Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

August 9, 2021
2021-5849

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):

Tariff and description

Import duty

Current rate

Rate under remission

Inputs for the assembly / manufacture of mobile phones

       Various

         0%

Aerosol cans of tariff 7310.29.10

10%

0%

Hard wheat of tariff 1001.99.10 & Other wheat of 1001.99.90

35%

10%

Other-of circular cross-section measuring more than 14 mm in diameter of tariff 7213.99.00

25% or

$200/MT

0%

Specific inputs for the manufacture of roofing tiles coated with acrylic paint and the weather side coated with natural sand granules.

Various

0%

Inputs and Raw Materials for use in the

manufacture of Energy Saving Stoves

Various

0%

Seats – Parts – Recliner mechanism under 9401.90.00

25%

0%

Various woven fabrics

25%

10%

Specific metal products

Various

0%

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

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct