FINAL DRAFT PROCEDURE MANUAL - KAMPALA

- type and quantity of product to be received; - vehicle/vessel that is to discharge; - Expected time of arrival (2) Procedures prior to pumping A6.fter approval and registration by Customs the copy of notice of intention is handed back to the applicant and the original copy retained in the Customs office. However, before actual pumping begins the following must be done: T7.he receiving of product is supervised by Customs, Facility Owner and a nominated Inspection Company (surveyor). In the absence of an inspection company, the representative of the Oil Marketer has to be present. T8.ogether these parties must undertake or witness the following activities:- - Ullaging of the ship’s/trucks/wagons tanks to determine quantity on board (QOB) before the discharge of the product. - Dipping of tanks in the nominated tanks to determine quantities therein before pumping begins - Where approved flow meters are installed, taking both initial and final meter readings for double checking with dip readings. Note: Dips must be read only if a clear cut is shown on the steel dip tape. This can best be obtained by rubbing a little lubricating grease or special water paste on that portion of the tape recording the gross dip. Each tank must be dipped to ascertain the water level, if any. It is impossible to obtain a clear cut at the water level unless “water paste” is used. (3) Procedures after pumping A9.fter the product has been received the following must be done:- - The nominated tank’s inlet valve is closed and the product left to settle before the quantity can be determined and the outturn report issued. - Ullage of the ships is also undertaken to determine the amount remaining on board (ROB). Page | 251

- Use of conversion tables to convert the observed sample density at the sample temperature to a corresponding “quantity” at 20°C of the product Note: The procedure of product measurement in the vessel is the same as that of shore tanks except the conversion table used. (4) Guidelines on dipping - In tanks with floating roofs, the amount of displacement is to be deducted from the gross litres. - The camber at the bottom of the tanks is convex in shape, i.e. it slopes upward into the tank. Where a camber is not covered by water, the height of the camber as shown in the calibration tables is deducted from the gross dip prior to reading the dip on the calibration tables. - To the gross dip of the contents of the tank will then be added the litres contained around the camber, and this total will then be the figure to be multiplied by the correction factor. - The tare weight of each type of container used by the oil companies is to be checked at least once every six months. As it is impossible to obtain accurate readings before the product settles down in a storage tank after pumping, dipping should only be undertaken after the following periods: Type of product Source of product or method of Dipping period delivery Heated lubricating Ex-refinery by pipeline No sooner than 24 hours and not later oils(base oil) than 48 hours Other petroleum Ex – refinery by pipeline No sooner than 3 hours not later than products 24 hours Other petroleum • Directly receipts ex-ship No sooner than 6 hours and not later products than 12 hours • For receipts ex-truck/wagons 3 hours and not later than 12 hours Page | 252

• For receipts ex- by pipeline No sooner than 3 hours and later than 12 hours Conversion Measurement Table 60A The volume of petroleum products varies with temperature and density of the product. Accordingly it is necessary to ‘correct’ the volume measured at the temperature of the product to the volume it would be at 20°C, the temperature at which the volume for duty purposes is determined. The following are guidelines for the use of conversion tables: Conversion Measurement Table 60A is used for converting the measured sample density at the temperature of the sample of crude oil to what it would be at 20°C. The density ‘value’ thus obtained will remain constant from the time of receipt of the product in a bonded tank. Consequently no further sampling for the purpose of checking densities is necessary except:- - at the month-end survey; or - where further quantities of dutiable bulk products are introduced into the tank. Conversion Measurement Table 60B Table 60B the conversion Measurement Tables is used for obtaining a factor for converting refined petroleum products at temperatures other than 20°C to corresponding volumes at 20°C by reference in the tables to the ‘values’ of density at 20°C determined using Table 60A. The observed volume is obtained from the tank’s calibration chart and is converted to 20oC. Using the product temperature, its equivalence known as Volume Correction Factor (VCF) is obtained from the table. Volume in litres at 20oC is converted into weight in Metric Tonnes (MT) through multiplying it by Weight Correction Factor (WCF) which is obtained by subtracting 0.0011 from the product density. Balance of stock is determined at the end of each month using the above procedure for the purpose of reconciliation between receipts and deliveries. The conversion procedure for product measurement outlined above applies to all petroleum products. However the procedure in vessels differs from that used in shore tanks in the conversion tables used. Whilst in shore tanks tables 60A/B are used in ship tanks tables 54A/B are used. (5) Processes before delivery of the product to the end user Once the Customs outturn report is issued after determination of the EACCM quantities received in the nominated tank, the Oil Marketer lodges the A s.34 warehousing entry or other entries under any of the other Customs procedure codes. The same procedure applies for crude oil, except that refining can only start after the Oil Marketer has paid the Import Declaration Fees (IDF). Page | 253

The following products are derived from the refining process:- - PMS Premium Motor Spirit - RMS Regular Motor Spirit - AVGAS Aviation Gasoline - LPG Liquefied Petroleum Gas - DPK Dual-purpose Kerosene - AGO Automotive Gas Oil - FO Fuel Oil (either FO 125 or FO 180) - Bitumen (Pen 60/70 or pen 80/100 The percentage of these products derived from particular crude depends on the type of crude input (blend) and the requirements of the market at that particular point in time. While the crude is being processed by the refinery the Marketer prepares and submits the Form C.16 (Request to Transfer Ownership of Warehoused Goods) to transfer the ownership of the crude to the end user of the refined products. These are processed by the Customs officer and a running balance is maintained as a control measure to ensure that the quantity warehoused is not exceeded. Refined products are moved into mainline in ‘batches’ assigned by the Pipeline Coordinator (PipeCor) based on market availability and demand for the product. Batch quantities are allocated to the Marketers by PipeCor based on each Marketer and throughput. The Marketer then pays the taxes for the quantities of product so allocated in each batch. 5. Registers Maintained The Survey Register, where necessary, should be maintained and must reflect the following details: - Full particulars of all main and service tanks; - All the tank dips indicating time and date, product type, temperature, density and volume in litres at 20°C; Page | 254

- Customs declaration number; - The pipeline content A stock register is maintained to record monthly product movement from the oil installations. The register shows:- - Each tank’s total volume; - Line content; - Opening stock; - Total receipts; and - Closing stock and gain/loss. 6. Control of the product from bonded storage The control of the movement of stocks from the bonded storage tanks is done by Customs information System which details are used to make Customs declarations through Customs declaration system. 7. Removals by road or rail for transit or export In the case of removals by road or rail in calibrated tank wagons or bulk lorries, the officer is to dip and seal each tank wagon or lorry prior to dispatch from the installation recording the volume at 20oC. The officer at the loading depot is to examine the seals and dip each tank wagon or lorry before giving the depot keeper permission to pump from the tanks. 8. Transhipment (Back loading)/ Bunkering Customs declaration is made together with a notice of intention indicating the quantity and the type of product to be transhipped or bunkered. Volume of the product bunkered or back loaded is determined by proper officer, facility owner and surveyor upon the settlement of the product. A certificate of quantity (COQ) is given indicating that volume bunkered/ back loaded in litres at 20oC 9. Re-exports/transit Ex-warehouse entries are passed using quantities determined through dipping double checked with metre readings as outlined above. No remission of duty will normally be allowed on Ex Warehouse Export Entries in respect of losses (e.g. from pipelines) discovered after the goods have left the installation. However, in the case of re-exports of oil in bulk for which landing Page | 255

certificates may be required, such landing certificates may be accepted and the bond security cancelled provided that the losses shown to have occurred do not exceed those allowed for oil in transit. 10. Removals by pipeline – ex refinery Losses on deliveries from refinery to the installations are bulked on a monthly basis for the purpose of applying allowable losses and control rests wholly with the refinery officer. Receiving Officers therefore need only enter the actual quantity received, on the left hand side of the register. 11. Delivery to privileged organizations Duty free deliveries to privileged organizations of ex-bond petroleum EACCM products may be allowed provided the goods in question have been A 5th Sch. purchased by the privileged organization prior to clearance from Customs control. In practice the Commissioner has authorised duty free deliveries prior to the respective ex-warehouse entries on the strength of Local Purchase Orders or other written authorities, issued by the beneficiary person or entity to the effect that the goods are for their official use. When this happens periodic consolidated ex-warehouse home use entry, supported by the Local Purchase Order or certificates will be lodged for all such deliveries. Where, at the end of the ten days period such documents are not produced then Oil Marketer must pay the duty against the consolidated Ex Warehouse Home Use entry (for Kenya only). 12. Losses Losses from whatever cause are to be investigated as a matter or urgency. Losses should be duty paid with the absolute minimum of delay or ‘allowed’ under the following instructions: (1) Accidental Losses The warehouse-keeper must give immediate notice in writing to the officer of any accidental loss of oil on which duty has not been paid and on the officer becoming aware of any such loss, the circumstances are to be investigated and, reported to the officer in charge of the unit for direction. Investigation is to be directed to establish, and reports are to indicate inter- alia, whether the accident was unavoidable or could reasonably be regarded as due to negligence. Page | 256

