East African Community finance ministers have agreed on measures to protect and enhance the competitiveness of the regional manufacturing industry ahead of the conclusion of a comprehensive review of the Common External Tariff (CET) that has dragged on for more than three years.
In his budget speech on Thursday, Kenya’s Finance Minister Ukur Yatani said the new measures on Customs duty were agreed on at the regional level at the EAC Pre-Budget Consultations meeting for the 2020/2021 fiscal year.
Customs taxation measures will take effect on July 1, 2020, and regional governments have agreed to maintain a 35 per cent import duty rate, with the corresponding specific rates on a wide range of iron and steel products for another year, to protect the metal and allied sector from competition from cheap imports.
In addition, all inputs for the manufacture of baby diapers will also be imported duty free under the EAC Duty Remission Scheme to support the local manufacturing of these products. Inputs used in the textile and apparel sector will be imported duty free under the scheme to promote local production of new clothing and apparel including fashion and design.
“I have proposed at the regional level, measures aimed at promoting local manufacturing and also measures to ensure that locally manufactured products are competitive,” said Mr Yatani.
EAC Finance ministers have also agreed that inputs for assembly or manufacture of mobile phones be imported duty free under the EAC Duty Remission Scheme to enhance innovations particularly among the youth in the telecommunication sector. The member states also agreed to grant duty remission on raw materials and inputs used in the manufacture of facemasks, hand sanitisers, ventilators and personal protective equipment including coveralls and face shields to help in the fight against Covid-19.
As part of the regional taxation reforms, the regional finance ministers are considering raising taxes on imported ready-made clothes between 30 and 35 per cent.
The move is part of the regional tax reforms that will also see iron and steel, agro-processing, wood and wood products imported into the region attract a similar duty.
Regional private sector businesses have proposed a 32.5 per cent duty on finished products. Currently, finished goods imported into the bloc attract a duty of 25 per cent, intermediate goods 10 per cent and there is no duty on raw materials under the EAC’s three-band tariff structure that came into effect on January 1, 2005.
However, as part of the review of the CET member states have agreed on a new tariff structure of four bands but failed to agree on the rates to be imposed on goods in the new band. The new four-band tariff structure includes no import duty for raw materials and capital goods, 10 per cent import duty for intermediate products not available in the EAC, and 25 per cent import duty for intermediate products available in the region.
SUPPORT FOR LOCAL
To protect the leather and footwear sector from cheap imported products and to encourage local investment in this sector the governments have maintained specific rates of duty in addition to a 25 per cent duty rate, which were granted last year.
The EAC has also increased import duty on imported electrical parts and accessories to 35 per cent from 25 per cent