Uganda and Tanzania support the proposed rate, but Kenya, Burundi and Rwanda want it set at 30pc.
East Africa’s private sector is pushing for the adoption of a 35 percent tariff as the fourth and maximum common external tariff for EAC member countries.
The private sector umbrella body, the East African Business Council, says the majority of its members are in support of Uganda and Tanzania’s proposal of 35 percent. The two countries have differed with Kenya, Burundi and Rwanda who want 30 percent as the maximum common external tariff (CET) rate.
The EABC says adopting the 35 percent maximum tariff rate will incentivise industrial development, protect nascent industries exposed to unfair competition and safeguard industries against cheap and subsidized imports and jobs.
“The 35 percent maximum tariff rate will attract investments in industrial value chains and transform the bloc into an export-led, industrialised economy,” said Bosco Kalisa, chief executive of the EABC.
“The proposed 35 percent tariff rate provides an adequate tariff differential required to incentivise industrial development in the EAC region,” he added.
Given the two options on the maximum rate, a meeting of the sectoral council on Trade, Industry, Finance and Investment in Arusha in May, proposed a middle-ground of 32.5 percent as a maximum rate.
The EAC Council of Ministers is yet to agree on the rate.
CET is the import tariff or rate adopted and applied by countries within a common market. The tariff is ideally imposed on products imported from non-member countries, with the intention of promoting industrialisation in the bloc, enhancing the economic development of member states, and liberalising regional trade.
The current CET tariff stipulates that the EAC members may import products at different levels with a triple band structure duty rates: Raw materials at 0 percent, intermediate goods at 10 percent, and finished products at 25 percent. Partner states have not agreed on the fourth band.
Under the priority value chains as provided for in the EAC Industrialisation Policy (2012-2032) some of the products to be included in the fourth band tariff are textiles, iron and steel and motor vehicles.
“There is a need to agree on the fourth band, after which partner states have also to agree on different tariffs. I believe by end of this year we are going to agree on the CET,” said EAC secretary general Peter Mathuki.
The private sector prefers the 35 percent CET rate because the proposed 30 percent will create just a five percent tariff differential with the third tariff band of 25 percent charged on finished goods. They say that 35 percent will create a tariff differential of 10 percent, which will safeguard products that are sufficiently produced in the region against similar cheap imports.
“EABC is proposing a 35 percent tariff rate to promote consumption of locally manufactured goods and strengthen the regional value chain,” said Mr Kalisa.
According to EABC members, most of the products that have been considered to be assigned a maximum CET rate (in the fourth Band) are under the EAC priority value chains as provided for in the EAC Industrialisation Policy (2012-2032).
Some of these products include textiles, iron and steel and motor vehicles.
“The 35 percent CET rate will offer the necessary effective protection the region requires to drive regional value chains and drive industrialisation through these products,” Kalisa explained.
“Some of the products have a long value chain and face unfair competition from cheap imports from Asian countries hence need higher rates to safeguard their production in the region.”
According to EABC analysis, the Products to be assigned Maximum CET Rate (4th tariff band) are produced in EAC.
Based on the agreed criteria for classifying and categorisation of goods, the products identified and assigned in the 4th band are only those manufactured in sufficient quantities in the EAC region.