(2) Losses In Storage, Packing, Refilling, Decanting, Etc. The gain or loss for the month on each class of oil in warehouse is to be calculated as a percentage of the balance of stock in hand at the beginning of the month plus the net receipts. This percentage is to be shown in the stock register in the relevant monthly account. Any loss not exceeding 0.5% (1% for L.P.G.) may be written off by the proper officer, provided he is satisfied that no part of the loss is due to irregular practice. Note: The percentage loss or gain for each month should be reasonably constant. When reporting excessive losses, the officer should include details of the previous six months losses and gains in his report. 13. Reconciliation of bonded stocks Reconciliation between Customs releases and the facility owner releases of the products is done on a monthly basis. 14. Payment of Drawback EACCM A s.138- 139 EACCM R139-142 (1) Products re-exported under drawback The following procedure/guidelines must be followed to control bonded re- export or transit movements of non-duty paid petroleum products:- - Duty paid petroleum oils entered for export and for conveyance by tanker or rail shall be conveyed in covered, lockable and sealable tankers or wagons; - Duty paid export products must be declared in the relevant entry Customs Procedure Code - The vehicles conveying petroleum oils for export (duty paid) must be licensed by the commissioner Customs services department upon payment of the prescribed fee; - The license Form C.40 (Export) and must be permanently affixed in a prominent position where it is visible at all times; - Duty paid export (petroleum oils) must be fuel marked for control and identification purposes; Page | 257

- Officers manning oil installations must supervise the loading and fuel marking and shall seal the wagons/tanker with Customs tamper proof seals along with the Oil Marketers own seal; - Particulars of the loaded tankers and details of the R370 must be entered in the Escort schedule; - After all documents are in order, the officer in charge notifies the respective Border Control Office (BCO) for arrangement of Escort in terms of availing Vehicle, Driver, Police and their remunerations. 15. Reports on Petroleum Stock Movements Reports on petroleum stock movements are to be prepared at the end of each month by the officer in charge of each installation and submitted to the officer in charge of the unit. This report shows volumes of products received and released to the marketers. 16. Treatment of additives Stocks of petroleum additives may be entered for warehousing at the time of importation at the appropriate rate of duty, as determined by the test results of Chief Chemist in the Customs Laboratory. Each time the additives are to be blended with bulk stocks of petroleum in the main storage tanks Customs authority must be obtained and an ex- warehouse Home Use entry passed in respect of the quantity used in each blending operation. Test checks of these operations are to be made from time to time at the discretion of the officer in charge, who is to keep himself regularly informed of the formulae for blending used by the warehouse licensee. As the duty on additives is paid upon their removal from the bonded tanks but before the blending, whilst duty on the blended product is paid only after blending, double taxation would occur if the duty paid on the additives is not taken into account when the blended product is removed from the bonded tanks. Accordingly, a remission of duty may be allowed on the additive element of petroleum entered for home use by means of a deduction from the bulk litres declared. To facilitate accurate determination of the duty remission details of the quantity of additives used in the operation are to be recorded in the bulk tank survey register and the warehouse licensee’s notices to blend additives with petroleum spirit are to be placed in separate file to be maintained by the officer in charge of each bonded installation. Page | 258

17. Lubricating Oils Duty free additives entered for home use ex-ship may be stored in a separate place within the bonded installation under an indulgence granted by the Commissioner. These additives may be blended with feedstock (base oil) in the manufacture of lubricating oils upon due notice being given to the proper officer by the licensee on a Blending and Filling Order. This notice must include full details of the type and quantity of feedstock and additives to be used. Test surveys of blending operations are to be made regularly by the proper officer. The quantities additives used in each blending operation (as shown on the Blending Order) are to be entered on the receipt side of the bulk oil warehouse register. Blending Orders given by the licensee are to be filed in a separate file maintained by the officer in charge of the installation. Despite the fact the lubricating oils will contain an element of duty paid EACCM additive, the duty at the rate applicable to lubricating oils will be levied on A s.51 (1) the total quantity produced. These duty paid additives may be obtained from (d) the local or international market. When motor spirit and lubricating oils containing additives are removed from the bonded installation where blended, to another bonded installation, full details of the proportion of additive content included in the total litres must be shown on the related ex warehouse removal entries. 18. Exports from bonded installation To enable the licensee of the bonded installation to claim a drawback of the duty paid, if any, on the additive element of motor spirit so exported, the licensee of the exporting installation may lodge an additional copy of the related ex warehouse export entries which after certification as to export will serve as supporting documents to claims for drawing back on additive content at the station where duty was originally paid. 19. Liquefied Petroleum Gas (LPG) LPG may be stored in bulk in bonded hydrocarbon oil installations in the same way as other petroleum products and the methods and procedure to be used in calculating quantities received into and delivered from the bonded installations are set out hereunder. LPG being liquefied under pressure both before and after receipt of the product, normal dipping procedures are impossible. The tank contents are Page | 259

gauged by measuring devises which are provided by the manufacturer. The loading density – as declared by the refinery of despatch on the ship’s manifest – may be regarded as the fixed density for the purpose of all calculations to determine the weight of the product received, stored and delivered. In this connection, it should be noted that the density of commercial butane is usually within the range of 0.570 to 0.585 at 20°C and is fairly constant. The quantity calculation for liquid gas is done by using the appropriate Measurement Tables. The filling of cylinders from bulk storage tanks will be permissible as normal operations in bond and officers in charge at bonded installations will check-weigh filled cylinders at the filling point from time to time. Applications from the licensee for remission of duty on losses of product due to evaporations and leakages are to be submitted in each case for consideration and approval by the Commissioner. 20. Treatment of packed dutiable products Warehousing Entries for lubricating oil in drums and other dutiable packed products landed at the port will be declared and passed by officers in charge of the installations but such entries are initially to be presented at the Document processing Centre for purposes of appropriate Valuation checks. After checking and passing by the officer in charge of the installation, the original and duplicate copies of the entry with relative Port release Orders will be dispatched to the landing station for release of the goods from the port. Where these packed goods are to be removed into a bonded warehouse their storage therein and subsequent removal or re-warehousing is governed by the same rules and procedures as other general goods. 21. Exportation and transit procedures EACCM A s.72 and 85 EACCM R 104 Export products are exported under draw back scheme while transit products are indicated in the manifest and the out turn reports showing the destinations of such products. Transit products are entered as per section 34 using transit documentation. All petroleum products imported in transit in bulk will be treated as follows:- Page | 260

