Entrepreneurship

TOPIC AREA: BUSINESS ACTIVITY

SUB-TOPIC AREA: TAXATION CUSTOMS

Key unit competence:

To be able to examine the role of Rwandan customs procedures.

Knowledge to be acquired

Meaning of customs and customs declaration.

 Types of customs declaration.

 Role of customs procedures.

 Stakeholders involved in customs declaration.

 Types of customs declaration.

Application to daily life

 Analyse the types of customs declaration.

 Analyse various documents used in customs declaration.

 Assess the role of various stakeholders involved in customs procedures.

 Appreciate the role of customs procedures in the facilitation of trade.

 Develop positive attitude towards customs declaration.

Introductory Activity

Some of the products we use in everyday life are not produced within Rwanda. Some are imported from other countries. Not all goods produced in Rwanda are consumed within Rwanda. Some are exported to other countries.

Questions

1. Describe the process involved in the:

    (a) buying of goods from countries outside Rwanda.

    (b) selling of goods to countries outside Rwanda.

2. How do we call the process of:

   (a) buying of goods from countries outside Rwanda?

   (b) selling of goods to countries outside Rwanda?

3. Mention the agents involved the process.

4. Mention the documents used in the process.

5 . Why do customs exist in Rwanda

6.1: Meaning of Customs and Customs Declaration

ACTIVITY 6.1

Using your knowledge of Senior one and two about sources of finance and taxes in Rwanda, answer the followingqueS11on.s:

1. What is taxation, tax, tax avoidance and tax evasion?

2. How are taxes collected in Rwanda?

3. Why is it important for individuals and businesses to pay taxes?

4. Which government agencies are in charge of collecting taxes?

ACTIVITY 6.2 Research activity

Visit your library or use the internet and research on the following:

1. Customs

2. Customs declaration

3. Types of customs declaration

  (a) Export and import

  (b) Temporary importation

  (c) Warehousing

  (d) Transit

From activity 6.1 and 6.2, customs is a government agency entrusted with enforcement of laws and regulation to collect and protect import-revenues and to regulate and document the flow of goods in and out f the country. (BusinessDictionary.com)

Customs declaration is an official document that lists and gives details of goods that are being imported or exported. Imported goods must be accompanied by a customs declaration form. Ifs a form declaring the nature and value of goods, and so on, for customs purposes. (Collins English Dictionary)

6.2: Types of Customs Declaration/Customs Entry

Customs declaration is a form that is required by most countries when a citizen or a visitor or goods are entering that nation’s borders, called import.

The purpose of the import form is to declare what goods are being brought into the nation,as some countries may have import quotas (limits), customs excise taxes, or bans from entry on some goods or quantities of goods.The form is also used to calculate any applicable tariffs or duties.

The entry/duty form states the customs classification number,country of origin,description, quantity, CIF value of the goods, and the estimated amount of duty to be paid.

If upon examination by customs officer the entry is verified as a correct or ‘perfect entry, the goods in question are released (on payment of duty and other charges, if any) to the importer, or are allowed to be exported.

Main types of customs entry are:

• Consumption entry: for goods to be offered for consumption in the importing country.

• Formal entry: that is required to be covered by an entry bond because its aggregate value exceeds a certain amount.

• Informal entry: That is not required to be covered under an entry bond because its value is less than a certain amount.

• In-transit entry: for the movement of goods from the port of unloading to the port of destination, under a customs bond.

• Mail entry: For goods entering through post office or courier service and below a certain value.

• Person baggage entry: For goods imported as personal baggage.

• Transportation and exportation entry: For goods passing through a country en-route to another country.

• Warehouse entry: For the goods stored in a bonded warehouse.

• To ensure observance of laws: Laws on taxes, quality standards of goods and services imported or exported are observed by customs authorities.

• Trade compliance and facilitation: Customs procedures also facilitate smooth running of trade activities through regulating prices and quantity of exports and imports.

• To protect economic interests: Customs procedures also protect economic interests of an economy through regulating what should be imported and exported depending on the prevailing conditions.

