Kenya, Tanzania seek middle ground, but...

Thursday September 21 2017

Cigarette manufacturer British American

Cigarette manufacturer British American Tobacco’s plant at Industrial Area, Nairobi. PHOTO FILE | NATION 

By JAMES ANYANZWA
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A meeting held in Dar es Salaam to discuss strained trade relations between Kenya and Tanzania failed to resolve the dispute over tobacco exports.

Tanzania, insists that cigarettes manufactured in Kenya must pay taxes before accessing its market, contrary to the East African Community Customs Union Protocol, maintained that it already has a contract with its tobacco stakeholders entered into before the Customs Union.

Members of the Tanzanian delegation said they would only address the issue after consulting tobacco sector stakeholders in their country.

The dispute continues despite a presidential directive in July that the two countries remove barriers to trade.

The Protocol provides for the elimination of duties and other charges on all imports within the region, elimination of non-tariff barriers to trade among partner states and establishment of a common external tariff (CET) on all goods imported from outside the EAC bloc.

But Dar es Salaam argues that the existing taxation measures do not discriminate against cigarettes imported from Kenya. “There are excise duties that favour cigarettes produced in Tanzania. There are similar duties in Kenya that favour locally produced beer. However, there are legal implications and contractual obligations which Tanzania is scrutinising with a view to coming up with an amicable solution,” the Tanzanian officials said.

Tanzania complained that Kenya has placed tough excise duty remission conditions that hinder Tanzania Breweries Ltd’s beer exports.

“Kenya does not agree with Tanzania’s position regarding the contractual obligations, given that they operate under the EAC law,” the Kenyan delegation argued.

The meeting held from September 6 to 9, brought together Permanent and Principal Secretaries of Trade, manufacturers, millers, wheat farmers’ associations, trade officers and high commissioners from both countries.

Rules of Origin

Kenya has been protesting against Tanzania’s decision to impose a higher local content requirement of 75 per cent of the inputs into export tobacco, contrary to the EAC agreement.

The former EAC Rules of Origin required only 35 per cent of local inputs in order for goods to qualify as originating from a member state and thus enjoy duty-free status. However, revised rules have lowered the threshold to 30 per cent

British American Tobacco complained that Tanzania Revenue Authority imposes excise duty on its exports which do not meet the 75 per cent local content requirement.

During the meeting Kenya also complained about other products that have been denied preferential market access to Tanzania because of issues related to the rules of origin.

These include cement, edible oils, textile, lubricants and products manufactured by industries outside the Export Processing Zones (EPZ).

Tanzania argued that as per the Legal Notice No EAC/84/2017, Kenya was granted a stay of application of the CET  rate on garments and leather footwear manufactured in the EPZ on the 20 per cent of the annual production allowed in the protocol to be sold within the domestic Kenyan market for one year, duty-free.

As a result the sale of these products in any of the EAC states is subject to duties, levies, and other charges provided in the CET.