- Packed petroleum products in drums or other packing in cartons or boxes may be entered in the Transit entry Form C 17. On release from the port of entry they must be stored in licensed premises pending re-exportation. - Aviation Spirit, Premium, Regular, Jet Fuel, Kerosene and Gas Oil, which are normally transported by pipeline, trucks, wagons and barges. - The products carried by pipeline will only be considered as exported when pumped for export from the last bonded installation pipe or storage tanks while Products carried by wagons, trucks and barges are considered as exported when they exit the territory of the partner state. - Deliveries of these petroleum products will be entered on transit or export documentation and are exported under bond. - All exports or transit will be transported and exited through designated transit routes. The originating station should send a report to the exit station and the exit station should give feedback to the originating station for reconciliation purposes. In the event of any delayed exports beyond reasonable time as may be allowed from different stations, the agent should be called upon to account for the product or pay duties. 22. Refinery Instructions (1) Additional guidelines peculiar to refineries Petroleum Oil Refinery is operated as a licensed bonded warehouse for storage of crude petroleum oil, refining and storage of refined products on which duty has not been paid. The refining process is strictly not regarded under the EACCMA as a “manufacturing operation” and the by-products are liable to duty as if they had been directly imported in that state. The refinery warehouse licensee must, therefore apply for approval EACCM specifying all tanks and buildings within and adjacent to the bonded area A s.62 and the purpose for which each is used. The licensee must also submit the plan of the refining machinery specifying all connecting pipes and EACCM describing the movement of the crude oil for refining and the by-products. R 74 Page | 261

(2) Operations within the Refinery The refinery licensee must provide full details of the refining operations to EACCM Customs. Thus, the proper officer must obtain a copy of the refining A programme per batch of Crude Oil being refined. The programme must s.51(1)(d) show the expected quantities of each refined product and by-product per particular Batch Number. These records to be entered in the bulk register. Must be treated as confidential. Once the refining is complete, the refinery licensee must again notify the officer so that the usual tank dips are taken before and after receipt of the refined products in each tank to determine the actual quantities used any losses incurred. (3) Delivery from Refinery a. Bulk refined products All withdrawals of refined products from the bonded tanks must be under Customs supervision. The oil refinery does not own petroleum products for refining and such withdrawals therefore are on the basis of instructions by the Oil Marketers, owners or importers. Outlet valves may be allowed to remain, open at the refinery warehouse licensee’s option without restrictions once the details of receipt into the tank have been taken and recorded in the register. The licensee should, however be required to keep the proper officer informed of all withdrawal operations by issuing “Notices of Intention” Gate Passes which must specify the total type of product, quantity, tank number, destination (bonded warehouse number) and name of the intended recipient. At the end of the month, the licensee will prepare a consolidated ex- warehouse removal entry relating to each bonded warehouse of receipt and submit it to the revenue officer for reconciliation. Page | 262

CHAPTER 10 MANUFACTURING UNDER BOND 1. Approval and Licensing of Bonded Factories (1) Application for Licensing by the Commissioner When the project has been approved by the relevant EACCMA s.161 investment regulation authority, the applicant must EACCMR 153 thereafter make an application for the licensing of his factory to the Commissioner in the prescribed Form C18. The Form C18 must be supported by: - A copy of the project authorisation from the approving body; - A plan of the buildings, factory and thoroughfares; - List and description of plant and equipment; and - A description of each building, room, place and item of plant, as well as the purpose for which each will be used. (2) Inspection of Factory Premises The Commissioner will only grant the license if he EACCMR 153(3) or she is satisfied that the location, construction, accommodation and other facilities are suitable for bonded manufacturing of goods for export. To facilitate this decision, on receipt of the application for the approval and licensing of any premises as a bonded factory the Commissioner will detail a sufficiently experienced officer to inspect the Page | 263

premises. To make the appropriate recommendation in the space provided on Form C.18 the inspecting officer is required to satisfy himself that the premises are: - Safe, secure, waterproof and rat proof; - Suitable for use as a bonded factory so far as construction and location in regard to other buildings and accommodation are concerned; - Fitted with adequate lights and suitable ventilators; - Fitted with doors capable of being secured by Customs locks. (3) Issuance of the licence EACCMA s.160 The application and the supporting documents will EACCMR 153(4) be submitted to the Commissioner for his approval and issuance of the Licence in Form C.19 This license is issued to a person operating in a premises approved for that purpose. Accordingly, no license may be transferred from one person or premises to another person or premises. (4) Conditions of the Licence The Commissioner shall issue the licence. This EACCMA s.160 license shall expire on the 31st December in the year EACCMR 153(4) of issue and subject to the following conditions: (5) Provision of Separate Stock Rooms The following goods must be recorded in separate EACCMA s. registers and, where applicable, must be stored in 161(1) separate storerooms declared on the Form C18 and registered for that purpose: - Imported raw materials till they are removed into the manufacturing part of the plant; - Local raw materials; Page | 264

- All manufactured goods until they are EACCMR 159(2) delivered for exportation, removed to another bonded factory or dealt with as the Commissioner may allow; - Waste and rejects resulting from the EACCMR 164 manufacture of goods in a bonded factory until they are disposed of as directed; - Imported plant and machinery; EACCMR 162(3) - Locally secured plant and machinery. EACCMR 162(3) (6) Marking of Bonded Factory A Bonded factory must be distinguished by a number EACCMR 158 and the words “Customs Bonded Factory” clearly marked on the principal entrance to the factory or in any other place the proper officer shall approve. (7) Payment of the Annual Fee The annual license fee for a bonded factory shall be EACCMR 154 one thousand five hundred Dollars. Where a license is issued in the course of a calendar year, the license fee shall be computed on a pro rata basis. The Commissioner may, by notice in writing, refuse EACCMA s.160 to issue a licence, suspend, revoke or refuse to renew a licence. (8) Execution of a Bond The licensee of a bonded factory shall execute a EACCMR 155 bond using Customs Bond Form (CB Form) to secure duties and other obligations of the licensee in respect of the manufacturing under bond. A security bond shall be cancelled upon: - Proof of exportation of the manufactured goods. - Payment of duty and any penalties. - Proof of transfer of goods to another Page | 265

authorised user. - Proof of destruction of the goods. (9) Structural Alterations Once the premises are approved and licensed no EACCMR 156 structural alterations to the premises may be made without the Commissioner’s written approval. Approval of alterations will only be given if they do not interfere with the suitability of the premises as a bonded factory. Thus applications for alterations must be accompanied by copies of drawings and plans. 2. Duties of the Licensed Manufacturer The manufacturer must: EACCMA s.163 - Provide office accommodation and all equipment and facilities required by officers to execute their Customs control responsibilities. - Provide all necessary labour and materials for the storing, examining, packing, marking, coopering, weighing and taking stock of the goods in the factory. - Keep a record of all types of plant, machinery and equipment, raw materials and goods manufactured in the factory. - Ensure that such records are at all times available for examination by the proper officer. - Submit a return of goods remaining in the EACCMR 163 bonded factory to the Commissioner for the period up to the 30th day of June each year. - Ensure that manufactured goods are removed EACCMR 166(1) from the manufactured goods stock room See also after the goods are duly entered for EACCMR 104(6) exportation and that the goods, wherever Page | 266

possible, are transported directly to the port of final exportation in sealed vehicles, containers or boxes. Where a manufacturer contravenes any of the provisions of this section, the Commissioner may direct that the manufacturer ceases operations until he or she has complied with those provisions to the satisfaction of the Commissioner. 3. Death or Bankruptcy of Licensee or the Surety The Licensee must notify the Commissioner of the EACCMR 157 death, bankruptcy or any other change in circumstances which renders the surety incapable of honouring his or her obligations under the bond. Likewise the surety is obliged to notify the Commissioner if it is the licensee who is so incapacitated. Bond officers must look out for these and any other EACCMA s.160, changes that might compromise revenue in respect of s.163 warehoused goods and notify them to the Commissioner for immediate action. 4. Closing Down of a Bonded Factory A manufacturer may cease his operations in the bonded factory for the following reasons: - Where the Commissioner suspends, revokes or refuses to renew his license by serving or causing to be served, in writing, a notice to that effect. - Where the licence expires and the manufacturer fails to renew it. - On account of any other reason such as bankruptcy or change to other business. Once the manufacturer ceases operations due to any EACCMR 160 one or more of the reasons given above, the following goods must, within thirty days, be entered under another Customs procedure such as removal Page | 267

