By ADAM IHUCHA-- Better days for the
East African traders are in the offing as the revised rules of origin are set
to be rolled-out anytime soon.
The rules of origin
determine the eligibility of products that qualify for EAC’s zero import duty
to goods originating in the EAC Partner States in a bid to spur intra-regional
trade.
Experts say the
application of rules of origin normally reduce the prices of the region
products as they enjoy free import duty and thus becomes affordable for the local
populace.
The East African
Business Council (EABC) says that the EAC secretariat is finalizing plans to
unveil the revised rules of origin with an eye to stimulate cross border
business.
“We are looking
forward for the rollout of the new set of rules of origin soon as the EAC
executive arm has completed their revision” EABC Trade economist, Adrian Njau
told their members.
Sources from EAC say
that the procedures are likely to be enforced immediately after the Summit of
heads of the states in November.
The EAC’s Customs
Union protocol provides for the rules of origin, but, since its inception in
2005, business community has been complaining that they are difficult to use,
involve protract process to acquire and some partner states do not recognize,
compelling them to pay all taxes even for the goods eligible for zero import
duty.
For instance, Uganda
and Tanzania have since been refused to recognize the EAC rules of origin
granted to several Kenyan tobacco products, testing their commitment into trade
liberalization.
Both Kampala and Dar
demand Kenya’s tobacco products to contain 70 per cent and 75 per cent of local
content respectively in order to enjoy free import duty.
Kenya’s British
American Tobacco says that the 75 per cent local content required by Tanzania
Revenue Authority (TRA) does not recognize the EAC rules of origin as
articulated into customs union protocol.
It is understood that
Uganda Revenue Authority (URA) had also directed that tobacco products imported
from Kenya must contain 70 per cent of local tobacco content.
However, under the
EAC rules of origin, only goods produced wholly from local inputs or made from
imported raw materials — with 35 per cent of the ex-factory value being added
from within the region — are allowed to cross national borders without being
taxed.
This, among others,
blamed for the dismal performance of intra-EAC trade, forcing the EAC to review
the procedures to provide maximum benefit to the economies of the partner
States in the face of over changing economic environment.
Idea is to ensure
that there is uniformity among partner states in the application of rules of
origin and that to the extent possible, the process becomes transparent,
accountable, fair, predictable and consistent with the provisions of the
Customs Union Protocol.
In addition, the EAC
also saw the need to have sets of rules of origin, which are compatible with
other preferential trade regimes such as EAC –EU Economic Partnership Agreement
(EAC-EU EPA), and Tripartite Free Trade Area (FTA).
“This is a very good
news that EAC has completed revision of its rules of origin and that plans are
afoot to release them. We hope they will be simple, trader friendly, and more
importantly accessible and are uniformly applicable across the five partner
states,” says Kenneth Barungi from Madhvani Group in Uganda.
Changes
In the revised sets
of the rules of origin agreed on by the EAC partner states, the value threshold
has been lowered from 35 per cent to 30 per cent local imports and will be
calculated by using the Ex-Works price instead of the Ex-factory.
Ex-works are charges
only up to the seller’s factory or premises. All charges from there on, such
delivery, distribution and commissions, are to be borne by the buyer, whereas
ex-factory means the price at the factory, and does not include any other
charges such as delivery or subsequent taxes.
Tariff heading (CTH)
has been made more flexible to some goods by
allowing change in tariff
sub-headings, the draft shows.
Other changes include
an introduction of specific manufacturing process as qualifying criterion to
some goods such as manufacturing from completely knocked down (CKD) kits for
motor vehicles assembled in the region.
Likely beneficiaries
of the new rules of origin include manufacturers of edible oils, beauty
products, milk products, television sets, car assembly and lubricants makers.
The sets of rules of
origin also revised the definition of a fishing vessel of partner states by
lowering the threshold of ownership from 75 percent to 20 percent.
In the list there’s
an introduction of a rule that provides for the treatment of goods sold in sets
and establishment of central database of registered exporters at the
Secretariat.
There’s also a
provision for other forms of cumulation other than full accumulation such as
agglomerated
with countries or regional economic communities that EAC has
concluded a free trade
with.
The
new rules also introduce a rule on approved exporter were the competent
authorities of the
exporting Partner States may authorize any who makes
frequent shipments of
products.
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