August 10, 2021 East African Community implements tariff changes Executive summary The East African Community (EAC) Gazette Notice No. 14 of 2021 (the Gazette), released by the EAC Secretariat on 30 June 2021, highlights changes to the East African Community Customs Management Act, 2004 (EACCMA) and the East African Community Common External Tariff (EAC CET). The Council of Ministers (The Council) has, through the Gazette, implemented several changes which affect both individual EAC Partner States and the EAC region with effect from 1 July 2021. In exercise of the powers conferred upon the Council by Articles 12 (3) and 39(c) of the Protocol on the Establishment of the East African Community Customs Union, the Council has approved the following measures on custom duty rates on the items provided under The Harmonized Commodity Description and Coding System in Annex 1 to the Protocol. This Alert highlights the implications of some of the international trade-related changes introduced by the Gazette across Kenya, Uganda, Tanzania, Rwanda and Burundi affecting importers. Detailed discussion EAC policy changes EAC general stay of application of the EAC CET/revocations Motorcycle spares The Council of Ministers has stayed the application of the conditions contained in Legal Notice No. EAC/39/2013 of 30 June 2013 on remission of duty for motorcycle assembly for one year. The 2013 Legal Notice provided for duty remission for assemblers of CKD kits who procure/manufacture the following specified parts within the EAC: main frame, suspension, or a combination of seat and seat frame, mudguard, wheel rim, break gear and exhaust pipe. Assemblers of motorcycles will therefore be able to apply for duty remission and import, duty free, on the specified parts for one year. Textile, garments and footwear manufacture equipment The Council stayed application of the EAC CET rate of 0%, 10% and 25% for Uganda, Tanzania, Burundi and Rwanda and has applied a specified duty as per Legal Notice No. EAC/136/2021 for equipment used in the manufacture of textiles and garments and Legal Notice No. EAC/137/2021 for equipment used in the manufacture of footwear. COMESA & SADC preferential rates of duty with a certificate of origin The Council granted the Republics of Burundi, Rwanda, Uganda and Kenya a stay of application of EAC CET on originating goods imported from COMESA from 1 July 2021 through 30 June 2022; and granted the United Republic of Tanzania a stay of application of the EAC CET on originating goods imported from SADC from 1 July 2021 through 30 June 2022. Importers of goods originating from COMESA/SADC with a valid certificate of origin will benefit from preferential rates for another one year. Duty remission The EAC duty remission scheme allows waiver of duty or refrainment from exacting of duty on gazetted inputs imported by gazetted users. The Gazette stipulates items approved by the Council to be imported at a lower rate under remission in accordance with Section 140 of EACCMA and the EAC Duty Remission Regulations, 2008. The scheme is applicable to those importing raw materials for manufacture of finished products for export outside the EAC or imports of raw materials considered as essential goods for manufacture of finished products either for export or domestic consumption. Where duty remission has been granted for manufactured goods for export and they end up being sold within EAC, full duties/CET will apply regardless of possession of a valid EAC certificate of origin. The Council has granted duty remission for various raw materials and industrial inputs for the manufacture of finished goods in accordance with the duty remission scheme and any conditions stipulated thereto when imported by manufacturers from the Republic of Kenya for one year (other countries have been granted remission as well):
Country specific stays of application of the CET Kenya The Council has through Legal Notice No. EAC/118/2021 approved various stays of application of CET duty rates on select items in Kenya, effective for the one-year period from 1 July 2021. These measures, implemented to address specific economic needs, have a two-fold effect, either an increase or a decrease in duty rates. See attachment for table of duty changes. Uganda The Council has approved various stays of application of CET duty rates on select items in Uganda through Legal Notice No.EAC/118/2021, for the one-year period from 1 July 2021. These measures, implemented to address specific economic needs, have a two-fold effect, either an increase or a decrease in duty rates. See attachment for table of duty changes. Tanzania The Council has approved various stays of application of CET duty rates on select items in Tanzania, effective for the one-year period from 1 July 2021. These measures, implemented to address specific economic needs, have a two-fold effect; either an increase or a decrease in duty rates. See attachment for table of duty changes. Rwanda The Council has approved various stays of application of CET duty rates on select items in Rwanda, effective for the one-year period from 1 July 2021. These measures, implemented to address specific economic needs, have a two-fold effect; either an increase or a decrease in duty rates. See attachment for table of duty changes. Burundi The Council has approved various stays of application of CET duty rates on select items in Burundi, effective for the one-year period from 1 July 2021. All measures granted to Burundi were decreases in applicable duty rates. See attachment for table of duty changes. Implementation Each EAC Member State, just like any other economy, is challenged every year to expand the tax base. Whereas higher tax rates are introduced to protect local industries and other new taxes are introduced to further expand the base, it is likely that the need to expand the tax base will continue for the foreseeable future until countries become less reliant on borrowed funds to finance their budgets. The new rates became effective on 1 July 2021. ______________________________________ Reference attachment
______________________________________ For additional information with respect to this Alert, please contact the following: Ernst & Young (Kenya), Nairobi
Ernst & Young Société d'Avocats, Pan African Tax – Transfer Pricing Desk, Paris
Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London
Ernst & Young LLP (United States), Pan African Tax Desk, New York
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