• To protect the rights and interests of citizens and businesses: This can be done through discouraging imports so as to protect local businesses from foreign competition and encourage exports.

• To ensure observance of revenue collection: Taxes are collected on imports and exports from borders of a country by customs authorities.

• both the trading parties,
• lists, describes, and quantifies the items sold,
• shows the date of shipment and mode of transport,
• prices and discounts (if any),
• and delivery and payment terms.

 

• written evidence regarding receipt of the goods (cargo),

• the conditions on which transportation is made (contract of carriage),

• and the engagement to deliver goods at the prescribed port of destination to the lawful holder of the bill of lading.

                           

• The word ‘Invoice’
• A unique reference number: the invoice number.
• The date the product was sent or delivered (or the date the service was rendered).
• The date the invoice was sent.
• The contact information and name of the seller.
• The name and contact details of the buyer.
• The terms of payment (that explain the means of payment, when the sum should be received, any cash discount details for early payment, late payment fees, and so on).
• A line detailing the product/service.
• The cost per unit of the product (if this applies).
• The total amount that is owed.

• Invoices are used to request payment from buyers,
• Keep track of sales,
• Help control inventory,
• And facilitate delivery of goods and services.

               

                             

• invoice number,
• quantity and description of the goods,
• the weight of the goods,
• number of packages,
• and shipping marks and numbers.

Certificate of Origin

                           

A “Certificate of Origin” is also called a “Form A”. It certifies a shipment’s country of origin. The Certificate of origin is commonly issued by a trade promotion office, or a chamber of commerce in the exporting country. This document is filled in by the exporter and certified by a recognised issuing body, confirming that the goods in a particular export shipment have been produced, manufactured or processed in a particular country.

A certificate of origin is often required by customs authorities of a country as part of the entry process. Such certificates are usually through an official organisation in the country of origin such as the local chamber of commerce or a consular office.

The goods description must coincide with that provided in the commercial invoice and in the packing list (number, goods description, name of the consignor and of the consignee, trademarks, etc). If the certificate of origin is not shown, the import customs may, if it deems it necessary, accept the dispatching of goods. In this case, the corresponding tariff would be applied to third countries (non preferential origin), without any tariff discount.

Phytosanitary certificate

Phytosanitary certificate is a certificate stating that a specific crop was inspected a predetermined number of times and a specified disease was not found.An inspection certificate issued by a competent governmental authority to show that a particular shipment has been treated to be free from harmful pests and plant diseases.The phytosanitary certificate must be issued before the customs clearance for export and import. It is granted for a period of sixty days covering the usual deadlines for shipping and international freight.

Phytosanitary certificates are issued for the following commodities:

• plants, bulbs and tubers, or seeds for propagation, fruits and vegetables, cut flowers and branches, grain, and growing medium.

• plant products that have been processed where such products, by their nature or that of their processing, have a potential for introducing regulated pests (e.g. wood, cotton).

• other regulated articles where phytosanitary measures are technically justified (e.g. empty containers, vehicles, and organisms).

Importing countries should not require phytosanitary certificates for plant products that have been processed in such a way that they have no potential for introducing regulated pests, or for other articles that do not require phytosanitary measures.

Delivery Note

                             

A delivery note accompanys the shipment of goods listing the description and quantity of goods delivered. A copy of the delivery note, signed by the buyer or consignee is returned to the seller or consignor as proof of delivery.

Delivery notes have a dual function for the exporter:

• Justify the removal of the products from its store and proof credit delivery to the importer and therefore, it is important that the importer signs the copy provided by the carrier. For the importer, delivery notes serve to verify that the goods received match those listed on the purchase order or contract.

• a. For the carrier, a delivery note is used as a proof of delivery of the goods.

Payment receipt

A payment receipt is a simple document that shows that payment was received in exchange for goods or services. For example, a receipt can be something as simple as what an individual gets after making a purchase at the grocery store.

Businesses also use payment receipts for product delivery or independent contractors, among others, to ensure that both parties have proof that the goods or services were rendered.

