No deal yet on cig­a­rette sales, ce­ment, tex­tiles, and lu­bri­cants

The East African - - BUSINESS - By JAMES ANYANZWA The Eastafrican

Kenya and Tan­za­nia fail to strike deal on tobacco ex­ports.

Ameet­ing held in Dar es Salaam to dis­cuss strained trade re­la­tions be­tween Kenya and Tan­za­nia failed to re­solve the dis­pute over tobacco ex­ports.

Tan­za­nia, in­sists that cig­a­rettes man­u­fac­tured in Kenya must pay taxes be­fore ac­cess­ing its mar­ket with­out pay­ing taxes, con­trary to the East African Com­mu­nity Cus­toms Union Pro­to­col, main­tained that it al­ready has a con­tract with its tobacco stake­hold­ers en­tered into be­fore the Cus­toms Union.

Mem­bers of the Tan­za­nian del­e­ga­tion said they would only ad­dress the is­sue after con­sult­ing tobacco sec­tor stake­hold­ers in their coun­try.

The dis­pute con­tin­ues de­spite a pres­i­den­tial di­rec­tive in July that the two coun­tries re­move bar­ri­ers to trade.

The Pro­to­col pro­vides for the elim­i­na­tion of du­ties and other charges on all im­ports within the re­gion, elim­i­na­tion of non-tar­iff bar­ri­ers to trade among partner states and es­tab­lish­ment of a com­mon ex­ter­nal tar­iff (CET) on all goods im­ported from out­side the EAC bloc.

But Dar es Salaam ar­gues that the ex­ist­ing tax­a­tion mea­sures do not dis­crim­i­nate against cig­a­rettes im­ported from Kenya. “There are ex­cise du­ties that favour cig­a­rettes pro­duced in Tan­za­nia. There are sim­i­lar du­ties in Kenya that favour lo­cally pro­duced beer. How­ever, there are le­gal im­pli­ca­tions and con­trac­tual obli­ga­tions which Tan­za­nia is scru­ti­n­is­ing with a view to com­ing up with an am­i­ca­ble so­lu­tion,” the Tan­za­nian of­fi­cials said.

Tan­za­nia com­plained that Kenya has placed tough ex­cise duty re­mis­sion con­di­tions that hin­der Tan­za­nia Brew­eries Ltd’s beer ex­ports.

“Kenya does not agree with Tan­za­nia’s po­si­tion re­gard­ing the con­trac­tual obli­ga­tions, given that they op­er­ate un­der the EAC law,” the Kenyan del­e­ga­tion ar­gued.

The meet­ing held from Septem­ber 6 to 9, brought to­gether Per­ma­nent and Prin­ci­pal Sec­re­taries of Trade, man­u­fac­tur­ers, millers, wheat farm­ers’ as­so­ci­a­tions, trade of­fi­cers and high com­mis­sion­ers from both coun­tries.

Rules of Ori­gin

Kenya has been protest­ing against Tan­za­nia’s de­ci­sion to im­pose a higher lo­cal con­tent re­quire­ment of 75 per cent of the in­puts into ex­port tobacco, con­trary to the EAC agree­ment.

The for­mer EAC Rules of Ori­gin re­quired only 35 per cent of lo­cal in­puts in or­der for goods to qual­ify as orig­i­nat­ing from a mem­ber state and thus en­joy duty-free sta­tus. How­ever, re­vised rules have low­ered the thresh­old to 30 per cent

Bri­tish Amer­i­can Tobacco com­plained that Tan­za­nia Rev­enue Author­ity im­poses ex­cise duty on its ex­ports which do not meet the 75 per cent lo­cal con­tent re­quire­ment.

Dur­ing the meet­ing Kenya also com­plained about other prod­ucts that have been de­nied pref­er­en­tial mar­ket ac­cess to Tan­za­nia be­cause of is­sues re­lated to the rules of ori­gin.

Th­ese in­clude ce­ment, ed­i­ble oils, tex­tile, lu­bri­cants and prod­ucts man­u­fac­tured by in­dus­tries out­side the Ex­port Pro­cess­ing Zones (EPZ).

Tan­za­nia ar­gued that as per the Le­gal No­tice No EAC/ 84/2017, Kenya was granted a stay of ap­pli­ca­tion of the CET rate on gar­ments and leather footwear man­u­fac­tured in the EPZ on the 20 per cent of the an­nual pro­duc­tion al­lowed in the pro­to­col to be sold within the do­mes­tic Kenyan mar­ket for one year, duty-free.

As a re­sult the sale of th­ese prod­ucts in any of the EAC states is sub­ject to du­ties, levies, and other charges pro­vided in the CET.

More­over, 96 per cent of tex­tiles pro­duced in Kenya is sold un­der the AGOA and thus mon­i­tor­ing such ex­ports is dif­fi­cult.” Tan­za­nian del­e­ga­tion’s con­cern

Pic­ture: File

Cig­a­rette man­u­fac­turer Bri­tish Amer­i­can Tobacco’s plant at In­dus­trial Area, Nairobi.

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