REFORM follows up on the Simplified Trade Regime (STR)

COMESA Following the recently launched Simplified Trade Regime (STR) between Malawi and Zambia and Zambia and Zimbabwe, the Regional Food Security and Risk Management (REFORM) programme funded by the European Union, commissioned a rapid assessment of its implementation. The study looked at how far the STR had been taken up by small traders, how simple was it, and had it reduced cost for the trader.

The REFORM project organized a 3-day workshop (29 September – 01 October 2010) to deliberate on the findings and come up with practical recommendations for improvement. The workshop was conducted in two phases: the first two days was with people at the sharp end – officials from the borders and traders and the ‘trade information desks’. The second phase involved Commissioners of Customs who listened to the recommendations and endorsed the recommendations of the workshop.

The total usage of STR documents in the 4 months that it has operated has been about 800.  Some borders are relatively busy, such as Victoria Falls which has clocked over 500 STR. The other 2 border posts between Zambia and Zimbabwe have shown very little usage of less than 40 each.  As for trade between Zambia and Malawi, Mwami/Mchinji, has registered 180 users of STR in 5 months.

The poor usage is put down to two main factors:

Firstly, many small traders use the “travellers’ rebate system” whereby they can carry goods to a value of $300 to $500 (depending on the country) in duty free (regardless of origin). Although this is not meant for commercial traders, many use this system and pay tax for goods in excess of their “allowance”.  Under STR, goods originating locally are duty free, but other taxes are then applied as they are now recognized as commercial traders. Others resort to smuggling where the border is open – as on the Malawi border. For the trader, the main interest is to see a reduced cost of trading if carrying locally produced products.

Secondly, there has been insufficient sensitization and education of traders on the potential benefits.

Customs officials observed that the STR had no marked effect on revenues. They also noted that the Trade Information Desks set up with assistance from COMESA had proved useful, and worked well with Customs.

After three days of careful deliberation, the Commissioners recommended that:

  1. The STR threshold be increased to USD1000,
  2. Fees on ASYCUDA be removed for all STR transactions
  3. The common list be regularly revised to accommodate new commodities,
  4. Awareness be deepened through more focused trainings and sensitization  on STR for traders and officials
  5. A simplified visa system for traders be developed and its issuance be decentralized,
  6. One year trade permits for cross border trader be issued for free, and finally
  7. Roll out the STR under the Tripartite framework to allow smooth movement of cross border traders and their goods in a grand FTA.

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