RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLU #0164/01 0471237
ZNR UUUUU ZZH
R 161237Z FEB 07
FM AMEMBASSY LUANDA
TO RUEHC/SECSTATE WASHDC 3721
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHJO/AMCONSUL JOHANNESBURG 0433 UNCLAS SECTION 01 OF 03 LUANDA 000164
STATE FOR AF/S AND AF/EX; JOHANNESBURG FOR FCS
E.O. 12958: N/A
SUBJECT: ANGOLA'S NEW CUSTOMS LAW
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1. (SBU) Summary. Angola,s new customs code took effect in
January 2007, bringing Angolan law into line with modern
international practices, including the Kyoto and Istanbul
Convention norms. Management consultant Crown Agents has
improved daily customs operations, computerizing and
streamlining procedures to reduce the amount of time for
customs clearance. Crown Agents also trains local
authorities on cargo valuation and investigations, and the
Customs Service has implemented higher salaries and a profit
sharing plan to encourage employees to eschew bribes but
fighting endemic corruption is a tough battle. Despite
improvements to Customs operations, importers are faced with
slow overall clearance time for imports as both Luanda,s
seaports and airports are overwhelmed with incoming cargo.
In addition, Angola charges some of the highest import duties
on goods in the world. End Summary.
The New Customs Code
2. (SBU) Angola,s new customs code took effect in January
2007, after National Assembly approval in October 2006. The
Angolan Customs Authority awaits the implementing regulations
but it is not yet clear when they will be issued. When
implemented, the new code will be an important step toward
modernizing customs operations in Angola and making clearance
practices consistent with other Kyoto Convention signatories.
On January 24, 2007, Econoff and Commercial Specialist met
with Andy Hunter, Consultant to Angolan Customs for Crown
Agents, and Fecilia Senalto, a lawyer with the investigative
office of Angolan Customs, to discuss the new regulations.
Crown Agents is a UK-based international consultancy working
with Angola,s Customs Service to improve its management
systems. Crown Agents was instrumental in amending the
previous code, portions of which had been in force since
1944. The GRA originally contracted Crown Agents in 2002 and
its contract was renewed in 2006 for another three years.
Crown Agents, fees are derived as a percentage of total
customs fees collected by the GRA, thus it has a direct
incentive in cleaning up customs irregularities and improving
efficiency. Angolan customs charges, at about ten percent,
are higher than U.S. (3.7 percent) or European Union (4.2
percent) average tariffs. In addition to tariffs, Angola
levies consumption taxes of ten to thirty percent on the
value of imports. However, an importer paying USD 30 in
tariffs and taxes on a USD 100 item can sell it for USD 240
in Luanda, thus allowing them to more than recoup the higher
Meeting International Standards on Customs
3. (SBU) Although 85 percent of the language in the customs
code remains unchanged, according to Hunter, the new parts
bring Angolan Customs into line with the Kyoto and Istanbul
conventions, as well the Southern African Development
Community (SADC) guidelines. (Note: The Kyoto convention
regularizes worldwide customs procedures so that shippers can
predict the time required for goods to clear customs;
automates risk management for customs services; establishes
universal standards for better understanding by importers and
exporters, and computerizes tracking documents to make
extorting facilitation payments more difficult. The Istanbul
convention covers temporary imports of goods, such as those
used in trade fairs. End note.) Angolan Customs licenses
brokers to clear cargoes for importers. Where the number of
brokers was previously strictly limited, the new law allows
as many brokers to operate as can qualify for licenses.
Risk Management and Investigations
4. (SBU) Risk indicators for suspect cargoes generate notices
reminding Customs officials to review documents and, if
appropriate, physically inspect the shipment. Customs also
conducts a certain number of random documentary and physical
5. (SBU) The new code gives investigations a more prominent
role, providing criminal penalties for violating the customs
code. The new law also gives importers the right of appeal,
whereas under the old law, Customs sanctions could not be
questioned. The new law ends separate Customs courts and
cases now must be prosecuted in the regular court system.
However, because of the specialized nature of many Customs
cases, judges who understand the customs code and case
histories will try these cases, somewhat like administrative
law judges in the United States. For the first time, judges
can hand down jail sentences for violations of the customs
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6. (SBU) Crown Agents has focused on computerization. As
soon as Customs receives documents, they are keyed into the
Customs, computer system, which permits Customs to track
cases and gives each official the same information to work
from. This has also helped speed the customs process.
