Council Advocacy Overturns Egyptian Tax Which Threatened $2 Billion in U.S. Agricultural Exports

Egypt imports approximately $2 billion of U.S. agricultural products annually. U.S. exports to Egypt face tremendous challenges and competition from the Ukraine, Europe, and South America. The Egyptian market is extremely price-sensitive, so any added costs effectively exclude certain products from the market.

In August of 2020, the Egyptian government, in an attempt to raise funds, announced a change to their tax laws that would have put U.S. agricultural products at a distinct disadvantage to other origins, simply due to transportation costs. Given that the U.S. market is further away from Egypt than Europe or the Black Sea, this new tax would have effectively threatened $2 billion in agricultural exports.

According to the new law, a 14 percent value-added tax (VAT) on the freight costs was to be added. The tax was based on average freight prices recorded by the Alexandria Chamber of Shipping and was higher on shipments from more distant origins than closer origins. For example, Panamax vessels of grain would incur a tax of about $2 per M.T. from the Black Sea versus $3.70 per M.T. from the United States and South America. The cost per ton was also higher for containerized shipments from the United States, where the freight costs for a 40-foot container is $1,200, meaning VAT of $168 per container or about USD $6.50 per M.T. This tax policy unfairly penalized the U.S. as an agricultural origin due to the greater distance from the U.S. to Egypt compared to the Black Sea or European Union.

The Council, working closing with the U.S. embassy in Cairo, USDA, and U.S. stakeholders (including the U.S. Chamber of Commerce in Egypt), was able to convince the Egyptian government that this new tax was unfair to U.S. agricultural exports and unfairly penalized U.S. origin. As a result, on November 18, 2020, three months after the tax was imposed, the Egyptian government announced that it was canceling the valued-added tax on the freight of agricultural commodities, providing a big win for U.S. exporters by ensuring a level playing field for their exports to the Egyptian market.

Responding quickly to the freight barrier in Egypt, the Council showed its ability to maintain viable markets for U.S. farmers and exporters when threats and disruptions are presented in the MENA region, especially at a time when the global economy is experiencing significant challenges and when Egyptian buyers have started buying and shipping U.S. corn by the Panamax into the country.