Uganda: EAC Secretariat Backs Uganda On Sugar and Rice Trade Disputes

Bags of sugar (file photo).

Uganda has received the support of the East African Community Secretariat in its sugar and rice trade disputes with Kenya and Tanzania respectively. The Secretariat said the disputes go against the spirit of integration and free movement of goods and services in the region.

According to the EAC, by requiring Ugandan traders to have permits to export sugar to Kenya, the country is imposing a non-tariff barrier, contrary to the EAC Treaty.

"Sugar exports to the EAC partner states are duty-free and quota-free under the EAC Customs Union if wholly obtained from the partner states. This means that as long as the sugar is locally produced in Uganda the traders can sell it in Kenya or in any of the other partner states without having to be issued with permits or licences," said Peter Kiguta, EAC Director-General in charge of Customs and Trade.

The EAC Secretariat's position highlights the contradiction of one country having dual membership of different trading blocs. Kenya and Uganda are members of the Common Market for Eastern and Southern Africa (Comesa), under which permits and quotas -- forms of non-tariff barriers for sensitive goods like sugar -- are allowed in order to protect industries in member countries.

However, under the EAC, such products only attract punitive import duties ranging from 100 per cent to 35 per cent if they are imported from outside the region and sold to partner states -- meaning the bloc relies solely on tariffs to protect domestic industries.

In the 2015/2016 budget, the EAC partner states increased import duty on sugar from $200 per tonne, or 100 per cent of the value, to $460 per metric tonne, or 100 per cent of the value -- whichever is higher.

The EAC Customs Union, which came into force in 2005, aims to ease and increase trade between member states.

"There is no such thing as Burundian avocado, Rwandan pineapple, Tanzanian rice, Kenyan beef or Ugandan sugar. These are products produced within the EAC and are bound by the bloc's Customs Union and Common Market Protocols. The Kenya-Uganda sugar saga is the most unfortunate thing," said EAC Secretary-General Richard Sezibera at the EAC Manufacturing Summit in Kampala.

Kenya has for the past few weeks been engrossed in a public debate following the recent bilateral talks between President Uhuru Kenyatta and his Ugandan counterpart President Yoweri Museveni in Kampala last month, where Kenya agreed to expedite issuance of sugar permits to Ugandan traders under the safeguards of Comesa.

The sugar row opened the floodgates of trade disputes involving the five EAC member states. Analysts say the disputes have made the region's journey to full integration longer, and exposed the nationalistic biases that continue to haunt it.

The Common Market Protocol, which was formally launched in July, allows free movement of goods, labour, capital and services in the region.

Tanzania complains that Uganda and Rwanda lock out its rice exports by imposing 100 per cent duty instead of 75 per cent as required by the EAC common external tariff.

Uganda said it is imposing the 100 per cent duty on Tanzanian imports because the rice is not locally produced and instead imported from outside the region, but Tanzania said the duty is unfair because the rice is locally grown.

According to Mr Kiguta, the EAC Secretariat conducted a verification study last year to confirm whether the rice imports originated from Iringa or Mbeya -- Tanzania's largest rice producing regions.

"The joint verification team found that the rice originated from Pakistan then was re-exported into Uganda and Rwanda," said Mr Kiguta, adding, "Such rice should attract full duty. Uganda is right in imposing the full duty of 100 per cent."

In another dispute, Tanzania has a discriminatory excise structure for cigarettes originating from EAC member states. It has been a long standing non-tariff barrier and has been reported to the EAC Regional Forum on NTBs as being contrary to the Customs and Excise Management Act 2008.

British American Tobacco Kenya complains that the Tanzania Revenue Authority charges it excise duty on tobacco products exported to the country and that for it to enjoy lower duties, it must have up to 75 per cent local content in its manufactured products.

"The 75 per cent local content requirement does not recognise the EAC rules of origin and contravenes the tax harmonisation objective of the EAC Treaty," said BAT.

The EAC Council of Ministers issued a directive to Tanzania in August 2014 to amend its Excise Acts to remove discriminatory local content provisions in its excise structures. Tanzania agreed to implement the directive by June 30.

"To date, Tanzania has failed to comply with the EAC Council of Ministers directive," said Philana Mugyenyi, EAC regulatory affairs manager adding that this should have been done through an amendment in the country's Finance Bill 2015.

Another tobacco dispute that is yet to be resolved involves Kenyan firm Mastermind Tobacco Kenya Ltd and Leaf Tobacco Commodities of Uganda over the Supermatch brand that both firms claim is theirs.

Mastermind Tobacco complains that Uganda Revenue Authority is using the dispute to frustrate the transit of the Supermatch brand through the country and into South Sudan, in favour of the products of Leaf Tobacco.

"Mastermind only uses Uganda as a transit route for its products to markets in East and Central Africa. There is no brand competition with Leaf Tobacco commodities," said Mastermind managing director Wilfred Murungi.

In 2013, the EAC Secretariat directed Uganda to ascertain whether the country's authorities had imposed prohibitions on cigarette exports but Uganda is yet to respond to the directive.

"The EAC secretariat has not followed up the matter keenly and we have been forced to abandon the Kenya-Uganda-South Sudan route for the longer Kenya-Lokichogio-South Sudan route to export our cigarettes into South Sudan, which is costly," said Mr Murungi.

The chair of the East African Business Council, Dennis Karera, said partner states have to fast-track the harmonisation of domestic taxes, work permits and residence regimes within the bloc to resolve recurrence of NTBs and improve the business environment.

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