fast clearances of their goods through simplified procedures and reduced inspections,” he explained.
Initiated by World Customs Organisation
The AEO system, initiated by the World Customs Organisation (WCO), aims to facilitate customs clearance for enterprises through authentication by customs agencies of enterprises with a high level of legal compliance, credit status and safety. WCO is an international umbrella body to which both China and Uganda are members.
Under the system, an individual, business entity or government institution involved in legal international trade is authorised by the commissioner of customs and given an AEO status. The AEO national status allows the authorised company or individual to enjoy all benefits prescribed by the URA customs.
Patience Rubagumya, senior commissioner in the URA, underscored the importance of AEO, especially in terms of helping Uganda to utilise tax revenues for economic development. She said that to achieve this, there is a need for closer cooperation between customs and domestic taxes to facilitate seamless trade operations. “Faster clearance of goods through the AEO would attract more business and contribute to accelerated economic growth,” she added.
Uganda-China AEO-MRA background
Abel Kagumire, URA commissioner for customs, told ChinAfrica that in May 2021, Uganda signed an AEO-MRA agreement with China during the Fifth WCO Global AEO Conference held in Dubai.
The move was aimed at facilitating trade between the two countries, being the first time such an agreement between the two countries was signed. Under the agreement, the two countries were supposed to enjoy simplified customs procedures, such as reduced examination or prioritised clearance, when they export products to the other country.
“After signing the agreement in 2021, it was not implemented immediately because of the scare of the COVID-19 pandemic, which hit the whole world. [The agreement was] recently launched in Uganda on 1 June at a function held at URA headquarters in Kampala,” said Kagumire.
The AEO launching ceremony featured officials from Uganda and China. Uganda’s officials were led by James Malinzi, assistant commissioner for customs in URA in charge of audit, while China’s side was led by its Ambassador to Uganda Zhang Lizhong.
In his speech, Malinzi enumerated the importance of the AEO-MRA agreement between China and Uganda and its importance on trade facilitation. He said that Uganda has now got 118 companies registered in AEO, while China has 5,000, adding that AEOs are key in streamlining trade. “Companies registered in AEOs that import goods from China will enjoy priority during clearance, ensuring expeditious processing of goods exportation between the two countries,” said Malinzi. Of Uganda’s 118 AEOs, 58 are agents and 60 are importers and exporters.
Zhang told the launch attendees that he was optimistic about the implementation of the AEO, underscoring the exchange of lists between AEO companies in both nations. He emphasised the tremendous advantages the AEO-MRA brings, including expedited customs clearance, which is estimated to improve clearance speed by 60 percent. Additionally, the AEO-MRA is expected to save 10 percent in logistics costs, leading to enhanced trade efficiency.
He noted that the bilateral trade volume between China and Uganda rose by 6.6 percent in 2022, reaching a substantial $1.14 billion. He acknowledged China’s recent decision to grant zero-tariff treatment for 98 percent of taxable items imported from Uganda, further boosting Uganda’s export of value-added products to the Chinese market.
Meanwhile, URA Commissioner of Customs Kagumire emphasised the crucial role AEOs play in Uganda’s revenue collection, contributing a substantial 26 percent to URA’s overall revenue.
In order to ease trade operations, each AEO in Uganda has been assigned a unique identifier just like AEOs in China. The identifier is to help to distinguish consignments received and also allow customs and other agencies involved to keep records.
Rubagumya said that among other benefits of AEO-MRA are providing a platform for sharing information on traded cargo for faster and more efficient risk assessment and hence faster clearance of cargo, more effective controls leading to more secure and safer trade supply chain, and increased competitiveness of Uganda products.
However, even before the launch of AEO-MRA in Uganda, some companies in the country were credited as AEOs in China, according to Kagumire.
The companies accredited as AEOs now include Uganda Tobacco Services Ltd., Afro Maize, Kabali Fisheries and Makala Electronics.
URA Commissioner General John Musinguzi said the companies accredited as AEOs are those that have been tax compliant, while Kagumire added that these companies have supported URA in making sure that they spread the message of compliance, in addition to supporting the national agenda of development.
John Bagada, manager of Makala Electronics, said that getting accredited as AEO has made his work better. “It reduces the cost of doing business by eliminating delays and enables our company to offer better services due to the simplified clearance processes,” he said.
Uganda’s Minister of State for Trade, Industry and Cooperatives (Industry) David Bahati said AEOs will go a long way in promoting trade between Uganda and China. He called on the business community in the country to embrace it.
Kagumire said that the only other country with which Uganda has signed such an agreement is South Africa.