1 January 2018

East Africa: EAC Set to Miss Another Common Tariff Deadline

Negotiations on the proposed review of the Common External Tariff (CET) by the EAC are expected to start soon, with Kenya and Uganda differing on the treatment of sensitive products that require protection.

The EAC Council of ministers has given member states new timelines of up to March 2018 to agree on a common position on how goods imported into the region would be taxed.

However, all member states were expected to submit their national positions on the review process before the end of December.

The EastAfrican has learnt that Uganda has discussed and adopted its preferred criteria and principles of the CET review.

Four-band tariff

A progress report on the comprehensive review of the EAC CET shows that Uganda has agreed to maintain the current list of sensitive products.

They have also agreed on a four-band tariff structure which takes care of goods that are usually imported as finished products thereby attracting higher duty but which end up being used as raw materials in industrial production.

These include clinker, which is used in the manufacturer of cement and palm oil that is used for the manufacture of soap.

To this end, Uganda has introduced an additional band which will subject them to an import duty of 5 per cent.

As such the four-band tariff structure will be zero per cent (raw materials), 5 per cent (both raw material and finished goods), 10 per cent (intermediate goods) and 25 (finished goods).

Sensitive goods such as wheat, rice, milk and sugar often attract a duty rate of more than 25 per cent to discourage their importation and allow local industries to grow.

Sensitive goods

While Kenya also wants a four-band tariff structure introduced, the country requires some items on the list of sensitive goods to be dropped and opened up to competition from imports outside the EAC.

It argues that though some of these sensitive industries have been given a lot of protection they have not taken advantage of this preferential treatment to develop.

Kenya, however, is yet to agree on the tariff rates for its proposed four-tariff band CET.

Last year Kenya said it would lobby its counterparts to support its position.

Rwanda is facing challenges coming up with a national position since most of the manufacturers have little knowledge on the relationship between CET and duty remission schemes and are not aware of the EAC CET and its contribution to the GDP.

The report of a meeting by the EAC partner states held from October 23 to November 3, 2017, shows that Rwanda manufacturers are comfortable with stays of application and duty remission.

In Burundi manufacturers are comfortable with stays of application and duty remission hence they have not shown interest in the review of the tariff regime and most of them are not aware of the EAC CET.

The manufacturers argued that CET was not the major challenge but rather high cost of production such as electricity, shortage of foreign exchange to procure raw materials and high transportation costs from the ports of entry, Dar es Salaam and Mombasa.

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