Customs now can clear a shipment in three days, but
importers, delays in assembling all required documents
normally add 20 days to this process. For example, a U.S.
company was recently assessed punitive charges of over USD
250,000 because its agent consistently delayed advising the
US company on required documentation, resulting in long
delays for submission.
Hung Up On Paper
7. (SBU) Despite computerization, the Customs process still
depends on a paper document, the documento unico (single
document). Crown Agents has also trained Angolan officials
in risk analysis and in valuation of cargoes under the Kyoto
Convention. Hunter ruefully gave an example showing the
potential downside of such training. In Mozambique, where
Crown Agents had authority over the Customs Service for nine
years, it managed to stop corruption by customs officials.
When it left, officials returned to demanding bribes, but
demanded much more than they had previously because of their
newly acquired expertise in cargo valuation.
Confronting Endemic Corruption
8. (SBU) Crown Agents is strictly a management consultant
located within Angolan Customs, with neither the mandate nor
the authority to fight corruption, but Hunter believes it has
impeded corruption by making the Customs process more
regular. Transferring paper records to computers protects
against altering documents, Hunter explained. Also, the new
Customs regulations, when published, will reduce the power of
individual officials to interpret the law.
9. (SBU) Hunter stressed that stopping the practice of
demanding bribes requires a change in the culture of the
workplace. He noted that since 2003, Customs officials have
received higher salaries than other Angolan civil servants.
In addition, Customs has established a special fund, which is
endowed by a small percentage of the duties, fees and fines
charged on incoming shipments, plus a &social fee8 charged
even on shipments otherwise exempt from charges. The Fund
represents a legitimate type of profit sharing scheme and its
capital is divided among all Customs officials each year.
The Fund also provides an incentive for Customs officials to
increase productivity as more shipments processed results in
a larger fund and higher per person stipend. Hunter believes
this incentive system is working with newer employees.
However, he maintained that higher salaries alone do not stop
older officials, who take bribes as a matter of course. An
internal audit unit investigates possible malfeasance by
Customs officials, but authority to discipline or remove
officials rests with a special committee and senior Angolan
officials in Customs. No figures are available for the
number of Customs officials disciplined.
10. (SBU) Hunter shared many examples of importers, brokers
and Customs officials trying to beat the system, ranging from
falsified invoices to outright theft, and conveniently
&lost8 paperwork in attempts to avoid physical inspection.
Angolan Customs is now investigating such cases and
prosecuting transgressions where possible. At least four
customs brokers have lost their licenses as a result of
investigations by Customs. The investigations office
compares values claimed against known values for the items.
Discrepancies in data submitted can also alert Customs
officials to take a second look at a shipment. Hunter shared
one incident where an importer was caught paying a bribe in
order to avoid duty payments on his goods ) when Angolan
Customs sat down with the importer and explained the duty
valuation on the goods in question the importer learned he
had paid far more with the bribe than if he had simply paid
the duty. But given the near institutionalized nature of
corruption with regard to all phases of importation, it is
likely that it will take many more cases of catching
transgressors and explaining the actual duties before the
importers &get8 that it is cheaper to conduct business
according to the law.
Improvements at Customs Dwarfed by Overall Processing Time
11. (SBU) Improvements in Customs clearance times have not
translated into improvements in overall processing times for
many importers. One non-U.S. medium-size importer says it
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gets its imports within 20 days from the time they are
landed, but it also usually pays a bribe for faster service.
A U.S. corporation, in contrast, reported persistent problems
with its imports despite having done business in Angola for
decades. Even the Embassy,s shipments take an average of
five weeks before they are released by the port. In
addition, Embassy Luanda,s GSO points to growing congestion
at the Port of Luanda and the airport affecting total
processing times. Ships arriving at Luanda typically wait
one to three weeks before docking, yet the seaport continues
to work a 40-hour workweek. Congestion in the container yard
adds weeks to processing seaborne shipments. One company
reported a shipment which was misplaced by the airport
warehousing authority for 14 months.
What Does This Mean for US Business?
12. (SBU) Comment: The new customs code should make Customs
clearance in Angola more predictable. However, it is only a
first step. Parts of the existing law still invite
corruption. While customs brokers must now compete with each
other for business, it is still possible for officials to
hide bribes in the broker,s bill. High customs charges are
a reality of doing business in Angola despite the high
markups in Angola,s retail market. Inefficiency in
Angola,s ports adds to import times and the tremendous
growth in import volume over the last two years has
overwhelmed port facilities in Luanda. Ending corruption and
eliminating inefficiencies at Angola,s ports is a huge task.
Small steps of success are tangible in the short term but
the complete systemic overhaul will take many years.