East African states defend tariff on used clothes

They opposed an out-of-cycle review by six US government agencies.

Customers at a secondhand clothes stall in Nyeri, Kenya. Tanzania argued that the EAC decision to phase out importation of second hand clothing and leather is yet to be implemented PHOTO | FILE 

IN SUMMARY

  • Tanzania, Uganda and Rwanda Together with the East African Community Secretariat, have defended the decision to raise tariffs on imported secondhand clothes, saying it is based on current value, trade realignment.
  • Tanzania and Uganda, in their submissions, insisted that the doubling of levies on imports of used clothing, from $0.20 to $0.40 per kilogramme, was for realignments with the current value.
  • Rwanda, which raised the tariff from $0.20 to $2.50 per kilo said that the increase would be in effect for only one year.

Tanzania, Uganda and Rwanda are defending their decision to raise tariffs on imported secondhand clothes, saying it is based on current value, trade realignment and that —for Rwanda— it’s a one-off.

The three countries are reacting to calls by a US business association to restrict their eligibility for the Africa Growth and Opportunity Act (Agoa).

Together with the East African Community Secretariat, they have written to the panel of the out-of-cycle review, comprised of representatives of six US government agencies: the Departments of Commerce, Labour, Treasury and State, as well as the US Agency for International Development and the Office of the US Trade Representative.

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The review could decide if the three countries should lose some of the benefits of Agoa.

Tanzania and Uganda, in their submissions, insisted that the doubling of levies on imports of used clothing, from $0.20 to $0.40 per kilogramme, was for realignments with the current value.

Tanzania’s Trade Permanent Secretary Adolf Mkenda said increase or decrease of tax, duties and fees is a fiscal decision, which is implemented as part of annual fiscal measures.

Tanzania also argued that the EAC decision to phase out importation of secondhand clothing and leather is yet to be implemented, meaning claims about loss of jobs by the Secondary Materials and Recycled Textiles Association (Smart) cannot be justified.

“There is no scientific proof that changes in the trade pattern and other macroeconomic variables, including jobs and shipping were caused by the EAC decision as pointed out in the petition and therefore the claim cannot be justified,” Mr. Mkenda argued.

Infant industries

Rwanda, which raised the tariff from $0.20 to $2.50 per kilo said that the increase would be in effect for only one year.

Rwanda also argued that the decision was informed by a study of the garment industry in the country and the impact of secondhand clothes and footwear on the infant garment industry.

“While we agree that the increase in duty applied to the secondhand clothes and footwear many result in reduction of imports of these products into Rwanda, the impact on the US secondhand clothes industry is negligible.

In fact, the imports of secondhand clothes from the US reached only $2 million in 2015, the year before the increase in duty. This amount represents only 0.2 per cent of the $1 billion secondhand clothes industry in US,” the Rwandan Ministry of Trade, through its spokesman Bonny Musefani, said.

Rwanda said it has since developed the 2017-2019 action plan for the transformation of the textiles, apparel and leather industrial sectors in order to increase the quality and quantity of products for both local and foreign markets.

“It is estimated that, if everything is implemented, this could create 25,655 jobs, increase exports to $43 million and decrease the imports of these products from $124 million in 2015 to $33 million by 2019. The impact on the trade balance will result in savings of $76 million over the three-year period. So far, the implementation of the action plan since July 2016 has led to a sector growth of 18 per cent over the first three quarters of 2016-2017, substantially above the six per cent industrial sector average growth rate,” Kigali argued.

READ: Kagame: We choose to grow our economies, industries

Bilateral trade

Uganda Minister of Trade Amelia Kyambadde said there is no ban on used clothes in the country, adding that the specific tariff was increased in order to align it to the current values.

“The application of this tariff is not discriminatory. It is being applied across the board and to all suppliers of used clothes to Uganda and to the region,” Ms. Kyambadde said.

Uganda also argued that imports of secondhand clothes have been minimal and declining over the years, a drop that started even before the Heads of State Summit decision. It said the imports dropped from $12 million three years ago to $7.2 million in 2015.

“The imports of used clothes from the US to Uganda were $7.2 million in 2015. This is 0.72 per cent of the used items sales. A minimal figure that should not cause significant economic difficulty to a US used items industry estimated to be worth $1 billion,” Ms Kyambadde argued.

Kampala further argued that US exports to Uganda go far beyond used clothes.

The volume of trade bilaterally stands at $143.294 million, while data for 2016 indicates that Uganda imported from the US goods worth a total of $89.327 million, with the key imports being machinery, electrical equipment, aircraft parts, optical and photographic equipment, and pharmaceuticals. Ugandan exports to the US last year stood at $53.967 million.

Customers at a secondhand clothes market in Kenya. PHOTO | FILE 

In his submission, EAC Director General of Customs and Trade Kenneth Bagamuhanda said that the review of the specific duty threshold from $0.20 to $0.40 per kilo while maintaining the 35 per cent was not a tariff increment but a realignment made after 11 years of reflecting on the realistic landing price of used clothing to be compatible with the ad valorem rate of 35 per cent.

“The review of the specific rate does not isolate worn clothing but covered all sensitive goods including rice and sugar,” Mr Bagamuhanda said.

Lawrence Bogard, a lawyer representing Smart, argued that Kenya should be included among the EAC countries facing partial loss of their Agoa benefits.

The top US trade agency had announced last month that Kenya would be excused from the group of countries potentially subject to review of their Agoa eligibility.

“Kenya ought to be included in the Agoa eligibility review until officials in Nairobi clarify their commitments. Smart specifically seeks confirmation that Kenya’s reported imposition of minimum tariffs on containers of used goods will not be implemented in a manner that negates the July 1 roll-back of Kenya’s tariff increases,” Mr Bogard said.

READ: EAC states oppose ejection from Agoa over used-clothes ban

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