To support local production through import substitution, East African Community member states have resolved to retain taxes on goods originating from the Common Market for Eastern and Southern Africa (Comesa) as well as the Southern African Development Community (SADC).
The two regional blocs—Comesa and SADC, comprise of about 37 countries with the EAC member states belonging to at least one of the blocs, save for Tanzania which has dual membership.
Mid last month (On September 15th 2020, the Council of EAC ministers issued a legal notice in the East African Community gazette, announcing stay of application of Common External Tariffs for goods originating from Comesa and SADC up to June 2021.
According to Mr Ivan Sebatindira, a tax expert, for Uganda, Kenya and Rwanda, this relates to goods imported from COMESA whereas for Tanzania, it will apply to imports from SADC.
Publication in the gazette follows months of lack of direction on which tariffs should be applied to goods imported under the tripartite Free Trade Agreements with Comesa and SADC in the East African Community Customs Management Act (ECCMA).
Section 112 (2) of EACCMA provided that preferential rates would be applied up 31 December, 2008 but the East African Legislative Assembly had amended this to stay up to December 31st 2019. This was to allow conclusion of negotiations and coming into force of Comesa, EAC and SADC tripartite FreeTrade Area.
EABC weighs in
The East African Business Council (EABC) brief noted that the import duty measures in the EAC Gazette which was issued on June 30th 2020 falls under three main categories which are Duty Remission for Industrial Inputs, Stays of Application and Amendments of the East African Community Customs Management Act, 2004.
The duty remission measures adopted by the EAC partner states, according to the EABC brief, will ensure that local manufacturers can import raw materials and inputs which are not available in the region at a lower rate. EAC partner states adopted Import Duty measures to boost local production amidst the Covid-19 pandemic.
“The decisions by the EAC partner states to stay application of the EAC CET rate and apply a higher duty rate are aiming at stimulating local production by safeguarding manufacturing of that particular product against similar cheap imports,” reads part of the EABC brief.
Some of the products include textile (garments) and textile products; leather (shoes) and leather products; edible oil; tiles, processed tea; coffee and cocoa; meat and meat products; and steel articles, iron and metal products.
The existence of the Stays of Application and Country’s Specific Duty Remission in the current EAC Gazette aims at cushioning vulnerable sectors/products, protecting local industries as well as enhance local manufacturing and production for those products that the EAC region has the capacity to produce.
Since most EAC partner states opted for stay of application of the EAC CET and applied higher duty rates ranging from 35 per cent to 60 per cent, it gives a positive indication that EAC partner states may soon conclude the comprehensive review of EAC CET as countries have shown some commonalities on the maximum tariff or the level of protection they require.