Some businesses combine a receipt with an invoice, and will just make a notation on the bottom of the existing document that payment was made; this can make filing slightly easier.

The purpose of this receipt in any situation is to verify that the correct amount was charged for the correct products or services.A receipt shows the following:

• the name and address of the store,
• the date of purchase,
• and a description of the item.
• It will also include the price paid and any taxes that were added in,
• as well as the method of payment, such as cash, a check or credit card.

Anyone being given a receipt after a purchase should quickly check to make sure that the amounts shown are correct; this is especially true if a credit card was used for the purchase, where a mistaken charge could be a big problem.

Receipts are used by buyers or customers to prove they paid for an item, especially in return situations in which goods are faulty or defective.

Certificate of Analysis

                         

Certificate of analysis is a document issued by a quality assurance entity confirming that specific goods have undergone testing with specified results and adhere to product specifications and standards of production of certain products such as food products and drugs.In international trade, a certificate of analysis is usually the result of an agreement between the seller and the buyer, or a requirement of one of their governments. The certificate of analysis is mostly used for food products, wines and spirits, chemicals and pharmaceuticals.Sometimes, as in the case of wine exports, there are countries that require it at the import customs. This certificate can be issued by a certification authority.

Goods arrival notice

A goods arrival notice is a document sent by a carrier or agent to the consignee to inform about the arrival of the shipment and number of packages, description of goods, their weight, and collection charges (if any). It is also called an arrival notice.Warehouse handling invoice Warehouse handling invoice is a written document given bya warehouseman for items received for storage in his or her warehouse, which serves as evidence of title to the stored goods.

The general rule is that warehouse receipts need not be in any particular form. They must, however, contain the following information:

• the location of the warehouse and the place where the goods are stored;
• the date when the invoice was issued;
• the consecutive number of the invoices;
• terms indicating whether the goods are to be delivered to the bearer of the receipt, to a particular individual, or to a particular individual on his or her order;
• the storage rate or handling charges;
• statement describing the goods or the manner in which they are packed;
• the signature of the warehouseman or his/her agent;
• the amount of advance payment made, if any;
• and any other terms that do not impair the warehouseman’s duty.

In situations where a warehouse handling invoice does not contain these provisions, the warehouseman can be held liable in damages to anyone who sustains financial injury because of the omission.

Assessment notice

This is a document issued by a taxing authority specifying the assessed value of a property.

                      

Importation Permit or License

An import license is a document issued by a national government authorising the importation of certain goods into its territory. Import licenses are considered to be non-tariff barriers.to trade when used as a way to discriminate against another country’s goods in order to protect a domestic industry from foreign competition. Each license specifies the volume of imports allowed, and the total volume allowed should not exceed the quota.

Government may put certain restrictions on what is imported as well as the amount of imported goods and services. For example, if a business wishes to import agricultural products such as vegetables, then the government may be concerned about the impact of such importations of the local market and thus impose a restriction.

Import licenses are put in place because of the following reasons:

• To restrict outflow of foreign currency and improve a country’s balance of payments position;
• To control entry of dangerous items such as explosives, firearms, and certain substances;
• To protect the domestic industry from foreign competition.

                      

6.5: The Process of Clearing through Customs

ACTIVITY 6.5 Research activity

Using the library, internet or resources from RRA, make research on the process of clearing through customs.

The different steps of clearing through customs are:

1.Obtain notice of arrival of the goods (avis d’arrivee)

Requirements

• Customs declaration number.
• Physical presence of the clearing agent.

2. Submit goods arrival notice for verification from Rwanda Standards Board.

Requirements for all

• Goods arrival notice (avis d,arrivee) (original).
  
• Goods invoice (original).
• Packing list (original).Requirements for foods and cosmetics
• Certificate of analysis (original) obtained from where goods originated.

Requirements for agricultural products such as seeds and fertilisers

• Certificate of phytosanitary (original) obtained from where goods originated.
• Certificate of analysis (original) obtained from where goods originated.
• Importation permit from Rwanda Agriculture Board (RAB) (original) obtained from RADA.

