Opinion & Analysis
How customs union can boost trade
From left: President Amani Abeid Karume of Zanzibar, President Kibaki, Rwanda President Paul Kagame and Deputy Prime Minister of Uganda, Eriya Kategaya, during the East African Community Investment Conference in Nairobi. A fully fledged customs union is bound to continue to bear more fruits. Photo/FILE
Limitations in access and efficiency in issuance of certificates tend to encourage cases of fraud, where importers present fake or fraudulent certificates of origin.
At the same time, there also seems to be negligence on the part of some authorities who do not necessarily abide by the manual for application of the Rules.
This is a challenge. Value-added criterion also poses a challenge in the implementation of the EAC Rules of Origin.
Its computation which is very complex renders it difficult to apply not only to the exporters/manufacturers but also the implementing authorities.
Despite these challenges, a verification mission is usually mounted and carried out to ascertain goods that meet the origin criteria.
Some of the verification missions in process are those of motor vehicles, products manufactured by Nestle Kenya, lubricants manufactured by Kenol/Kobil, beauty products manufactured by Inter-consumer Products and televisions manufactured by AUCMA Digital Technology Africa Ltd.
When they are conducted, the outcome must be approved by the relevant Sectoral Council (in this Finance, Trade, and Investment) and the full Council of Ministers.
It is, therefore, important to appreciate the role played by Rules of Origin in promoting the industrial development of the EAC region, employment creation and the steps in the achievement of freer flow of goods.
Common External Tariff, popularly known as CET, is one of crucial elements of a Custom Union.
The Community’s CET regime has very low rates on raw materials and capital goods, moderate rates on intermediate goods and highest rates on consumer goods.
Local production
The EAC trade regime has designated 58 goods as sensitive products and set advalorem tariffs with the top rate of 100 per cent applying to most varieties of sugar, 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.
Since the launch of the customs union in 2005, CET has been applied uniformly.
With proper handling of the administrative issues of the Customs Union, addressing NTBs well and proper application of the EAC CET and the exemption and duty remission schemes, the transition to the fully fledged customs union is bound to continue to bear more fruit to the member States.
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