EXCLUSIVE- Car assemblers safe as FinMin looks to close knock-down loophole: The Finance Ministry has instructed customs officials to charge the same duties on knocked-down imports they do on finished products in the same categories, Finance Ministry adviser and former Customs Authority head Magdy Abdel Aziz told Enterprise. The move is meant to close a loophole under which Abdel Aziz says importers bring in knocked-down goods — essentially kits of fully manufactured components that are assembled here in Egypt with zero value addition — to take advantage of lower import tariffs. The decision will protect local manufacturers, he added, suggesting the move appears is a shift in regulatory policy and will not require the House to pass new legislation.

Auto assemblers need not worry: Auto assemblers can rest assured that completely knocked-down (CKD) imports will not be subject to the policy, Abdel Aziz said. Assemblers who augment their CKD kits with locally-manufactured components are exempt from the policy as they “contribute to an important value-added industry,” he added.

Food for thought #1: The topic of duties on CKD raises a few interesting questions for policymakers. As customs duties on EU cars fall to 0% in January (the same time at which levies on Turkish auto imports will fall to 4% from 8%) and with no automotive directive in place, cutting or eliminating tariffs on CKD could provide lifeline to auto assemblers. As it stands, local assemblers pay 7-9% in custom tariffs on CKD kits.

Food for thought #2: Policymakers could also help local assemblers compete with EU cars by giving incentives to consumers: Car buyers in Egypt have to pay registration fee of up to 2% on locally-assembled cars. Cutting or eliminating these fees could help spur sales of locally assembled vehicles.

Speaking of customs legislation, proposed changes to the Customs Act are back to the Finance Ministry for review after others at the cabinet table offered comments for consideration, a senior ministry source told Enterprise. Expect news on an amended draft of the legislation within about two weeks, we’re told.