Ministry of Finance Issues Applicat

On 14 January 2019, Ministry of Finance (“MoF”) Decision No. 34 of 2019 was published in the Egyptian Gazette, setting out the rules and terms for the application of the new custom tariffs that came out in the final quarter of last year (the “Decision”).[1]

Background

On 11 September 2018, new custom duties were issued by Presidential Decree No. 419 of 2018,[2] which increased the import tariffs for over 300 goods in a variety of categories. The hike was meant to encourage national industry in the hope of curbing importation and reducing high demand on foreign currency. In addition, the classification of goods in the decree was updated to comply with international treaties to which Egypt is a member.

Rules for the Application of the New Tariffs

• The 10% Tariff on Goods Temporarily Sent Abroad for Maintenance or Completion of Manufacturing

The new tariffs set a 10% custom duty on any good that is temporarily sent abroad for maintenance or repair and then re-entered into Egypt. The percentage is calculated based on the price of maintenance plus shipping and insurance costs. The new Decision sets out the rules for the application of the 10% tariff. It provides that the exporter must attest in the custom declaration that the item is being temporarily exported for maintenance or the completion of manufacturing and is to return. The item must return within a six-month window, which could be extended up to two years for justifiable reasons, or for more than that by the MoF in exceptional circumstances. Custom officials must undertake measures to inspect the items on their return. Items that are difficult to ascertain after completion of manufacturing must be presented to the competent authority at the Ministry of Trade and Industry (“MTI”) at departure and return.

• The 20% Tariff on Imports by Hotel and Tourism Facilities

The 20% custom duty on imports by hotel and tourism facilities is based on value or importation tax, whichever is less. Said items must be imported directly by the facility or for its account. A letter from the relevant regulatory authority must be presented for the release of these goods at customs, along with ratified invoices and an attestation that the imported items are necessary for replacing/replenishing resources at the facility. In addition, proof of the removal of custom restriction on the items to be replaced must also be presented.

• Tariffs for Assembly Industries

Favourable custom treatment was granted to assembly industries based on the percentage of local component used in production. For instance, in order to benefit from a 10% reduction on custom duty on disassembled parts that are imported for an assembly industry, a facility must present a detailed invoice ratified by the Industrial Development Authority (“IDA”). IDA must determine that the imported items are for an assembly industry and that the parts are completely disassembled. The importer must also present a declaration from the assembler that the parts will not be used for any other purpose. Reductions on foreign components in a product that uses 30% local component also require a letter from IDA and an attestation from the importer and the manufacturer that the imported components will not be used for other purposes. Separate rules are indicated for a special approval that is granted by the MoF in consultation with the MTI regarding a custom duty advanced reduction of up to 40% on complex assembly operations.

• Custom Duty Reductions for Selected Imports

The Decision also contains the rules that must be met and the documents to be presented at custom clearance for an entity to benefit from custom duty reductions granted to factories that produce infant milk, imports by the Arab Petroleum Pipelines Company (SUMED), imports by companies operating under the auspices of the Arab Organization for Industrialization, imports for natural gas station installations, and renewable energy and other environmental equipment. For the application of the reduced custom duty of 35% on vehicles that run on natural gas, the vehicle must meet technical standards and be designated by the manufacturing company as a natural gas vehicle, and not adjusted after manufacturing to operate on natural gas. Finally, imports by tourist facilities (such as food and beverage products) must be conducted through an entity determined by the Ministry of Tourism and must be limited according to the facility’s needs and within the extent of the quantity, brand, and value that is authorized by said Ministry.   [1] Ministry of Finance Decision No. 34/2019 with the regulations on applying certain provisions of the Presidential Decree No. 419/2018 issuing the custom tariffs, Egyptian Gazette, Issue No. 11 (cont.) (c), 14 January 2019. [2] Presidential Decree No. 419/2018 on Custom Tariffs, Official Gazette, Issue No. 36 (bis) (a), 11 September 2018.