into another bonded warehouse, clearance for export or entered for home use: - Any manufactured goods not yet exported. - Any remaining raw materials and waste. - All the plant, machinery and equipment in the bonded factory. Any plant, machinery & equipments, raw materials EACCMA s.162 or manufactured goods that are not entered after the expiry of the period allowed by the Commissioner become liable to forfeiture. Once a bonded factory ceases to be licensed as such all the marks and numbers distinguishing the premises as a bonded factory must be removed. The notice may be served by delivering it to the EACCMA s.239 licensee or by leaving it at the bonded factory and thereafter the notice shall be deemed to have been served. 5. Control of Goods prior to receipt into Bonded Factory The rules and procedures for the entry, examination and general control of goods entered for warehousing in Chapter 8 apply, mutatis mutandis, to goods intended for use in a bonded factory. However, the following important differences must be taken into account. Whilst the manipulation of goods in a bonded warehouse is limited and can only be undertaken on special authorisation, manipulation of goods happens all the time. Further, locally sourced raw materials and the means of production such as plant, machinery, tools, etc may be introduced into the bonded factory. The goods produced in the bonded factory must be exported under Customs supervision. However, because the goods are a product of a manufacturing process, the exported goods may be very different in Page | 268

nature and form from the imported raw materials. These peculiarities have far reaching implications on the Customs control of the manufacturing process and export of the final product. They also create significant differences in the way the two procedures are controlled. The following should therefore be taken into account: - All items of plant, machinery, spares and raw EACCMA s.164 materials imported and entered for use in a bonded factory must be removed to the factory within forty-five days. - A register in the prescribed form is to be kept at all bonded factories where goods are entered for manufacture under Bond Scheme to record the Entry numbers as well as the particulars of the goods. - The licensee of the bonded factory must EACCMR 155 lodge a Customs bond with enough security to cover the removal of goods from the landing station to the bonded factory. - Such a bond may be particular (covering each transaction) or general (covering the amount likely to be outstanding at any one time in respect of the transactions of one particular licensee). - Bond Allocation Registers must be maintained to track the liabilities of the licensee the imported goods move into the factory and manufactured goods are exported. Locally sourced and imported goods must be EACCMR 162(3) recorded and stored separately. All finished manufactured goods must be transferred EACCMR 159(2) and stored in the “Manufactured Goods Stock Room” every day and must accordingly be entered by the Licensee in the Manufactured Goods Register Page | 269

A licensee shall obtain a certificate of exportation EACCMR 167 endorsed on the Form C.17 from the proper officer at the port of exportation to acquit the outstanding removal from the bonded factory. However, goods can also be removed into another bonded factory or bonded warehouse. Where this happens, an appropriate certificate from the proper officer must be issued and used to acquit the removal from the bonded factory. 6. Approval of Goods eligible for Duty Remission on EACDRR 2006 Export (1) Goods Eligible for Remission of Duty The Council may grant remission of duty on goods EACCMA s.140 imported for use in a manufacturing process EACDRR 3 approved for the production of goods for export or approved goods for local consumption as may be gazetted. (2) Application and Approval Process An application for remission of duty shall be made to the Council through the Commissioner in Form C33 Upon receipt of an application for duty remission, the Commissioner shall forward the application to the Duty Remission Committee for its comments. The Commissioner shall after receiving the comments above forward the application together with his or her comments to the Council The Council may for reasons to be communicated to the applicant reject an application for remission under these regulations. The remission of duty may be granted by notice in EACDRR 6 the gazette and will be valid for 12 months from the date of the notice. The Council may extend this period for a further period of 6 months. Page | 270

The following documents must be attached to the application: - A bona fide export order or export contract for specified export goods and a corresponding letter of credit. - A detailed production plan including production processes or formulae, and specifying the types and quantities of goods to be imported. - A list of the goods to be imported including description, tariff classification, quantity, value and estimated amount of duty to be remitted. - A list of the goods to be imported including description, tariff classification, quantity, value and the estimated amount of duty to be remitted. - Export entries showing the value of the exports of specified goods during the immediately preceding year, or such longer period not exceeding three years. (Where an exporter or a manufacturer has an established record of exports or production of the goods in question). (3) Entry Declarations All imports under this arrangement shall be entered as usual on the C.17 but must be supported by the original of the approval. Under no circumstances may unsigned originals or signed photocopies of the approval be used to support these entries. (4) Examination of Imports and Exports a. Examination of the Processes in the Bonded Factory In order to verify the process of manufacture at a bonded factory, Customs inspectors should compare the production plan and formulae in use at the Page | 271

bonded factory with the detailed production plan and formulae submitted with the application for approval. The examination should include verification of books and records of the manufacturer, inspection of the production facilities, examination and verification of any goods or materials within the production facility or any storage place related thereto. b. Examination of Finished Goods Once goods are manufactured or processed and are ready for exportation, the manufacturer or producer must enter them for exportation. The goods must then be produced to the proper officer at the port of export for examination. The examination findings including description, quantity and packing are to be posted onto the Customs clearance system for audit purposes. (5) Transfer of Goods and Change of Ownership Transfers are permitted only from one approved importer to another on condition that the goods shall be transferred under cover of the recipient’s bond. (6) Treatment of Waste Duty on by-product, scrap or waste resulting from EACDRR 10 workings on imported non-duty paid goods must be dutiable on the value of the waste. In determining the value of the waste account shall be taken of the rate of yield of the raw materials to arrive at the correct proportion of the value of the waste to the overall value of the manufactured products. (7) Penalties and Revocation of Applications Duty must be paid in respect of goods imported EACDRR 7 under remission of duty but which are not used to manufacture authorised goods or where the authorised goods manufactured are not exported. Page | 272

Where a serious misdemeanour, such as failure to export the manufactured goods, the matter must be immediately reported to the designated senior officer who may decide to charge the offender, seize the goods in question or raise a penalty. Claims of failure to export due to cancellation of orders must be investigated to substantiate their authenticity. Where credible evidence is produced to substantiate these claims, the Proper Officer may waive the penalty or authorise home use upon payment of duties due. (8) Revocation of Applications Manufacturing licences may be revoked or applications rejected where licensee or applicant: - Fraudulently contravenes the provisions of these regulations. - Is grossly negligent in complying with the provisions of these Customs regulations. - Repeatedly acts in a manner inconsistent with the intent of these regulations. Accordingly, cases where manufacturers, producers or exporters, as the case may be, who are found guilty of serious violations must be reported to the Commissioner for appropriate action to be taken. (9) Reconciliation and Bond Cancellation All beneficiaries of the duty remission scheme must render reconciliation declarations in respect of each approval within the prescribed period from the date of such approval or completion of the contract, whichever is earlier. These declarations must be supported by the following documents: - Certified copies of all import entries and indirect export transfers to which the Page | 273

reconciliation declaration relates. - The invoices for the exported goods, indirect exports and domestically sold goods as the case may be. - Documentary evidence linking the goods reflected therein to the goods imported under remission of duty. - Documentary evidence that all the imported goods were properly used in the approved manufacturing process and that any waste resulting from the manufacturing process in question was duty paid, destroyed or otherwise properly accounted for. (10) Verification of Reconciliation Declarations On receipt of the reconciliation documents, the proper officers will verify documentation particularly to ensure that: - The signature of the approving Officer is authentic; - The reconciliation declaration is being submitted within the nine months time limit (or a further nine months in the case of renewal); - The description and quantity of imported goods tally with what was actually approved; - All export entries are supported by the correct certificates of exportation; - In the case of direct exports, the manufacturer or producer has signed the transfer and that delivery notes tally with the particulars of the exports declaration; - The manufacturer has produced the required quantity of goods from the imported materials in accordance with the rate of yield declared on application; Page | 274

- The manufacturer has produced the approved type of goods where the remission is approved for the production of essential goods for home use; - Where discrepancies are noted, call for duty on materials which are not accounted for including raising penalties where applicable. (11) Bond Cancellation Security bonds may only be cancelled after the following has been positively proved or established: - The reconciliation declaration has been verified and approved by the designated officer; - All unused imported goods have been re- exported or transferred to an approved bonded factory or carried forward under a fresh application, as the case may be; - The duty, where it is due and payable, has been paid or otherwise secured or accounted for. (12) Control of Bonded Factories through Site Visits Occasional site visits to bonded factories are necessary for the monitoring the activities in bonded factories, particularly to : - Compare processes on the ground with the processes, formulae and plans submitted with the application for approval; - Verify losses, waste, by-products and stocks of imports including registers, books and other relevant documents; - Check actual losses and disposal of waste including witnessing of destruction of waste and by-products; Page | 275

