The EAC Customs Union Protocol, which came into force in 2005, provides for the rules of origin, but since its inception, the business community has been complaining about its applicability.
“It is our expectation that the new rules of origin will spur intra-EAC trade as they are more flexible for the private sector to comply with compared with the former ones,” said Adrian Njau, a trade economist at the East African Business Council.
Currently, some partner states do not recognise some goods, forcing the business community to pay all taxes including those eligible for zero import duty, just to save time.
Uganda and Tanzania, for example, have not been recognising the EAC rules of origin granted to several Kenyan tobacco products. Kampala and Dar demanded that tobacco products from Kenya comprise 70 per cent and 75 per cent of local content respectively, for them to enjoy the free import duty.
But British American Tobacco says the 75 per cent local content required by Tanzania Revenue Authority (TRA) does not recognise the EAC RoOs as stipulated in the protocol.
Under the current RoOs, only goods wholly produced using local inputs or those made using imported raw materials but have 35 per cent of the ex-factory value added within the region, can cross national borders without being taxed.
This, among other setbacks, has been blamed for the dismal performance of intra-EA trade.
For this reason, last year the EAC Council of Ministers directed technocrats to review the RoOs by November this year so that partner states would gain maximum benefits from trading with each other.
Now, Dr Abdallah Saadalla, Tanzania’s Deputy Minister for the EA Co-operation, says the application for a revised set of the RoOs will take effect in the new financial year.
The RoOs determine the eligibility of products that qualify for zero import duty on goods originating in the EAC partner states.
In the revised set of RoOs, the value threshold has been lowered from 35 per cent to 30 per cent on local imports, and will be calculated by using the ex-works price instead of the ex-factory.
Ex-works price includes distribution costs like transport and logistics to the shop yard while the ex-factory price looks at the value added on the factory floor only.
Experts say the RoOs application will reduce the prices of products from the region due to the free import duty, making them more affordable for the local populace.
“The new RoOs are more trade facilitative with an eye on spurring cross-border value addition of manufactured products,” said Dr Saadalla.
He said the idea is to ensure there is uniformity in the application of the RoOs among partner states and that to the extent possible, the process becomes transparent, fair, predictable and consistent with the provisions of the Customs Union Protocol.
In addition, the EAC also sees the need for RoOs which are compatible with other preferential trade regimes such as the EAC-EU Economic Partnership Agreement (EAC-EU EPA), and the Tripartite Free Trade Area (FTA).
Likely beneficiaries of the new RoOs include manufacturers of edible oils, beauty products, milk products, television sets, car assembly and lubricant makers.
The sets of RoOs also revise the definition of a fishing vessel of partner states by lowering the threshold of ownership from 75 per cent to 20 per cent.
Other changes to the new RoOs include one that provides for the treatment of goods sold in sets and the establishment of a central database of registered exporters at the EAC Secretariat.
The RoOs similarly saw introduction of a rule on validity of proof of origin which shall be valid for six months from the date of issue in the exporting country.
The East African
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