East African countries have agreed to remove the special treatment given to “sensitive goods” and impose a Common External Tariff on them starting from July 1, 2018.
According to EAC countries, such preferential treatment is not anchored in the law and is stifling intra-regional trade.
The region’s Council of Ministers has also resolved that goods manufactured from raw materials that are granted country-specific duty remission should attract duties, levies and other charges provided in the existing EAC-CET, effective July 1, 2017.
They agreed that removal of frequent stays of applications and duty remissions should inform the comprehensive review of the three-band CET that is expected to be completed in September with an implementation of July 1, 2018. Initially, the revised CET was scheduled to go live on July 1 this year.
The Council of Ministers yielded to requests by the partner states to grant special tax to over 80 product lines in the 2017/2018 budgets.
Among the goods are raw sugar, wheat, barley, motor vehicles, liquefied petroleum gas cylinders, iron and steel products, crude edible oil, clothes, inputs for the assembly of ships and raw materials and industrial inputs for the manufacture of textile and footwear.
Kenya and Uganda received a stay of application on a duty of 25 per cent instead of 0 per cent on LPG cylinders for a period of one year. Rwanda, Burundi and Uganda were allowed to apply a duty of 25 per cent instead of 10 per cent on road tractors for semi-trailers for one year.
Burundi and Uganda will charge duty rate of 10 per cent instead of 25 per cent on buses for transportation for a period of one year while Kenya has been granted duty remission on raw sugar at a duty rate of 0 per cent for one year on condition that the finished product is not sold in the EAC Customs Territory otherwise it will attract duty.
The EAC Secretariat noted that the increased requests for stays of application are undermining the CET and intra-regional trade.
In addition, the stays of application do not have a legal foundation in the EAC Customs law.
Tanzania said the increasing requests for stay of applications and duty remissions have defeated the logic of the Customs Union. The list of goods has been expanding and thus creating trade distortions and impeding intra-region trade.
The review of the current EAC CET is under way. A team of consultants from the partner states has already endorsed the criteria for the classification and categorisation of goods within the EAC CET.
The ministers for finance in April 2014, decided to do away with stays of applications and directed that a phase out proposal be developed, which was subsequently adopted by Sectoral Council of the ministers of trade, industry, finance and investment in May 2014.
According to the EAC Secretariat, the intra-regional trade is declining since 2015, which could be attributed to the increasing restrictions imposed by partner states on country specific stays of application and duty remission.