Memorandum report on payment of customs duties on locally procured project equipment in Egypt

policies on import duty reimbursements on locally procured project equipment in Egypt. Memorandum audit report is based on documentation and interviews with vendors, contractors, and Government of Egypt (GOE) and USAID/E officials. Bilateral and project agreements specify that no taxes or duties be paid to donees, yet detailed examination of 4 of 30 active projects revealed that USAID/E routinely pays for shelf items the cost of which may include import duties of 15-40%. Specifically, USAID/E reimbursed import duties on 108 of 190 (57%) shelf items procured from 35 local vendors during the period 12/80-4/83. These reimbursements amounted to $42,820 or 8% of total procurement costs. USAID/E holds that a tax or customs duty previously paid by an importer in acquiring shelf stock is not a tax levied or paid as part of an AID-financed transaction, and thus there is no requirement to avoid or seek reimbursement for these payments. However, given that vendors said they could easily provide invoices showing customs duties as separate amounts and could in fact procure items duty-free if payed in dollars using a letter of credit, it would be easy for USAID/E to avoid paying the duties and to eliminate any subsequent need to reimburse the GOE. It is suggested that the Bureau for Management"s Office of Procurement and Contract Management review A.I.D."s policy on routine payment of duty on shelf items.