- Check actual receipt and deliveries in the case of indirect exports and subsequent use of the materials. 7. Export Processing Zones An Export Processing Zone (EPZ) is a Customs area where one is allowed to import plant, machinery, equipment and material for the manufacture of export goods under security, without payment of duty. The imported goods are subject to Customs control at importation, during the manufacturing process to the time of sale for export or home consumption. Export Processing Zones are licensed by the Ministries responsible for trade in the Partner States. For Customs purposes, an Export Processing Zone shall be considered to be an export country. As such, Customs legislation shall be enforced in respect of the entry of goods and exit of goods from an EPZ. (1) Responsibilities of Export Processing Zones Operators EACCMA s. 169(2) Each EPZ shall have a Customs office and the EPZ Operator shall: - Provide office accommodation and operational facilities to Customs for examining and taking account of goods and for securing them as the proper officer may reasonably require. - Keep a record of all plant machinery and EACCMR 170 equipment, raw materials and goods manufactured in the EPZ or a Free Port. The Operator shall keep and make available all such records for inspection by the proper officer at all the time. If goods are found missing on inspection, the EACCMR 170(3) operator shall be liable to a penalty equivalent to twice the amount of duty payable on the missing goods. Provide all the necessary labour and materials required to facilitate the conduct of all Customs Page | 276

functions in the EPZ. Customs Authorities in the EPZ are responsible for: - Conducting inspections of incoming merchandise when such merchandise is unloaded at the premises of an EPZ user. - Conducting inspections of outgoing merchandise when such merchandise is loaded at the premises of an EPZ user. - Conducting inspections of merchandise and inventories of merchandise produced in Export Processing Zones. - Maintaining records of merchandise produced in the EPZ entering and leaving the EPZ. - Preparing and submitting reports as required by law and Customs management. (2) Import Procedures into Export Processing Zones EACCMR 169 The importer shall: - Make a declaration of the imported goods in the prescribed Form C17. - Execute a security bond using CB Form. EACCMR 174 The bond secures the duty amount that would have been payable at the time of importation. The bond also covers the taxes due in the event that the goods are consumed elsewhere other than the EPZ or disposed of in the domestic market without authority. - Present the imported merchandise together with Form C17 to the proper officer in charge of the EPZ for purposes of recording receipts and deliveries. - Provide examination facilities within the EPZ where imported goods are examined or verified. The Commissioner may on reasonable grounds direct a Customs officer to carry out examination of the goods at the port of entry. Page | 277

(3) Export Procedures from Export Processing Zones EACCMR 171 The exporter shall: - Make a declaration of the imported goods in the prescribed Form C17; - Execute a bond for the removal of goods from an EPZ to the port of exportation using CB Form; - Present the goods together with the export entry at the port of exportation. In situations where the seals placed by EPZ officers have been tampered with, then Customs Officers at the port of export should re-examine the goods; - Obtain a certified copy of Form C17 confirming that the goods have been exported to facilitate cancellation of the security bond. (4) Transfer of Goods Between Export Processing Zones EACCMR 172 Goods to be moved from one EPZ to another shall be entered using Form C17 and goods to be moved from one enterprise to another enterprise within the EPZ shall be entered using a Cargo Receipt (F10). A bond covering goods moving from one EPZ to another EPZ shall be executed using CB Form. The Customs officer at the receiving EPZ shall certify or endorse the copy of Form C17 and post a message in the Customs Clearance System in order to facilitate the cancellation of the bond. (5) Movement of Plant and Machinery EACCMR 173 EPZ operators and enterprises therein shall be permitted to temporarily export goods from an Export Processing Zone into a Customs territory for maintenance, repair or for exhibition at promotional events. The exporter shall make a declaration of the exported goods in the prescribed Form C17. Page | 278

A bond may be executed for the temporary removal of goods from an EPZ to a Customs territory using CB Form. (6) Disposal and Destruction EACCMR 175 Disposal or destruction of waste may be carried out within the EPZ under the supervision of a Customs officer In situations where disposal or destruction facilities do not exist in an EPZ, goods may be moved to a Customs territory upon application to Customs. The officer shall issue a certificate of destruction. When waste or rejects are sold in a Customs territory, then normal import procedures shall apply. Records of waste and rejects shall be maintained in a register. (7) Transportation of Dutiable Goods EACCMR 177 With the exception of heavy or bulky objects or as authorised by the Commissioner, all goods into and out of the EPZ shall be transported in sealed vehicles. Small packages and samples may be transported in any vehicle in locked boxes made of steel with provisions for Customs seals. The boxes shall be sealed when used for the transportation of goods. Page | 279

CHAPTER 11 EXECUTION OF BONDS 1. Purpose of surety bonds Certain trade circumstances demand that the payment of duty be EACCMA deferred to some future time or that certain activities that s. 106 - necessarily involve potential prejudice to revenue be allowed: 109 Further, one of the roles of Customs is to facilitate the growth of trade and industry by promoting identified industries or manufacturing activities. To achieve this objective it is necessary, at certain times, for Customs to release goods from physical Customs control before all the obligations under the EACCMA are fulfilled. These circumstances include: - Goods in transit to destination beyond the borders of a Partner State; - Goods cleared under an exemption regime that requires the goods to be used in approved processes or to produce approved goods for export; - Goods imported temporarily and without payment of duty for repair and return or for some authorised purpose; etc. Persons to whom these facilities are extended must adhere to whatever conditions that may be set and must eventually ensure that all the obligations in relation to the goods in question are in fact fulfilled. Bonds are necessary to ensure that, in the event that the EACCMR principal becomes unable or unwilling to satisfy his obligations, 104(3) Customs can turn to a reputable third party of strong financial standing (i.e. a surety) to shoulder the responsibility of meeting those obligations. Thus bonds only kick in Bonds when the principals (importer, exporter, manufacturer, etc) fail to adhere to the conditions or to fulfil the obligations under the EAC EACCMA. 2. Definitions A bond is a contract executed under seal whereby a person or persons (sureties, guarantors or underwriters) solemnly bind themselves to pay some other person up to a specified sum of money as a penalty for the failure by some other person (the Page | 280

principal) to perform certain agreed acts. For this reason the maximum amount to be paid by the guarantors is referred to as the penalty (or the penal sum) of the bond. Bonds may be required either to protect the revenue or to ensure due compliance by the principal with some other obligations placed on him under the EACCMA e.g. CB Form Where a bond is underwritten by several persons, such persons are “jointly and severally” liable. This means that, in the event of breach, the person in whose favour the bond is drawn can proceed, at his or her option, against one or all of the guarantors for the payment of the penalty. The following are the parties to Customs bond: - The principal who undertakes to perform or desist from performing certain acts (such as the licensee of a bonded warehouse) - The surety who undertakes to pay a penalty in the event of the principal failing to honour his or her obligations General bonds are given to guarantee performance, by the principal, in a number of transactions, normally of the same kind. These bonds are normally time-bound or valid till cancelled. Particular bonds, on the other hand, are given to cover a specified operation. These bonds are activity-bound. Thus, as soon as the principal has performed as expected in that specific operation the bond is automatically retired. 3. Customs clearance regimes requiring bonds The following are Customs clearance procedures that require to be supported by a bond: S/No. Procedure Entry (where Bond in force/Licence Applicable applicable) (where applicable) Legal Provisions 1. Removal of Warehousing General bond: EACCMR goods into a entry Application for 74, 76 & bonded 57(1) warehouse licensing on Form C.18 Page | 281

