CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background of the Study

Custom clearance is a necessary procedure to be followed before goods can be imported or exported internationally. (Kimberly, 2017) defined imports as foreign goods and services bought by residents of a country. Residents here include citizens, businesses and the government.  If a shipment is cleared, then the shipper will provide documentation confirming custom duties that are paid and the shipment can be processed. Custom clearance is a simple process when a custom broker is use for import and export. Cameroon’s import tax is charged based on the F.O.B. (Free on Board) value of the vehicle you’re importing. The rates are applied using the F.O.B. values of cars, as stated by KBB.com for autos from the U.S.A., Canada, and some parts of Asia. Taxes charged on car imports into Cameroon often depend on the vehicle’s age and engine capacity. 82% duty is charged for cars less than ten years of use, 71% for vehicles above ten. 57% charged for trucks. Cameroon’s largest container port is the Port of Douala. Port Autonome de Douala manages it.

There are two standard shipping methods for importing cars to Cameroon from Germany. They include: Containerized Shipping RoRo Shipping, Container Groupage Shipping. Shipping your consignment in a container offers more safety. In this context, you freight your motor vehicle to Cameroon in a container, not by Ro-Ro—a shipment method whereby one drives auto into the ship. As a result, containerized is becoming the best alternative for the importer in Africa (Bernard, A.B., Jensen, J.B., and Schott, P.K. (2005). Importers, exporters, and multinationals). Container Groupage shipping entails combining your cargo (cars) with other shippers in a single container to reduce cost. The shipper unloads the container upon arrival, and the consignee claims the shipment. Container groupage is also known as consolidated shipping. It is a slightly cheaper method of shipping than containerized shipping. However, to successfully carry out this shipment method, you need an expert in it, a shipper who can load your vehicle correctly. Autos loaded wrongly can bring unnecessary expenditure.

The best policy for African importers is to tie-up with a third-party that could simplify the import process. Such third-parties can save the importers from the hassles of documentation, while also facilitating a smooth transaction with overseas partners. Furthermore, there are various websites that offer customised services to car importers from Africa. These companies can help you in finalising your documents and comparing the quotes from different exporters. Such third parties are also capable of assisting you in terms of drafting the key terms and conditions of your trade (Grubert, H., and Mutti, J. (1991). Taxes, tariffs, and transfer pricing in multinational corporate decision making). Finally, it is important to seek professional advice because these companies are specialists in what they do. Their assistance could go a long way in facilitating your importing activities (OECD,2005). In order to make the process of importation into Africa simpler, importers can avail the services of international financial institutions that provide trade assistance as well as offering useful financial instruments. Importers of cars can take the help of such institutions in order to streamline their import activities. One such institution is Euro Exim Bank. The bank allows businesses to import and export products without any hassles.

In recent years, Africa has emerged as a major market for used cars. At present, there are just 44 cars per 1000 people in the continent. However, this ratio is increasing on a consistent basis and is likely to improve significantly over the next few years. It is estimated that there will be more than 90 million registered vehicles in Africa by the year 2030 (Anderson, J.E., and van Wincoop, E. (2004). Countries such as Nigeria have a population in excess of 140 million, making them attractive markets for used cars. However, importers are often unaware of the regulations and the financial instruments that could help them in importing cars from Asia to Africa. This blog will assess the regulations and discuss the methods to simplify the import process.

The most important market that caters to Africa’s increasing demand for used vehicles is Asia. Within Asia, Japan has emerged as a significant market that exports used cars to Africa. Multiple trade agreements have already been signed between Asian and African countries. There are two major reasons why Africans prefer to import used cars from Japan. Firstly, the international policies adopted by Japan do not interfere in African markets. Secondly, Japanese cars are already popular in these markets, allowing for the easy sourcing and installation of spare parts and equipment. This has led to a situation where African consumers are increasingly importing used cars from Japan.

World customs organization (WCO, 2011) indicated that the effectiveness of the operational procedures of customs have a great influence in the movement of border crossing goods across the globe. Customs have to be in position to revise their operational procedures to optimize trade facilitation and control. According to the WCO (2015), excessive delay is a serious challenge for business that significantly depress them because of the inefficient coordination and cooperation among customs within and between themselves, and other governmental agencies that inspect the same goods more than three and above. A s a result, the shipment waits for a longer time to clear the customs and these delays are associated with attendant cost that can significantly affect the competitive position of the trading community.

