Kenya seizes Ugandan milk, sparks trade war

Uganda has threatened to reconsider her position on the East African Community Customs Union Protocol and impose retaliatory taxes after Kenya seized its milk products on their market.

In a protest letter to Kenya, the Ugandan government said it was “exercising maximum restraint but reserves the right to reconsider this position.”

The Ministry of Foreign Affairs wrote to the Kenyan High Commissioner in Kampala, protesting Kenya’s continued behaviour to impose unwarranted tax restrictions on milk and other dairy products exported to the country.

“The government of the Republic of Uganda protests the manner within which authorities in Kenya have continued to deliberately constrain and impose unwarranted restrictions on the smooth importation of Uganda’s milk and milk products into Kenya,” the letter reads in part.

Kenya blocked Uganda’s milk and dairy products, particularly Lato Milk on claims that Ugandan companies are exporting counterfeit and substandard products.
Kenya had seized 262,632 litres of Ugandan milk valued at $157,106 (about Shs573m) and 54,310kg of powdered milk at $203,630 (about Shs743m) in two weeks.

Uganda said the seizure of the dairy products was illegal since they had been cleared by the Kenyan Ministry of Agriculture, Livestock and Fisheries, Kenya Revenue Authority, Kenya Dairy Board, Kenya Bureau of Standards and port health services.

A Kenyan government delegation visited the country in December last year to verify whether milk imports originated from Uganda or from third parties following claims that the latter had no capacity to export such huge quantities.

The delegation presented a report back to the Kenyan parliament recently showing that milk imported from the EAC region, with most volumes coming from Uganda, hit 110.7 million litres between January and September last year, up from three million litres in 2016.

Kenya’s Trade ministry has already proposed a 16 per cent duty on milk products that enter the country from Uganda to protect local dairy farmers who have protested over the influx of low cost Ugandan milk.
Uganda has protested the tax, saying it breaches Article 15, 1(a and b) of the protocol establishing the East African Customs Union on national treatment.

“The ministry would like to express its surprise at the unfortunate actions by senior government officials wrongly claiming that the bilateral meeting on trade held on December 19, 2019 had agreed that Kenya imposes a 16 per cent VAT on Ugandan milk exports, well knowing it is not the case,” Uganda’s Foreign Affairs ministry said.

Uganda warned Kenya that it also “has high levels of imports from Kenya but has not taken the route Kenya has taken” but suggested it could retaliate.
Uganda was the biggest importer of Kenya products in East Africa worth $720.14m in the financial year 2018/19.

Mr Emmanuel Mutahunga, the Trade ministry commissioner for external trade, told Daily Monitor at the weekend that they had already agreed in the Joint Financial Commission (JFC) that in the event a member country blocks Uganda’s exports, government will retaliate.
The warning comes amid a deadlock on some of Uganda’s exports to EAC member states, key among them sugar and milk.

“We have already agreed in the JFC to reciprocate…treat them [member states] the way they treat you,” Mr Mutahunga said, adding that Uganda will implement decisions of the JFC if other member states refuse to remove blockades on its goods.

“Saying Ugandan milk is not of standard… those are just barriers. Kenya is trying to put up [a cover up] but I understand these goods were authorised by the Kenyan Bureau of Standards and once a product has been cleared it is good for use. Kenya just wants to rule the whole of East Africa where it exports to other countries but does not allow imports into their country,” Mr Everisto Kayondo, chairman of Kampala Capital City Traders Association, said.

Early last week Kenya’s Trade Principal Secretary Chris Kiptoo also said it would retaliate if Uganda did not abolish a 13 per cent excise duty on the Kenyan pharmaceutical, beer and spirits exports.
He said it was discriminative and against the spirit of the East African Community Protocol.

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