2. Operating as a General Bond: EACCMR Customs clearing Agent Application on C.20 149(1) License fee USD 400 License on Form C.21 EACCMR 151(1) EACCMR 151(3) 3. Conveying of Transit entry General Bond: EACCMR uncleared Application on C. 28 104 goods in transit (or C. 29 for SADC EACCMR vehicles): 104(5) License fee USD 200 4. Transhipment of Entry in C.17 General bond EACCMR 55(2) goods from one or direct EACCMR means of transport transfer without 105(1) to another entry under supervision 5. Operating a Transit No specification EACCMA Shed s.12 6. Removal of General bond or EACCMR uncleared goods particular bond 179(2) from a Customs control area to another port or place 7. Removal of certain General bond EACCMR Form.C.12 49 high risk goods without final clearance 8. Removal of Ex-warehouse General or particular EACCMR warehoused to entry bond 68(1) another place or for export 9. Transfer of stores General bond EACCMR Application on C.25 98, 99. from one means of transport to another. 10. Shipment of goods General EACCMR prior to entry 94 Page | 282

11. Re-exportation of Particular bond EACCMR Imported goods Particular bond 132 (1) & delivered without General 133 (5) payment of duty General Bond EACCMA 12. Project goods Particular bond s.114 General imported and EACCMA s.160 delivered without EACCMR 166 payment of duty EACCMR 13. Goods imported for 49 use in the EACCMR 132(1) & production of 133(5) Goods for export EACCMR 55(2) 14. Provisional entry of goods 15. Temporary Imports 16. Coastwise removal C.17 of Imported goods 4. Bond amount and period of validity (1) Assessment of bond amount The amount of the bond should be assessed to cover the duty at EACCMA stake. Where the bond is a general one given to cover several s.107 transactions or ongoing activities, the bond amount should cover the maximum amount of duty at stake at any one time. Bonds are also often given pending performance of certain obligations under the Act which do not involve possible revenue prejudice such as completing a transit operation in respect of duty restricted but duty free goods. In such cases what is prejudiced is Customs control and the bond amount should be based on the value of the goods. To prevent importers from substituting proper clearance with payment of bond amounts the penal sums of bonds, in high risk circumstances bonds may be assessed at duty plus one third of such duty. Where a bond amount is assessed using approximate value and it is subsequently discovered through physical examination that the Page | 283

value was under declared the goods must be detained until a fresh bond for the correct amount is tendered. (2) Period of bond validity Once a bond is given and accepted by Customs it remains in EACCMA force until cancelled with Customs consent or reviewed after 3 s.107(3) years. Bonds may also not carry any clause in which surety reserves the right to withdraw from the bond. Withdrawal can only be on the basis of the obligations having been satisfied. A surety is deemed to be the principal debtor and no EACCMA circumstance whatsoever will discharge the surety from his s.108 obligations under the bond unless such circumstances also discharges the principal debtor of his obligations. Particular bonds are discharged immediately upon due performance of the conditions for the discharge of the bond by the principal debtor. Once a general bond has been in use for three years, the Principal or his Agent should be advised in writing to account for all outstanding obligations under the bond. The bond should, thereafter, not be used to cover any fresh transactions. 5. Procedure for marking off or cancelling bonds When an importer or Agent wishes to enter under a general bond he registers the entry in the Customs clearance system by selecting the relevant general bond which already exists in the system. The system automatically deducts the duty amount from the bond balance. The system will reject entries where the duty at stake is more than the bond balance. The importer/Agent has to be notified in case of insufficient bond An entry under a particular bond is processed exactly as in the cases involving general bonds. However, as the bond is specific to a particular transaction the penal sum should be the same as duty at stake and the bond is not replenished but is cancelled immediately the transaction is satisfactorily completed. 6. Bond execution Bonds are solemn legal documents which must be meticulously prepared and properly executed. All bonds must be sealed and signed by properly authorised persons representing the surety and the principal debtor. Page | 284

Thus in a sealed agreement such as a Customs bond, the surety is bound to pay regardless of who signed the bond on his behalf. A sealed document is thus a level higher than an ordinary agreement and therefore of superior in effect. Erasures must not be made on bond forms, and any alterations to a bond should be initialled by the principal, surety and the witnesses. Pins and staples and similar items must not be used to puncture or perforate any copy of the bond. Only paper clips or such non-perforating office equipment may be used to keep copies of bonds together. (1) Signing of general and particular bonds Each signature of those signing on behalf of both the principal and surety must be witnessed by two other signatories. Where possible these may be witnessed by a designated senior Customs officer. Any alterations to a bond must be initialled by all signatories as well as the witnesses. Note: Alterations include cases where a mistake, made in the completion of the bond, is to be corrected. Such alterations should not be confused with endorsements. Endorsements are insertions of clauses into the text of the bond and are not allowed under any circumstances whatsoever. When one of the original witnesses is not available to initial an alteration, other witnesses may witness the amendment provided they sign their names in full. When a former signatory - whether on behalf of the principal or surety - is not available to initial an alteration, it will be in order for a duly authorised person to authenticate the alteration by signing his name in full, giving his capacity, date of signature and his signature being attested to by two witnesses. Officers should ensure that bonds are signed only by officials who have been duly authorised to do so. Acceptable annexure to bonds need not be completed by the original signatories. Any duly authorised official of the principals or sureties may complete the annexure but officers must ensure that such officials are duly authorised and that their designations are reflected next to/under their signatures. Persons signing a Customs bond must sign in his own capacity and never \"for Manager\", \"for Accountant\" etc Page | 285

Bonds should always be prepared in the original. Signatures on photocopies cannot be allowed. (2) Annexing documents to bonds If for any reason any schedule or document is annexed to the bond reference to the annexure(s) is to be included in the bond itself whilst the annexure must, in turn, be cross referenced to the bond, e.g.: Text in the bond: “this is in respect of goods as detailed in the annexure(s) hereto marked “A” etc” and Text in the annexure(s) “The goods reflected herein care are the subject matter of the bond executed by ………………………… and guaranteed by ….……… …………… at ………………on ……………………. (date)…………………………..” The Company Seal Where the principal or guarantor is a registered company, the bond must be executed under the company seal, known as the “Common” Seal. In the case of banks or insurance companies, however, signature by the attorney of the bank or insurance company may be accepted provided he or she is authorised to bind the company by a properly executed Power of Attorney. Signature by an attorney on behalf of other companies is equally legal, but should be accepted only in exceptional circumstances and provided such signature is possible under the terms of the company’s Articles of association and the Attorney is properly authorised by a resolution of the Board of Directors. (3) Signature by Principal a. Registered company The signature must be in accordance with the Articles of Association of the company relating to the affixing of the seal. Normally this is by two directors, or one director and the secretary but, as this may be modified by the company, the Articles of association should be examined to ensure that signing Page | 286

powers have not been altered. b. Partnerships In ordinary course of business the signature of one General Partner (as opposed to a Limited Partner) or other properly authorised person is sufficient. For bond purposes, however, only the signature of a General Partner should be accepted. A Limited Partner is a partner with limited liability and limited capacity to bind the partnership. Before accepting a bond signed on behalf of a partnership confirmation that the nature of the business of the partnership includes dealing with importation and exportation of goods is necessary. c. Individuals and entities In the case of any other type of company or individual carrying on a business, the bond must be signed by the proprietor or any persons authorised to bind the company. If in any case it is suspected that any individual purporting to sign a bond on behalf of any other person does not have the necessary power to do so, the bond must be rejected. (4) Signature by Sureties All bonds executed in favour of the Commissioner are normally underwritten by a bank or a reputed Insurance Company. In the case of a bond executed by a principal registered outside the Partner State, the guarantor must be an entity registered in the Partner State and with a registered office therein. The requirements for the execution of general and particular bonds by guarantors are identical with those applicable to principals and, so far as is possible, guarantors should subscribe to the bond under the seal of the company, but the following points should be noted regarding banks and Insurance companies: If banks are unable to execute bonds under seal the person subscribing on their behalf must be required to produce his Power of Attorney on the occasion of his first subscribing. The Power of Attorney must then be carefully inspected before his signature is accepted. Page | 287

