US exports of soybeans, corn and corn derivatives to Egypt are expected to be disrupted after value-added tax (VAT) was introduced on the freight of agricultural commodities, the Foreign Agricultural Service (FAS) division of the US Department of Agriculture (USDA) said in a report.
The freight VAT was brought into effect on August 1, after an agreement was inked between the Egyptian Tax Authority, the Customs Authority and Alexandria Chamber of Shipping on July 16.
Though some agricultural commodities are exempted from VAT, the government began subjecting the freight of such commodities to taxation in August without advance warning, the FAS said.
It added that the tax policy would place "US exports at a competitive disadvantage in the Egyptian market which could potentially jeopardize the reliable, affordable supply of food, feed and agricultural products for producers and consumers especially at a time when the global economy is experiencing significant challenges."
With freight costs varying from one country to another, it said countries geographically closer to Egypt would have a competitive edge over the US.
"This would deny Egypt the opportunity to source supplies globally and make it captive to certain markets," FAS said.
The report added that the policy could threaten the availability of food supply to Egypt and lead to a hike in food prices.