Just a week after the new East African Community common external tariff (CET) band came into force, businesses are already feeling the pinch and crying foul over the “unintended consequences” of the regime.
Kenya and Uganda have filed complaints to the East African Business Council (EABC), the regional lobby, over the law that raised import taxes on goods from non-EAC countries to 35 percent. They say that some basic commodities outside the band have also been affected.
The bloc’s Trade and Finance ministers in May adopted 35 percent as the maximum rate for products classified under the 4th Band of the EAC common external tariff.
The CET, one of the key instruments of the Customs Union, is meant to foster regional integration through uniform treatment of goods imported from third parties. It also seeks to protect local manufacturers against competition from similar goods imported from outside the region.
According to experts, a 35 percent duty on imported finished products has the potential of growing intra-EAC trade by $18.9 million. In addition, the region’s industrial production will increase by 0.04 percent to $12.1 million and tax revenues by 5.5 percent.
It also has the potential to create an additional 6,781 jobs.
The new band took effect on July 1 but consumers seem to not have been prepared for the price increment. The band features dairy and meat products, cotton and textiles, iron and steel, edible oils, soaps and beverages and spirits imported from outside the EAC.
Other commodities covered are furniture, leather products, fresh cut flowers, fruits and nuts, sugar and confectionery, coffee, tea and spices, textiles and garments, headgear, ceramic products and paints.
But Kenya and Uganda now say the new tax has pushed up the cost of importation, spilling over onto basic commodities.
The EABC has, in the past week, received letters from organisations raising concerns over the implementation of the common external tariff.
“Kenya is raising concerns over wood products while Uganda is concerned about industrial sugar. We are going to address the complaints after deliberations,” said John Bosco Kalisa, EABC’s chief executive.
Kenya has been importing wood from EAC partner states, including the Democratic Republic of Congo, after the government banned logging. Now, with the new CET band, imported wood is fetching the same price as finished furniture already in the market.
Kenyan furniture manufacturer PG Bison Kenya Ltd says the increase of import duty on raw materials used to produce furniture products has forced it to increase prices of products.
“Due to these policy decisions, and along with the recent increases in fuel-related logistics and a rapidly depreciating local currency, our prices will change effective Friday, July 8, 2022. A revised price list will be issued and distributed accordingly,” the company told its customers in a notice.
