EAC bloc has come a long way since birth of Customs Union

The other important factor in the Custom Union is the CET. The CET regime has very low rates on raw materials and capital goods, moderate rates on intermediate goods and highest rates on consumer goods. Specifically, the rates are zero per cent for raw materials and capital goods; 10 per cent for intermediate goods; and 25 per cent for consumer goods.

Partner states also identified a set of sensitive products where potentials for domestic production and cross-border trade existed and whose importation from outside the community could affect domestic production. Such products are accorded additional protection over and above the maximum 25 per cent duty.

Partner states agreed on the classification of sensitive products and the applicable rates of duty in 2005 when the Custom Union Protocol commenced. Such sensitive items would attract rates of over 25 per cent and, in some cases, a mixture of specific duty and ad valorem rates. Partner states also agreed to review the maximum rate of the CET after a period of five years and the process is currently ongoing.

Sensitive products

On the issue of sensitive products, the EAC trade regime has designated 58 goods as sensitive products and set advalorem tariffs ranging from 35 per cent to 100 per cent. The top rate of 100 per cent applies to most varieties of sugar; high rates also apply to rice (75 per cent); wheat (60 per cent), milk and various milk products (60 per cent) and maize (50 per cent).

This measure was intended to protect local production on the assumption that the region had adequate capacity to meet the demand for the selected commodities.

The tariff protection rates were agreed upon and set at the regional level. However, during the pre-budget consultations of Ministers of Finance, undertake some reviews in response to the economic, social and trade requirements. A notable example is the review of CET rate of cement to 25 per cent in 2008 for a period of two years to address the shortages that were being faced in the region.

Similarly, the import duty rate on rice from Pakistan has been lowered to 35 per cent instead of 75 per cent for a period of two years and a further two years. But with the aggressive programme of expanding land areas which are under irrigation as recently announced by His Excellency President Mwai Kibaki, the country and indeed the entire EAC region should target to be self reliant in rice production.

Another important aspect of the Custom Union is Duty Remission. The Customs Management Act provides guidance on handling of remissions and exemptions of import duty. Under sections 138, 139 and 140, the Council may grant remission of duty on goods imported for the manufacture of goods in partner states and prescribe regulations on the general administration of the duty remission.

The special concessions are granted on special grounds including the need to enable infant industries attain meaningful levels of competitiveness or for attainment of national policy objectives. For instance, the exemptions on paper and paper products are largely driven by governments’ universal obligation for access and affordability of education services. Some notable remissions include the approval of Ugandan list of raw materials and industrial inputs; approval of Tanzanian manufacturers and quantity of completely knocked down (CKD) motorcycles and bicycles to be imported; approval of Kenyan manufacturers and quantities of paper and CKDs for assembly of motor-cycles.

Administrative issues

With proper handling of the administrative issues surrounding the Customs Union, addressing NTBs in an efficient manner and proper application of the CET and the exemption and duty remission schemes, the transition to a fully fledged customs union is bound to continue to bear more fruit to the Governments, businessmen and all citizens of the partner states.

Equally important is the issue of ushering necessary reforms to support the Common Market when it becomes effective on July 1, 2010. And some of the reforms which are required are legislative, administrative, as well as are capacity building when it some to service industry in the region.

Nalo is the permanent secretary, East African Community ministry.