A fresh dispute has erupted between Kenya and Uganda over motor vehicle imports, adding to dozens of costly trade wrangles among East African Community member states that are frustrating efforts at regional integration.

Ugandan traders claim that the Kenya Revenue Authority (KRA) has imposed a new cash bond on motor vehicles transiting through Kenya from the port of Mombasa.

The dispute has heightened focus on the dozens of trade disputes involving companies in the five EAC member states. Some analysts say the disputes have made the region’s journey to full integration longer, and exposed the nationalistic biases that continue to haunt the plan.

Several regional companies are currently locked in trade disputes with either their competitors or regulators, among them cigarette makers British American Tobacco (BAT) and Mastermind Tobacco.

READ: Kenya in cigarette trade wars with neighbours

Integration was meant to ease trade and stop the revenue losses suffered by companies while doing business in the region. However, many exporters and importers have landed in expensive trade battles that may inform the future of cross-border business deals in East Africa.

Frustration is growing among businesses in landlocked countries like Uganda and Rwanda, which are paying a heavy price for unnecessary and costly trade barriers, usually erected by regulators.

While the EAC partner states had in principle agreed to remove non-tariff barriers (NTBs) by December 2012, in the absence of a legally binding framework, action has largely depended on the willingness of the different countries.

READ: Fresh hurdles to free trade emerge, NTBs push up costs

In a letter to Kenya’s Ministry of EAC Affairs, Commerce and Tourism from the Uganda’s Ministry of EAC, Ugandan motor vehicle traders, in particular African Crescent Corporation, have complained that KRA has, for the last few days, been demanding a cash bond on motor vehicles with an engine capacity of 2000cc or more, transiting through the country and destined for Uganda.

KRA spokesman Kennedy Onyonyi has however denied the accusation saying that only the normal bond — known as the particular consignment bond, equivalent to the cost of the vehicle and not paid unless the vehicles do not get to their stated destination — is being imposed as security to curb dumping. This bond is cancelled as soon as the vehicles cross the Kenyan border into Uganda.

Businessmen have opposed the cash bond which is paid in advance and is equivalent to the price of the imported motor vehicles. They claim it is difficult to raise the additional money, on top of paying for the goods and clearing import duties.

Richard Sindiga, director of economic affairs at Kenya’s Ministry of EAC Affairs said a cash bond, as per the EAC Sectoral Council on Trade, Industry, Finance and Investment directive of June, should be used as the last resort for security by any revenue authority in the region, and its imposition should be reported immediately to the Council of Ministers.

The growing number of unresolved trade tussles shows that the East African partner states are still lagging behind in implementing the Common Market Protocol, just two years away from the 2015 deadline. The protocol, which calls for the free movement of goods, labour, capital and services in the region, came into effect on July 1, 2010, and was to be implemented over a five-year period.

READ: EA Common Market limps towards 2015 deadline

Regulatory barriers aside, businesses continue to incur huge costs from weighbridges, roadblocks, poor infrastructure, unnecessary delays at border posts and lack of harmonised import and export standards, procedures and documentation.

“It is only when the protocol is fully implemented that the larger integrated market will bring in more investment. If this increase in investment is sustained, then the level of economic growth will go up,” said Patrick Obath, a former chairman of the Kenya Private Sector Alliance.

Last August, KRA had imposed a cash bond on Uganda traders importing motor vehicles of 2000cc capacity, as well as sugar. Kenya introduced the cash bond to stop dumping of sugar imports transiting through Mombasa to Uganda. As a result, Ugandan traders threatened to boycott the Mombasa port and move to Dar es Salaam. The dispute was resolved early this year, after intervention by the EAC secretariat.

READ: Dumping talk sours regional sugar dispute

Samuel Nyandemo, an economist at the University of Nairobi, said trade between the member countries is likely to decrease due to the trade disputes.

Ugandan manufacturers have for a long time disagreed with Tanzanian authorities over the export of their products into the country. Tanzania insists that Ugandan manufacturers should pay full duty for exporting goods manufactured using raw materials imported from outside the EAC. Uganda argues that under the EAC, they are allowed duty free importation of specific raw materials and industrial inputs.

Every year, the EAC has extended Uganda’s duty free importation of specific raw materials and industrial inputs, known as the Ugandan List. These are 135 raw materials used in the production of goods exported to other East African countries. The Ugandan List first came up in 2004 when the EAC Customs Union law was passed. This remains one of the biggest sources of trade conflict across the region.

“Rwanda and Burundi argue that this gives Ugandan companies unfair advantage in the EAC market, since goods produced using these duty-free inputs do not attract the 10 per cent EAC Common External Tariff, thus making them cheaper,” said Mr Sindiga.

