East Africa's private sector wants a review of the region's rules of origin in order to maximise its gains from the implementation of the Africa continental free trade area.
Traders, under the East African Business Council (EABC), say that the existing rules, which have not been reviewed since 2015, have denied a number of products duty-free access to the EAC markets.
The current rules of origin deny edible oil, cement and newly introduced fruits duty-free access, among other products.
The EAC rules of origin set the criteria to distinguish between goods that are produced within the EAC Customs territory and are eligible for community preferential tariff treatment, and those produced outside the bloc, which attract import duties specified in the Common External Tariff (CET).
“The EAC rules of origin were updated up to 2015 and that is what is being used by all customs unions. Based on the fact that they should be reviewed every five years, the current ones are overdue for review,” said John Bosco Kalisa, the chief executive of EABC, which is the apex body of private sector associations and corporates from the six EAC members.
The main intention of the review is to make EAC rules of origin facilitate trade and attract more investments into the region.
However, there has been an outcry from the business community that some areas in the rules need to be reviewed to respond to the environment, especially the coming into effect of the African Continental Free Trade Area (AfCFTA).
The AfCFTA came into force in January 2020, but so far the EAC is yet to begin trading under the agreement.
“The EAC partner states should initiate the process of aligning its preferential rules of origin with the AfCFTA and the tripartite Free Trade Area (FTA) rules of origin,” said Kalisa.
“We have not reached the tariff threshold for the AfCFTA, and so we need to sensitise the SME’s and our members on the challenges. We need to agree on what products we are ready to offer under the tariff preferences.”
The main challenge identified in the current EAC rules of origin is rigidity in some products such as edible oils, cement and fruits, which are unable to qualify for EAC originating criteria and accorded preferential tariff treatment.
“The rules of origin determine the origin of the products. There are what we call whole produced products, such as edible oils. They are extracted from our soils. There is no contentious issue about it,” said Kalisa.
“But as we trade we get more trade coverage and that is why it is always important like five years we review the rules of origin to take into consideration the new products or materials that are either coming into the region or being exported to other regions. There are a lot of discoveries and new products always coming up,” he added.
In 2016, the sectoral council on Trade, Industry, Finance and Investment directed that the review of the rules of origin, 2015, be undertaken after completion of the comprehensive review of the CET.
However, the review of CET has taken more than five years to be finalised and some products cannot access the EAC market at preferential tariff treatment.
“Several meetings were held in 2021 and significant progress was achieved in the EAC CET review process. However, none has been scheduled so far, but we expect meetings to be held in the first and second quarters of 2022 to finalise the pending issues,” said Phyllis Wakiaga, chief executive of the Kenya Association of Manufacturers.
EAC partner states have agreed to adopt a four-band tariff structure, that is, zero percent, 10 percent, 25 percent, and a rate above 25 percent.
The partner states have reached a consensus on only the first three bands. On the fourth band, they are torn between 30 percent and 35 percent.