Some banks do not issue their staff with Powers of Attorney. In such cases the signature of the manager may be accepted at the discretion of the designated senior officer. Signatures of other ordinary bank staff are not to be accepted. In the case of an Insurance company the Power of Attorney of the person subscribing must be called for in every instance and inspected on the occasion of his first subscribing to any document. The signature or any deed or document (including a Customs security bond) by the attorney of a company authorised by a power of attorney is for all purposes as good as signature by the company under seal. In such cases the attorney should be required to sign the document under his own seal. The Commissioner may, however, at his or her discretion, insist EACCMA on the bond being signed under the seal of the company in s.107 accordance with the Articles of Association. Officers scrutinizing Powers of Attorney must ensure that the power of attorney is: - properly authorised by a resolution of the Board of Directors properly constituted according to the Articles of Association or by some other person capable of so authorising; - executed under the common seal of the company; - currently valid and actually confers upon the holder power to sign Customs security bonds (as opposed to signing generally); Where the power of attorney may also confer upon the holder power to delegate his authority, or any part thereof. Where this is the case the holder of the power of attorney must properly delegate any other persons in accordance with the terms of that power of attorney. A decision to authorise a person to sign on behalf of a company actually consists of two decisions. The first is the decision to authorise the person and the second being to actually authorise that person. Page | 288

Thus, it is not enough for a resolution to read: “The Board of Directors, meeting on (date), resolved to authorise (name of person) to sign Customs bonds on behalf of the company” An acceptable resolution must read: “The Board of Directors, meeting on (date) resolved to authorise (name of person) to sign Customs bonds on behalf of the company and was thereby authorised” A power of attorney executed outside a Partner State giving power to a person to act within the Partner State must be attested by a Notary Public. (5) Validity of signatures Powers of attorney must be registered in a special register and filed for future. Where a power of attorney is given for a specified duration this must be reflected in the register and the person so authorised cannot be allowed to sign Customs bonds after the expiry of that period unless the power of attorney is renewed. All Powers of Attorney should be called for and inspected annually. The register should be annotated with the date and finding of each inspection. Each subsequent time a signatory authorised by a power of attorney signs a Customs bond he or she must sign the following declaration on the reverse of the bond:- “I declare that I am the lawful attorney of ……………………………by virtue of the power of attorney dated the ………………………… day of ………….20 …… and that I have not received notification of the revocation by death or otherwise of the said power of attorney. This declaration must be witnessed by Customs (6) Dealing with bonds signed by unauthorised persons Where a bond is incorrectly signed on behalf of either principal or the guarantor by a person not authorised to do so, the irregularity may be corrected and the bond validated by a resolution of the company in general Meeting ratifying and Page | 289

confirming the bond. The ratification and notification must be properly executed under the company seal and in accordance with the Articles of Association. 7. Enforcement of bonds If the principal debtor fails to honour his or her obligations EACCMA within 14 days of being called upon to do so, the bond will be s.109 called up and the surety asked to honour the obligations. Under no circumstances may the surety’s obligations under the EACCMA bond be extinguished before satisfaction of the conditions of the s.109(2) bond. 8. Cancellation of Bonds Bonds remain valid until cancelled and cancellation of a bond is considered only on application by the principal except where the bond is due for review after at the expiry of three years from the date of original issue at which time a fresh bond must be called for. Cancellation will only be authorised after the principal produce acceptable evidence that all the conditions for such cancellation have been met such production of the certificate of exportation in respect of transit goods or ex-warehouse goods exported. In the event of a surety requesting the withdrawal of any security, they should be informed in writing that the bond cannot be cancelled until all the outstanding transactions are satisfactorily discharged. As soon as such a request is received, however, no further transactions should be allowed against the bond. In other words, the bond remains in force in respect of previous transactions but void in respect of any new ones. When considering cancellation of general bonds particular care should be exercised to ensure that all the principal’s obligations have been met. Upon application and successful cancellation of a bond, the EACCMA original and duplicate copies are discharged and returned to the s.107(4) undersigned a covering letter with a copy made to the guarantor. Page | 290

9. Invalidation of bonds due to change of status or identity of principal A change of names of one or more of the parties to the bond renders the bond non-binding to the new entity. Accordingly, when this happens new bonds should be executed. The legal identity of entities changes (and the bond becomes invalid) when the following happens: (1) In the case of a sole proprietorship: - death of the proprietor (unless a clause in the will provides for the continuation of the business for the benefit of the deceased's estate); - winding up; - sale of the business; or - conversion of the sole proprietorship into a partnership or company. (2) In the case of a partnership: - death of one of the partners (unless a clause in the agreement provided for the continuance of the business for the benefit of the deceased's estate); - dissolution; (breaking up of the partnership); - reduction in membership or on admission of additional persons to partnership. (As all members of a partnership are jointly and severally liable for the obligations of the entity, any change in its membership terminates the Partnership and a change of identity results) - sale of the business; and - conversion of the partnership into a company. (3) In the case of a Company, whether private or public: - winding; or - amalgamation with another entity. Note: Companies \"In Liquidation\" or \"Under Judicial Management\" do not change identity and the death of a director of a firm does not necessarily necessitate a fresh Page | 291

bond. 10. Invalidation of bonds due to change of status surety The consequences of the change of identity or status of the principal must also be applied mutatis mutandis to the sureties under the same circumstances. A new bond should be demanded where the surety dies, becomes EACCMA bankrupt, goes under judicial management, departs from the s.108 Partner State without leaving sufficient property to cover the bond amount or otherwise loses his capacity to act as surety. (1) Action to be taken in cases of change of identity Officers responsible for managing bonds must keep an eye on change of name notices in the press or other developments which might result on change in the legal identity of companies or other persons who have bonds in favour of the Commissioner lodged with Customs. This is particularly important in the case of general bonds lodged in respect of on-going activities such as manufacturing under bond, bonded warehouses or project goods. The following action should be taken immediately following any change in legal identity becoming known: - If the company was registered to manufacture under bond, the stores for imported raw materials must be sealed; - No further transactions under the bond should be accepted EACCMA until the new bond is registered in the name of the new s.106 entity; - The remaining stocks may be duty paid or, alternatively, transferred to the new company upon registration of the new bond or to another similarly registered and bonded manufacturer; - The old company also has the option of applying for abandonment of the remaining stock. Applications for such abandonment must be considered on case by case basis. Note: In instances where legal identity changes whilst manufacturing operations are in progress, the sealing off of the raw materials may negatively affect the company’s wellbeing. Accordingly, reasonable quantities of the raw materials required to sustain immediate operations may be released against cash deposits to cover the duty. Page | 292

Where a bonded manufacturer goes into liquidation, or is placed under judicial management, the balances of raw materials on hand must be established and placed under Customs seal. If the liquidator or the judicial manager desires to continue manufacturing operations, rebate materials may be released on lodgement of suitable cash deposits to cover the duty. This would be accepted only until the new bond has been registered and the Customs seal removed from the rebate store. Once the new bond is accepted the deposits may be refunded. The liquidator or judicial manager should be advised of Customs requirements in respect of imported raw materials. Should liquidators decide to deal with the goods in any other manner the legality of which is in doubt, the matter should be immediately referred to Customs for guidance. The same procedure outlined above must be applied mutatis mutandis to bonded warehouses under the same circumstances. REGISTER OF POWERS OF ATTORNEY Seri Nam Name Date of By whom Name By Date of Observati al e of & Power Signed & and whom Annual on No. Firm Addres of whether Addres inspecte Inspectio or s of Attorne under the s of d and n Co. Agent y Company Notary date having ’s Seal Public Power attestin of g Attorne y Page | 293

ORDINARY RESOLUTION (Front of Form) Of (Insert company name) on (insert date) AT AN EXTRAORDIANRY GENERAL MEETING of the Members of the above named Company duly convened and held at (insert place) on t(insert date), the following Resolution was duly passed, namely:- ORDINARY RESOLUTION “That the Company in General Meeting hereby ratifies and confirms the Bond given by the Company and of (insert address) unto the Commissioner of Customs in the sum of (insert amount) on (insert date), and hereby authorises the Directors of the company to cause the Common Seal of the Company to be affixed to the form of Ratification set out overleaf”. Signature ……………………………… (Chairman) Signature ……………………………… (Directors) COMPANY SEAL Signature …………………………………………….Director Signature …………………………………………….Secretary Page | 294

