Kenya and Tanzania have agreed to hold a meeting from June 21 to 23 to iron out a tax dispute on wheat flour that is threatening to undermine regional integration.
The agreement was reached on the sidelines of the East African Community Sectoral Council on Trade, Industry, Finance and Investment meeting in Arusha on June 2.
This came after Kenya disregarded advice from the EAC Secretariat to allow Tanzania’s wheat flour access its market duty-free.
According to the EAC Secretariat, Kenya, Tanzania and Uganda currently enjoy 10 per cent duty on importation of wheat grain from outside the region and, therefore, the preferential trade between them would not disadvantage any of the member states.
But Kenya has maintained a hardline stance that it will not allow Tanzanian wheat flour into the country. And, should Tanzania decide to opt for a duty remission scheme, Kenya will still charge import duty to protect its wheat farmers.
This, says the secretariat, contradicts the spirit of the EAC integration.
Kenya had been given until February 10 this year to allow Tanzanian wheat flour access to its market without duty but only allowed a limited amount and banned subsequent consignments, a development that has infuriated Tanzanian authorities.
For instance in February 2017, Kenyan bread manufacturer DPL Festive Ltd ordered 40 trucks of wheat flour from Said Salim Bakhresa and Company Ltd, Tanzania, according to a trade and policy brief at the East Africa Business Council.
But, after all 40 trucks were approved by a Kenya Revenue Authority officer in Namanga border point, a counter-order came from the KRA head office directing that all the trucks be turned back or otherwise pay the full duty of 50 per cent.
Tanzania is of the view that the wheat flour produced from the grain that attracts 10 per cent Common External Tariff (CET) be traded on a duty-free basis between the two countries immediately.
Kenya on the other hand insists that given the different schemes being applied, wheat flour produced from the grain that attracts 10 per cent CET can only be traded duty-free between the two countries after a gazette notice providing for duty remission.
The EAC Permanent/Principal Secretaries noted that although wheat is in the sensitive list at 35 per cent in CET, all partner states have been importing it with a duty remission.
Tanzania maintains that its wheat flour qualifies for duty-free access to the Kenyan market since it meets the EAC rules of origin.
During the EAC meeting meeting in Arusha of June 2, 2017, Tanzania was concerned that despite the matter having been resolved by the pre-budget meeting of the ministers of finance, wheat flour from Tanzania is still denied entry into Kenya.
The Council called for the review of the duty remission regulations to cater for the protection of local wheat farmers. It also noted that wheat grain, being a raw material, should benefit from duty remission in accordance with the EAC Customs management law.
The Council recommended periodic evaluation of imported wheat grain to ensure that wheat grown locally is given priority by millers.
This will free up their time to discuss issues of duty remission, protection of local farmers, mopping up of local wheat and policy direction regarding milling.
Kenyan millers expressed concern that Kenyan officials at the border were allowing zero-rated wheat flour from Tanzania to enter the country even though Kenyans pay duty when exporting their products to the EAC.
Kenya’s wheat production deficit has increased over the years, with local production currently estimated at less than 20 per cent of the total supply, necessitating imports.