TRADE BARRIER

Comesa free trade spirit threatened as duty deal in abeyance

Kenya moves to tax goods

In Summary

•Member states are said to be slow in adopting the COMESA-EAC-SADC Tripartite Free Trade Area (TFTA) agreement, exposing cross-border trade to high tariffs.

•Countries have started to levy import duty on goods from the markets, against the spirit of preferential treatment of goods for intra-regional trade and development.

Trucks wait to be cleared at the Kenya-Tanzania border in Namanga.
Trucks wait to be cleared at the Kenya-Tanzania border in Namanga.
Image: FILE

Kenya risks falling out with other Common Market for Eastern and Southern Africa (COMESA) member states following plans to impose taxes on imports from these regions.

This comes amid lack of a clear position on the COMESA-EAC-SADC Tripartite Free Trade Area (TFTA) agreement, exposing cross-border trade to high tariffs.

Member state in the three trading blocs- East African Community, the Common Market for Eastern and Southern Africa and the Southern African Development Community (SADC) are yet to fully adopt TFTA, the Star has established.

 

Section 112 of the EAC Customs Management Act , 2004 provides for preferential tariff treatment for goods from COMESA and SADC.

However, preferential treatment was accorded to such goods until December 31, 2019, to allow for the conclusion of negotiations under the COMESA-EAC-SADC Tripartite Free Trade Area.

Currently, 22 out of 26 member states have signed the TFTA agreement which includes all the EAC Partner States except South Sudan.

While it requires ratification by 14 member states to come into force, only about eight partner states have ratified including Kenya, Egypt, Uganda, South Africa, Rwanda, Burundi, Botswana and Namibia.

A number of countries, including Kenya, have moved to impose duty on imports from the COMESA and SADC bloc, for lack of a proper guideline on preferential treatment for goods.

“We have been instructed by the Commissioner Customs and Border Control to reject all Comesa entries and notify the clearing agent or importers to pay the requisite taxes,” a KRA internal communication seen by the Star reads in part.

This is against the intentions of the TFTA which seeks to ensure no tariffs are levied on COMESA originating products, whilst each member state applies its own regime of tariffs to goods imported from outside the region.

 

Neither Kenya's EAC and regional development CS Adan Mohammed nor his Trade counterpart CS Betty Maina could clarify Kenya's position on the trade pact.

"Please check with trade ministry, "Mohammed's office told the Star on phone.

CS Maina could not be reached, with calls and text messages going unanswered.

The EAC Secretariat had last year sought an extension of terms to allow preferential tariff treatment for goods from COMESA and SADC, until 2023.

This would allow time for the TFTA to be fully adopted, according to EAC director general-customs and trade– Kenneth Bagamuhunda.

“Currently, there is no legal basis for the partner states to accord preferential tariff treatment to goods from COMESA and SADC, since the extension granted by the assembly expired on December 31, 2019,” Bagamugunda says in a communiqué.

During a meeting on May 31, last year, the Sectoral Council on Trade, Industry, Finance and Investment (SCTIFI)considered the proposal to amend section 112(2) of the EAC Customs Management Act to remove the restriction on goods imported from COMESA and SADC.

Since the COMESA-EAC-SADC Tripartite Free Trade Area Agreement is yet to be fully ratified by the required number of partner states, it gives a leeway to repeal subsection two (2) of Section 112 of the EAC Customs Management Act.

Kenya is a member of the EAC and COMESA trade agreements where membership entails extending preferential tariffs to goods imported from member states, subject to agreed conditions (the rules of origin).

Goods originating in Kenya also enter into the other member countries at preferential rates.

This provides an incentive to import from or export to other countries in the regional trading bloc.

Goods imported from outside the EAC are subject to a Common External Tariff (CET) which provides a three-band tariff of 0 per cent, 10 per cent and 25 per cent .

The rates are for raw materials and capital goods, semi-processed and intermediate goods, and finished goods respectively.

COMESA takes up more than 73 per cent of Kenya’s total exports to Africa while the EAC takes up about 54 per cent.