ORDINARY RESOLUTION (Reverse of Form) To the Commissioner of Customs Services and to all whom it may concern The (Insert company name) whose registered office is situated at (insert physical address) (hereafter called “the Company”) hereby irrevocably ratifies and confirms the Bond given by the company and the (insert name of surety) to the Commissioner of Customs in the sum of (Insert amount) Bond is dated (insert date) and notwithstanding the fact that the Common Seal of the Company was affixed to the said Bond in the presence of only one Director. IN WITNESS whereof the Company has caused its Common Seal to be hereunto affixed this (Insert Date) THE COMMON SEAL OF (INSERT COMAPNY NAME) LIMITED: COMPANY SEAL was hereunto affixed in the presence of: …………………………………….(DIRECTOR) …………………………………… (COMPANY SECRETARY) Page | 295

CHAPTER 12 CLEARANCE OF TRAVELLERS This chapter outlines the procedure for clearing passengers and baggage in their possession at a port of entry. Upon completion of immigration formalities, persons arriving at a port of entry by any means of transport must report to Customs where they are required to make a declaration of all the goods and articles in their charge. The declaration may either be verbal or written. This is in order for Customs to assess whether there are any duties due after granting statutory rebates where applicable. All persons arriving in any Partner State must report to EACCMA Customs and make declarations of all goods and articles in s. 46 their charge. 1. Kinds of Travellers The following are the four broad categories of travellers: - Returning Resident - New Resident - Tourist - Diplomat 2. Receiving the Passenger Officers must, at all times be professional and courteous when dealing with travellers. The following guidelines must be followed when meeting a traveller for the first time: - Greet the passenger politely. - Identify the traveller as a tourist, diplomat, new resident or returning resident - Ask any other necessary questions to establish the truth such as intended length of stay, purpose of the visit etc 3. Customs Control of Travellers Travellers’ baggage must immediately be removed by the carrier to the place where the baggage may be examined by Customs before importation. All disembarking travellers and crew must proceed to the EACCMA baggage room or other place set aside for the examination of s.44 Page | 296

baggage. Each traveller must then present himself or herself to EACCMR Customs for assessment before exiting that place. 44 To facilitate proper risk assessment, passenger liners or other EACCMR carriers must submit the list of passengers disembarking as 15 well as those remaining on board. These lists must be passed to the relevant officers before travellers begin to disembark. As baggage rooms are Customs control areas, no other person, EACCMA except travellers and crew may enter the baggage room s.15(2) without Customs permission. Further, no person may remove goods from the baggage room without such permission. These EACCMR restrictions are intended to prevent travellers who have not 42 been cleared through Customs from passing uncustomed goods to members of the public. Travellers may be required to stay on board, and persons who EACCMA are not passengers may be prevented from boarding the carrier s.15(2) from any part of the Customs area, until all baggage has been offloaded. 4. Dual Channel System To facilitate speedier clearance of passengers the RED and EACCMA GREEN channel has been established at every major place of s.45 arrival and within the baggage room at every major port. EACCMR 43 The green channel is for use by travellers arriving without any baggage or with baggage consisting only of goods which are neither dutiable, prohibited nor restricted Travellers with dutiable goods or carrying restricted or prohibited goods must use the red channel. The selection on which channel to take is deemed to be an EACCMR express declaration. Thus a passenger who walks through the 45 GREEN channel will be charged with false declaration if he or she is stopped and found in possession of goods that are EACCMA dutiable, restricted or prohibited. s.45 Officers appointed to examine baggage are to be posted at EACCMA strategic points within the baggage hall and near the green s.155 channel to scrutinize passengers and their baggage through professional observation in order to identify and stop high risk individuals for examination. Red Channel Persons electing to use the red channel or those stopped by a EACCMA Customs officer in the green channel are required to make a s.154 Page | 297

declaration to the officer either in writing or orally as the EACCMR officer may require 45 A child under the age of 18 need not make a declaration when travelling with a parent or guardian. Should a child be travelling alone, however, an oral declaration is to be taken. The representative who may be accompanying the child is permitted to be present during questioning but may not make the declaration on behalf of the child. Any false declaration or concealment of goods is treated the same way as if the goods were concealed and falsely declared by an adult. However, under no circumstances should the child be unduly detained or harassed. It must be borne in mind at all times that a person below the 5th age of 18 years does not qualify for certain duty concessions Schedule , under the Fifth Schedule to the Act. Part B, Para 5(3) &(6) of EACCMA 5. Clearance by Agents or Other Representatives of the Traveller A declaration by a Customs licensed Agent or by any person acting exclusively in the employment of the traveller may only be made on Form C17. Such instances normally would only arise where the traveller:- - Is unwilling or unable to wait to effect clearance, such as where the baggage is missing at the time of his or her arrival; - Brings packages for other persons; or - Has arrived via a different route or port making it difficult for him or her to personally attend to the clearance; - Where goods exceed the allowed threshold under the fifth schedule para 5(9) If goods arrive or are produced after the traveller or owner has left, as may happen in respect of mislaid baggage, the goods should be detained in the Customs Warehouse pending clearance. In such cases the normal Customs warehouse procedures, including those relating to Customs Warehouse rent, will apply. Any person claiming to act as an Agent for a traveller, for whom goods belongs, shall produce a written authority to Page | 298

clear the goods. 6. Declarations by Families or Groups When a family is travelling as a unit, the baggage of all EACCMA members of that family may be presented as a whole and a s. 154 general declaration taken from the travelling head of the family. EACCMR 42 - 46 However, all members of the family who have reached the age of 18 are liable to be questioned and must, therefore, be present at the time of examination. It is important to positively determine the ownership of the baggage where person are travelling as a group. A traveller presenting baggage must be confirmed to be the owner. The traveller must identify and present all his baggage at one time, and if there is more than one owner they must all be present unless there is a good reason for the absence of the other(s). Travellers arriving in a Partner State for the first time may have little or no knowledge of their Customs obligations and entitlements. Officers must, therefore, accord travellers every assistance and consideration possible. Proper officers must apply their discretion when enforcing Customs requirements and restrictions to ensure that bona fide travellers are not subjected to unnecessary harassment. 7. Guidelines on Questioning Travellers Questioning is an important part of traveller clearance. Proper questioning enables an officer to establish the category of the traveller and the exemptions the traveller may be entitled to. It is also through questioning that the completeness or truthfulness of the traveller’s declaration is determined and the decision to confirm declaration with a physical examination taken. Officers must maintain a professional attitude throughout the questioning session. Under no circumstances should the traveller be humiliated or made to feel intimidated. How the questioning is started can also affect the outcome. Depending on the situation and the time available, it is best to establish some rapport with the traveller before starting to ask questions which are specifically intended to solicit information. Establishing this rapport can be done by simply Page | 299

asking such questions as “how was your trip?” The following should be kept in mind when questioning travellers:- Language and cultural differences To take into account language and cultural differences, questions should be couched in the simplest language possible. Words which may have a different meaning to the traveller whom you are questioning must be avoided. Listening techniques Careful listening and observation of the traveller is as important as asking questions correctly. Avoid thinking about the next question when what you should be concentrating on is the answer to the question asked. Avoid the temptation to ignore answers that may not have been expected. Listen to the whole answer and be prepared to change the next question if the answer requires a follow-up. However, these follow-up answers must be within the confines of the objective of the questioning. Good questioning entails remaining in control of the conversation by avoiding being diverted into discussing irrelevant matters, debating or arguing with the traveller. Good listening involves: - Concentration: placing all of your attention on the answers which are given and resist the urge to interrupt. - Pay attention to non-verbal indicators: Look for signs of stress or discomfort - Stay neutral: Listen to the entire message, not just what you want to hear. - Encourage the speaker: Appear like you are interested in what the speaker has to say. Active listening is the best way to encourage others to continue speaking. - The following are some of the factors to consider when listening to the traveller’s answers: - The traveller’s inability to answer a question: Why is the traveller not able to answer the question? Does he or she Page | 300