East African Community partner states have made relative progress in eliminating non-tariff barriers (NTBs) over the past twelve months, with the number of newly reported ones falling for the first time, new data shows.

As a result, businesses could benefit from a reduction in the cost of doing business in the coming months with the lessening of NTBs — mainly weighbridges, roadblocks, poor infrastructure, unnecessary delays at border posts, and lack of harmonised import and export standards, procedures and documentation.

A report released by the EAC Secretariat shows that over the past one year, 55 NTBs were resolved since last year, up from 36 that were resolved in 2012.

Although six new NTBs have been imposed by the partner states since November 2012, there is progress from last year when 10 new NTBs were reported as new.

The status report tabled before the EAC Heads of State Summit on November 30 in Kampala, Uganda shows the number of unresolved NTBs in the region have also dropped from 35 reported last year to 22 currently.

The reduction of NTBs, the report says is as a result of the reduction and or elimination of weighbridges, roadblocks on the main corridors (Central and Northern Corridors).

The opening of One Stop Border Posts across the region has also helped reduce unnecessary delays at border posts as well as the slashing of procedures and documentation at the port of Mombasa.

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However poor infrastructure, and lack of harmonised import and export standards remain a top concern for businesses, executives said.

This is the first time the secretariat is reporting a drop in NTBs across the region. East Africa’s standing as one of the continent’s most attractive destinations for foreign investment has recently come under threat from other blocs, which are benefiting from the region’s NTBs, lengthy licensing procedures and sluggish commercial dispute settlement procedures to improve their competitiveness, the World Bank said in a recent report.

While the five partner states agreed to remove all NTBs by December 2012, in the absence of a legally binding framework, action largely depended on the willingness of the different countries.

“A number of NTBs have already been resolved especially on the Northern Corridor while decisions had been reached on how to address the remaining ones,” said Richard Sezibera, the EAC secretary general. 

“However, the issue of NTBs will always be there because in trading arrangements, there will always be disagreements and disputes and new NTBs will always emerge. Therefore, to address this, we have to set up a trade disputes committee,” he said.

Mr Sezibera added that elimination of NTBs has to be carried out in accordance with the Treaty for the Establishment of East African Community, which outlaws the imposition of NTBs to Intra-EAC trade unless permitted in the Treaty.

Current NTBs

The EAC secretariat report shows that Rwanda is blocking the entry of rice, small fish and palm oil from Burundi. “Rwanda informed the meeting that there was no denial of the above-mentioned commodities from Burundi, instead Rwanda restricts commodities packed in polythene bags,” said the report.

Kenya reported that Auto-Axillary Ltd, which produces U bolt and Centre bolts is charged CET of 25 per cent when it exports to Tanzania despite the fact that the products meet the EAC Rules of Origin.

Kenya also complained that its metal products were being charged a CET rate of 25 per cent by Tanzania although they meet the EAC Rules of Origin criteria.

The report says that Tanzania is still charging plastics from Kenya a CET rate of 25 per cent although the products meet the EAC Rules of Origin criteria.

Tanzania however said it had instructed border stations to give preferential treatment to plastics imports from Kenya.

Kenya was requested to provide documentary evidence on the charges during the next regional forum on NTBs to be held early next year.

The plastics row between Kenya and Tanzania has been long standing. The EAC Sectoral Council on Trade, Industry, Finance and Investment early this year commissioned a study to ascertain if all the plastics products manufactured from Kenya and other partners 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, directed partner states to grant members tariff preferences on plastic products upon fulfilment of the rules of origin.

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

Burundi, the report says charges full Common External Tariff (CET) on some items from the other partner states even though they meet the required standards.

“Burundi indicated that it started charging full CET after finding out that several EAC Certificates of Origin were not authentic,” noted the report.

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.

Regional 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 found themselves involved in expensive trade battles that may inform the future of cross-border business deals in East Africa.

Kenya complained that East African Breweries’ beers were being charged a CET of 25 per cent when exported to Tanzania through Serengeti Breweries, EABL’s subsidiary in that country.

“Tanzania informed the meeting that beer produced in Kenya was accorded preferential treatment except imported spirits re-exported to Tanzania,” said the report.

Kenya undertook to investigate the issue and report back during the next meeting of the Sectoral Council on Trade, Industry, Finance and Investment early next year. 

Tanzania produced documentary evidence claiming that the County Councils of Kwale and Kajiado in Kenya had re-introduced charges for transit cargo. Kenya and Tanzania are to hold discussions on the allegations, the report shows.

Kenya’s EAC Integration secretary Barak Ndegwa said barriers by county governments would negatively affect EAC’s mission to achieve free movement of goods and services.

“The county governments should not use this as an opportunity to generate revenue,” said Mr Ndegwa adding that the government was aware of the complaint and it is working on resolving it.

Kenya’s decision to introduce a levy of 1.5 per cent on all imports to the country has also been raised as a new impediment to trade in the region.

The levy introduced in June is to fund the construction of a standard gauge railway line from Mombasa to Kisumu and also applies to goods transferred from other EAC Partner States to Kenya.

This levy according to the report has resulted in making products from EAC partner States less competitive than similar products produced in Kenya.

“The Sectoral Council considered the imposition of the levy and noted that the levy contravenes the EAC Customs Union Protocol and therefore proposed that the levy be abolished for EAC products,” said the report.

Last week, Kenya launched the standard gauge railway line, a signal it was determined to go ahead with the project. Andrew Luzze, the executive director at East African Business Council said that inadequate government structures, erratic application of rules and the lengthy customs procedures were some of the barriers to trade in the region.

“There is a need to have a law to hold partner states responsible for not eliminating NTBs. NTBs are as a result of trade competition among the partner states. This will be there in any trading bloc but we need to have strategies in place on how to deal with them fast,” said Mr Luzze.

Enforcement needed

The EAC Council of Ministers, during its meeting held in April 2011, among others, reviewed the elimination of NTBs in the region and directed EAC to source for funds to develop a legally binding enforcement mechanism on the elimination of NTBs as identified in the EAC time Bound programme. 

The EAC with the support of Trade Mark East Africa contracted a consultant who prepared a draft Bill on a legally binding enforcement mechanism for the elimination of NTBs. The draft Bill was subjected to national stakeholders’ workshops in May and June to solicit for comments.

After the national stakeholders’ workshops were held, an independent consultant was contracted to consolidate and incorporate comments in the draft Bill.  The Sectoral Council considered the revised draft Bill and recommended its adoption by the Council of ministers.