Business

New EAC tariffs to spike cost of goods – experts

Wednesday, July 6th, 2022 00:00 | By
President Uhuru Kenyatta (second left) with his EAC counterparts at State House, Nairobi, yesterday, during the third EAC Heads of State Conclave on Inter-Congolese Dialogue of the Nairobi Process. PSCU

The adoption of a new East African Community Common External Tariff (CET) will push up the cost of certain commodities, experts say. 

EAC ministers in charge of trade and finance have agreed to apply the new CET with the 4th band of 35 per cent this month.

The move, according to the ministers,   is meant to spur intra-regional trade by encouraging local manufacturing, value addition while safeguarding consumer welfare on products. 

New band of 35 per cent

However, according to Clifford Otieno an independent tax expert, the latest move may spike the price of commodities in the regional market.

“It is likely to affect commodity prices, especially of those items affected by the new band of 35 per cent,” noted Otieno.

Tariff lines in the 4th band include dairy and meat products, cereals, cotton and textiles, iron and steel, edible oils, beverages and spirits, furniture, leather products, fresh-cut flowers, fruits and nuts, sugar and confectionery, coffee, tea and spices, textiles and garments, head gears, ceramic products and paints.

Cost of imported goods to increase

Head of advisory at Grant Thornton, Parag Shah also pointed out that while the move is likely to benefit some local businesses, it will increase prices of other goods.

“Generally the cost of imported finished goods will go up. However, where locally produced alternatives exist, then we expect to see such industries grow since their products will be relatively cheaper,” explained Shah.

On its part, Kenya Association of Manufactures (KAM) had said that it does not expect any increase in prices due to the adoption of CET.

In a statement on Monday, EAC agreed on flexibility in the implementation of the revised CET, particularly on products currently affected by the current global economic realities.

“The Community shall have a four band common external tariff with a minimum rate of 0 per cent, rates of 10 per cent, 25 per cent and a maximum rate of 35 per cent in respect of all products imported into the Community,” EAC said in the statement yesterday.

The maximum tariff band at 35 per cent was agreed on as the most appropriate rate, with generated added employment opportunities from the switch of local production, expected to cure any short time losses experienced.

EAC argues that the CET is one of the key instruments under the Customs Union pillar which justifies regional integration through uniform treatment of goods imported from third parties.

Lilian Nyawanda, Commissioner for Customs and Border Control, had already issued a circular to importers on the implementation of the CET.

“Kenya Revenue Authority would like to draw the attention of taxpayers and the general public to recent changes in the Harmonised Commodity Description and Coding System (HS) and the East African Community Common External Tariff (EAC CET)” 

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