To make importation easier, when purchasing abroad a vehicle certified to the U.S. standards, a buyer should have the seller verify in the sales contract that the label is attached and present this document at the time of importation. A vehicle without a certification label cannot be imported as a conforming vehicle. In this case, the importer must contract with a Registered Importer (RI) to modify the vehicle and post a DOT Conformance Bond in an amount equivalent to one and a half times the vehicle’s dutiable value.

The automotive market is one of the most globalized industries in the world and is dominated by a small number of companies with worldwide recognition. Totalling USD 2,243.5 billion of revenue of in 2010, the automotive sector is one of the key segments of the world economy having extensive forward and backward linkage with other segments of the economy. (Organization, United Nations Industrial Development, 2003).

  The 1980’s were marked by globalization. Auto marketers started assembling cars around the world which gave the possibility to reduce costs and to understand better customer needs of new markets; being able to have greater capacity to penetrate new markets. At the same time, U.S automakers began losing market share due to the entrance of new foreign competitors, especially from Japan, who offered higher quality, fuel efficiency and lower prices. During the 2000’s automakers emphasized their strategy to enter new emerging markets such as Asia-Pacific (especially China and India) and South America (especially Brazil). New alliances and commercial strategic partnerships with foreign automakers have been made in order to take up the challenge. At the same time, the tendency to drive eco-friendly cars which began during the end of the 1980’s grew even stronger. Since 1952, the automobile is a primary transportation mode in many developed economies. (Grübler & Nakicenovic, 1991)

The performance of the industry is expected to accelerate in the upcoming years, with an anticipated Compound Annual Growth Rate of 7.3% for the five years’ period 2010 –2015 and most of it will come from the Asia Pacific region. (Datamonitor, 2011), however the sector will have to face to several issues during the next decade: Oil prices increasing, fluctuation in exchange rates, changes in customer’s behaviour, new emission regulations, new technologies, changes in supply chain, and worldwide economic crisis. The automotive industry is dominated by few multinational companies such as General Motors, Ford, Hyundai or Volkswagen. Only five companies concentrate 47% of world sales. Consequently, the automotive market is very mature and new entrants don’t have a chance to survive. In order to become a tangible competitor, an automaker must be able to achieve economies of scale, which means that it must mass-produce in order to reduce costs. Otherwise, products will not be affordable to the customer.

The drop of the purchasing power of cars in Europe and the credit crisis harm the sales of news cars and force the automotive industry to restructure their marketing strategies. (Benzakri, Nachet and Sandwidi, 2009). Most car manufactures must limit their production and they have to re-examine their strategy in order to deal with the new macro-environment. On a mature market, it seems likely that the car manufacturers will tend to give priority to form alliances and to seek synergies in order to maintain their share market.

The responsibilities of customs administrations vary from country to country, and are often the subject of regular review and modification to ensure their ongoing relevance in a constantly changing world. However, Customs has been responsible for implementing a wide range of government policies, spanning areas as diverse as revenue collection, trade compliance and facilitation, interdiction of prohibited substances, protection of cultural heritage and enforcement of intellectual property laws.

Customs are expected to satisfy the wants of both the government and border crossing traders without compromising the balance between trade facilitation and control through maintain regulations and laws that govern the movement of international goods (Alterman, (1997). Both trade facilitation operation and control has been given optimum attention by the customs to satisfy the expectation of both customs and government by ensuring the compliance of border traded goods with the regulations of regulatory bodies those involved in the movement of border crossing goods and the time to process border goods has to be minimum as much as possible.

Bamenda also known as Abakwa and Mankon town, is a town in the North West Region of Cameroon and it is the capital of the North West Region. The city has a population of about 2million people and it is located 366 kilometers North West of the Cameroonian capital, Yaoundé. Bamenda is known for its cool climate and scenic hilly location. The town of Bamenda has roads links to Yaoundé and Douala. North of the town is the Bamenda ring road as well as other roads. These roads are used by passengers and goods and it also eases the movement of cars imported by citizens of Bamenda.