A bid to resolve a long-drawn out sugar exports dispute between Kenya and Uganda has hit a fresh hitch, threatening trade ties between the two neighbours.

Kenya imposed a sugar export ban on Ugandan sugar exports last October on suspicion that it was dumping duty free sugar that it was allowed to import in 2011, a claim Uganda traders highly refute.

READ: Kenya, Uganda tussle over bitter sugar import levy

In February, the Kenya Revenue Authority (KRA) stopped over 220 metric tons of Uganda-manufactured sugar from entering the country.

A new report on the comparative testing of sugar to ascertain proof of origin of the consignment failed to reach a clear conclusion, further fuelling suspicions that the sugar might not have been produced in Uganda.

“Sugar samples drawn from Kakira bonded warehouse had different chemical and physical characteristics with sugar samples drawn from the production lines of both Sugar Corporation of Uganda (Lugazi) and Kakira Sugar Ltd and sugar samples drawn from the Busia border,” said the report by a joint committee picked by the EAC Secretariat last month.

The team of experts was to conduct a joint inspection on the sugar samples of Kinyara, Kakira, the Sugar Corporation of Uganda (Lugazi) and Mayuge sugar factories to ascertain the quality and capacity of the factories to produce sugar in surplus for export outside the Ugandan market.

“The sugar samples drawn from Busia border had similar chemical and physical characteristics with sugar samples drawn from production lines of Lugazi and Kakira,” said the report while concluding that the results obtained may not be final proof that sugar found at the Busia border originates from Uganda.

KRA is expected to use the findings to make a decision on whether to charge a levy of 100 per cent if it decides to treat the sugar as originating outside the EAC or the 10 per cent levy charged on sugar originating from any of the EAC partner states.

Kenya conducted its own laboratory tests on the sugar earlier this year but did not release the results of the findings.

“We found disparities in the sugar at the border and the one in Uganda but our Ugandan counter parts did not agree with it,” said Beatrice Memo, the Commissioner of Customs Services at KRA.

On the sugar samples, the URA Commissioner for Customs Richard Kamajugo said: “These were really negligible. I don’t think they [variations] would be a basis for KRA to raise any further issues, and so we agreed after the tests that the sugar be released.”

The tussle can be traced back to August 2011 when Kenya allowed Uganda to import sugar through the port of Mombasa duty-free for a period of six months (stay period) following a request by Uganda to help it plug a deficit.

The only condition was that the sugar would only be consumed in Uganda and if it was re-exported back to Kenya, a levy of 100 per cent would be charged by KRA.

Sugar manufacturers from Uganda, Kenya and Tanzania were last December forced to convene a crisis meeting at the Kenya Sugar Board, following an impasse where Kenya accused Uganda and Tanzania of flooding its market with cheap sugar accusing them of exporting 26,000 metric tons into Kenya in 2012 compared to four tons in 2011.

Kenya’s tax officials are accusing Ugandan businessmen of exporting the sugar back to Kenya, after they observed that sugar imports from Uganda have been steadily rising after the stay period lapsed in January 2012.

KRA argued that it is difficult to distinguish between sugar imported during the stay period and other ordinary imports.

Additional reporting by Julius Barigaba