Requirements for used clothes

• Certificate of fumigation (original) obtained from where goods originated.

Requirements for medical products

• License of importation (original) obtained from the ministry of health (Rwanda).

• Notice of arrival (avis d’arrivee) (original).
• Tl (original).

• Goods invoice (original).
• Copy of goods invoice with RRA stamp. RRA stamp is obtained at the point of entry in the country.
• Transport invoice (original).
• Bill of ladding (original+ simple) copy should have RRA stamp obtained at the point of entry in Rwanda or Airway bill (original).
• Packing list (original + Simple) copy should have RRA stamp obtained at the point of entry in Rwanda.
• Tl obtained from RRA at the point of entry in Rwanda.
• Goods arrival notice with RBS stamp (original + simple copy). Costsƒ

1. Cost detailƒ
2. 50,000 Frw for clearing agent handling feesƒ
3. 9,000 Frw for VATƒ
4. Payment methods: cash, check

• Assessment notice
• Costsƒ

1. Payment methods: cash or cheque.ƒ
2. Import tax include; import duty, Value Added Tax (VAT), withholding tax and consumption tax.ƒ
3. VAT and withholding taxes are fixed at 18% and 5% respectively.
4. Customs duty vary according to the origin of the goods. Goods from the East African community are exempted from this tax and some other COMESA countries pay a reduced price.ƒ
5. The clearing agencies have a system where by goods are assigned different codes and once this code is entered in the system and the country of origin of the goods, taxes are calculated automatically.ƒ
6. Large importers who had been previously paying taxes well may be exempted from withholding taxes.

• Notice of arrival (avis d’arrivee) (original).
• Time frameƒWaiting time in queue: Max. 10mn.ƒAttention at counter: Max. 5mn.

• Warehouse handling fees invoice (original).
• Costs: Warehouse handling fees are set by MAGERWA management. The fees depend on the quantity of the goods and the time spent in the warehouse. Within 7 days, each kilogram is charged l0Frw per day. From 7 days and above, an extra 1Frw is charged per kilogram/day. VAT (18%) and parking fees is added on the total cost.

• Warehouse handling fees invoice (simple copy).
• Tax declaration form (original).
• Payment receipt (MAGERWA) (original).

• Provides reference documents containing solutions to technical and commercial problems concerning products, goods and services which rise often in the relationship between economic, scientific, technical and social partners.

• Improves the quality of products. This promotes competition which leads to the consumption of quality products at a relatively lower price.

• Protect imported commodities against theft and bad climate conditions.
• Prepare in advance against price fluctuations, for example, if after a particular season, certain products are in abundance, one must keep them to wait a stronger demand at a good price.
• Goods can be stored and repacked again for transporting to the importers premises.

• Consumption entry: for goods to be offered for sale (consumption) in the importing country.
• Formal entry: that is required to be covered by an entry bond because its aggregate value exceeds a certain amount.
• Informal entry: that is not required to be covered under an entry bond because its value is less than a certain amount.
• In-transit entry: for the movement of goods from the port of unloading to the port of destination, under a customs bond.
• Mail entry: for goods entering through post office or courier service and below a certain value.
• Person baggage entry: for goods brought imported as personal baggage.
• Transportation and exportation entry: for goods passing through a country en route to another country.
• Warehouse entry: for the goods stored in a bonded warehouse.

• To ensure observance of laws.
• Trade compliance and facilitation.
• To protect economic interests.
• To protect the rights and interest of citizens and businesses.

• Obtain notice of arrival of the goods (avis d’arrivee).
• Submit goods arrival notice for verification by Rwanda Standards Board.
• Obtain manifest.
• Submit import document to the clearing agent for tax calculation.
• Pay import tax.
• Obtain an invoice for warehouse handling fees.
• Pay warehouse fees for goods handling.
• Obtain goods exit note.

• Rwanda Revenue Authority (RRA).
• Rwanda Standards Board (RSB).
• Clearing and forwarding agencies.
• Warehousing agencies and security bodies.