“The issue has never been fully resolved, but Kenya and Uganda have, in their previous budgets, cut the list down.”

A cigarette dispute between British American Tobacco (BAT), Kenya, and Tanzania Revenue Authority (TRA), which worsened early this year, remains unresolved. BAT is complaining that the TRA charges it excise duty on tobacco products being exported to the country. And in order 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 in a recent statement.

BAT head of communications Keith Obure said they are waiting for the issue to be resolved by the EAC council of ministers.

Another tobacco dispute is between Kenyan firm Mastermind Tobacco Kenya Ltd and Leaf Tobacco Commodities of Uganda over the Supermatch brand that both firms have claimed is theirs.

Although the matter is in the court awaiting a resolution, Mastermind Tobacco complains that the Uganda Revenue Authority (URA) is using the dispute to frustrate the transit of the popular cigarette through the country and into South Sudan, in favour of the products of Leaf Tobacco.

In a letter dated May 16, Secretary General Richard Sezibera asked Uganda to ascertain whether the country’s authorities had imposed prohibitions on cigarette exports.

“Such unilateral action contravenes both the international conventions and EAC Customs law. We, therefore, seek a response from the Republic of Uganda on this matter,” said Mr Sezibera.

However, Mr Sindiga says the matter is yet to be resolved and is awaiting the council of ministers’ decision.

Uganda banned the importation of beef from Kenya in 1997, claiming that it was not sure that the meat met the required standards.

Ugandan authorities argue that, although Kenya has ruled out the presence of mad cow disease in the country, there is suspicion that its imported cattle feeds could be contaminated with the disease.

In an effort to resolve the issue last year, the EAC Sectoral Council on Trade, Industry, Finance and Investment appointed a task force of experts from the two countries to investigate the claims. The task force conducted an inspection on the feeds being imported into Kenya from the main port of Mombasa, and concluded that the feeds were safe and Kenya could resume its beef exports to Uganda.

READ: Uganda to extend ban on Kenyan meat products

However, the Ugandan Ministry of Livestock disputed the results, claiming they need to carry out further inspection of all the Kenyan borders, and that the animal feeds could be coming in through neighbouring countries like Somalia and Ethiopia.

“Another inspection was to be conducted by the task force on the other ports as suggested by the Ugandan authorities. But no other inspection has been carried and the issue has remained unresolved,” said Mr Sindiga.

Traders from the member states have complained that Tanzania does not allow exports of plastics into the country, claiming that the products were substandard and that they are protecting local manufacturers.

The EAC Sectoral Council on Trade, Industry, Finance and Investment commissioned a study to ascertain if all the plastics products manufactured from the region qualify under the EAC rules of origin criteria, which prescribes a zero per cent customs duty rate.

It was established that plastics manufactured in the region qualified for zero rating, and that Tanzania should allow exports of the products freely into the country.

Walter Kamau, a trade expert at Kenya Manufacturers Association, said the decision by the EAC Council of Ministers on June 10, 2013, directed partner states to grant members tariff preferences on plastic products upon fulfilment of the rules of origin.

“The problem now lies with lack of implementation of the council’s decision,” said Mr Kamau.

“One of our members informed us recently that the TRA officials at Namanga border were not aware of the decision to accord plastics manufactured in the region preferential duty,” he added.

There has also been a stand-off between Uganda and Kenya on rice exports. Uganda charges a 100 per cent common external tariff (CET) on rice grown in Kenya, on the reasoning that Kenya enjoys a stay of application on CET on rice of 35 per cent. Kenya thus imports rice at 35 per cent duty, and not 75 per cent CET like the other EAC countries. Uganda argues that it charges the high duty to prevent smuggling of rice into the country because of the huge difference in import tariffs.

Rwandan traders have also complained of discrimination at the ports of Mombasa and Dar es Salaam, despite the Common Market Protocol. They argue that cargo destined for Rwanda is cleared after cargo to other EAC countries, even when it is urgent.

Traders from Rwanda and Burundi say that it takes days to access their cargo at the two ports, unlike their counterparts from the other EAC member states. They attribute the delays to corruption.

READ: Rules in EAC states hurting Rwanda traders

Rwandan traders using the Rusumo border post have accused Tanzanian customs authorities of reluctance to remove trade barriers by making it difficult to obtain the simplified certificate of origin from the authorities. The certificate allows traders to conduct business in any EAC member state without paying customs duties.

Importers are required by the EAC Common Market Protocol to have a certificate of origin from a competent authority in the source country to confirm that the merchandise is indeed from an EAC member state.

The certificate can be obtained at the border post in one day, but Rwanda says Tanzania requires its traders to wait for days before they can obtain it, which is costly to their business.