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External tariffs review pushed to 2015

Saturday December 08 2012
EAC px

PHOTO | STEPHEN MUDIARI Uganda’s President Yoweri Museveni (left) receives the baton from Kenya’s President Mwai Kibaki as the next East African Community chairman during the 14th Heads of State Summit at Kenyatta International Conference Centre in Nairobi, on November 30, 2012.

East African Community member states have three years before the common external tariff takes effect, after the Fourth Ordinary Summit of Heads of State extended the period to review them to 2015.

The East African Community partner states signed a protocol establishing the EAC Customs Union and the Common External Tariff (CET) in 2005.

The negotiations are said to require finances that are not currently available, and having different internal rules of origin is making it harder to come up with a common external tariff.

“Member states still differ on issues like the range at which different goods will be taxed, but task forces have been formed to enable continuity of the negotiations,” said Richard Sindiga director of economic affairs in Kenya’s Ministry of East African Community.

The delay in establishing the CET and a single Customs territory is hindering free movement of goods, capital and people across member country borders, even though the Common Market Protocol was officially launched in 2010. 

The CET will apply to countries outside the Customs Union. The extension of the review period to 2015 means that proposals made by member states on the tariffs will have to wait, delaying the region’s integration.

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The proposals include reduction of import duty to 10 per cent on parts and inputs for refrigerators and freezers, reduction of import duty on food supplements from 25 per cent to 10 per cent, and reduction of import duty on raw materials used in the manufacture of animal and poultry feeds from 10 per cent to zero.

EAC members negotiate on behalf of their counterparts in other blocs. For example, while Tanzania is trading  with SADC using SADC rules of origin, goods imported from SADC into Kenya, Rwanda, Burundi and Uganda have to meet the EAC rules. However, goods from Comesa entering members of the EAC, apart from Tanzania, are exempted from an external tariff.

Harmonisation of the rules of origin of EAC members against other countries remains complicated as long as EAC member countries belong to different blocs.

Burundi is a member of Comesa, the Comesa Free Trade Area (FTA), the EAC and Economic Community of Central African States (ECCAS), Kenya is a member of Comesa, Comesa FTA, EAC and Igad, Rwanda is a member of Comesa, Comesa FTA, EAC and ECCAS, Tanzania is a member of SADC and EAC while Uganda is a member of Comesa, Comesa FTA, EAC and Igad. This means that partners apply different external tariffs.

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According to an East African Business Council report, being a member of different blocs breeds conflict in jurisdiction and policies and leads to legal uncertainties where more than one agreement applies.

It is impossible for a country to apply two different CETs and be a member of two Customs Unions, the report states.

Dan Ameyo, a consultant with the EABC, criticised the multi-membership of the EAC partner states, saying it is diluting the common external tariff.

Members of the various groupings must maintain border posts to enforce rules of origin meant to prevent preferential trade from entering the countries that are not party to the agreement, Mr Ameyo added.

The preferential treatment granted to third parties reduces the expanded market that the EAC is supposed to offer regional industries. However, the EAC, Comesa and SADC are negotiating a Free Trade Area arrangement, which is expected to remove intraregional trade distortions in the three regional groups.

“With the tripartite bloc, there’s no need for CETs because we will be governed by tripartite rules of origin acceptable to all member states,” said Mr Sindiga.

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