A row between the US and Kenya over maize imports has rekindled the challenges of a binding standard tariff that guides trade within the East African Community (EAC) bloc.
On Monday, US Trade Representative Jamieson Greer cited Kenya’s maize import market conditions among unfair trade practices American exporters face, refocusing the spotlight on the EAC Common External Tariff (CET).
“Kenya imposes a 50 percent tariff on imports of US corn, and imposes burdensome regulatory requirements, effectively blocking US exports of corn. Kenya’s market for feed corn is currently estimated at $50 million (Sh6.47 billion), with a potential to grow by 30 percent by 2027” he said in a post on the X social media platform.
“Securing market access for American farmers will ensure they can compete on a level playing field.”
Kenya retains an ad-valorem import duty of 50 percent on maize from outside the EAC, in line with the bloc’s CET, while maize imported from countries within the eight-member bloc has duty-free access.
The CET tariff on maize imports is, however, temporarily waived in instances where Kenya sought to stabilise domestic prices of the commodity. For example, the Agriculture ministry is set to grant an exemption on the CET as it opens imports of 5.5 million bags of yellow maize to ease pressure on the white variant of the commodity whose prices have jumped by as much as 26.47 percent since December, hitting households reliant on the staple food.
The US, however, maintains that the CET is an encumbrance of its maize trade with Kenya, adding to the growing list of concerns even among local manufacturers. For example, the industrialists cite a 35 percent tariff on Kraft paper and the introduction of an export and investment promotion levy of 10 percent, imposed on Kenyan imports that were not based on the EAC common external tariff raised the cost of basic commodities in Kenya.
The Kenya Association of Manufacturers (KAM) said the 35 percent rate on unbleached kraft paper increased the price of paper used in packaging food items and creative projects like arts, negatively impacting the cost of doing business.
The rise in the cost of business was because Kenya failed to adhere to the CET rates while imposing taxes on specific imported items.
This not only distorted trade in the region but placed local manufacturers at a disadvantage when excise duty and other taxes were applied.
The CET structure, introduced in 2022, features a four-band tariff that ensures that raw materials have a CET rate of 0 percent, a rate of 10 percent for intermediate inputs not abundantly found in East Africa, a CET rate of 25 percent for intermediate inputs found abundantly found in East Africa, and a maximum of 35 percent for finished goods.
Custom duties
The EAC CET imposes taxes on imports outside the EAC partner states of Kenya, Uganda, Tanzania, Rwanda, Burundi, and South Sudan.
“The EAC has working CET principles that guide the imposition of customs duties on all imports. Kenya must observe these principles. However, there are instances when this is not adhered to,” Tobias Alando, chief executive at KAM.
“For example, through the EAC Gazette Notice dated June 30, 2024, Kenya imposed an import duty rate of 35 percent on bleached sack kraft of tariff 4804.29.00, an increase from 10 per cent. This goes against the CET principles governing the EAC CET.”
After a verification exercise by the Ministry of Trade, it was confirmed that the paper is imported outside Africa.
“A verification study carried out in 2024 under the Ministry of Trade confirmed that the paper used in packaging unga and other products is not locally produced and is not also available in the African continent. This type of paper is produced in Nordic countries. The correct CET rate should therefore be 10 percent,” said Alando.
“Further, the tax laws amendment Act 2024 introduced export and investment promotion levy (EIPL) of 10 percent and thus increased effective tax on bleached sack kraft paper to 49.5 percent undermining Kenya’s capacity to compete in the region,” said the KAM boss.
The CET was set to protect local industries. However, higher tariffs on imported goods intended to protect local industries could lead to higher prices and reduced consumer choice while potentially making local industries less competitive in the global market.
Tariffs have also led to shifts in consumption patterns, as consumers choose to consume locally produced goods that are cheaper due to lower tariffs, even if they are of lower quality.
For instance, a 35 percent CET on imported edible oils has led to an increase in prices in the EAC region, making foreign edible oil more expensive and adding to the cost borne by domestic consumers.
The move also caught the attention of EABC chairperson John Lual Akol Akol, who urged governments to ensure uniform application of the EAC Common External Tariff, harmonise taxes, and remove discriminatory taxes across the eight partner states.
“There is a need for partner states to eliminate stays of application on the EAC-CET and refrain from country-specific duty remissions for inputs that are sufficiently available in the region,” said Mr Akol.
According to the EABC chairperson, the lack of uniform application of the CET could lead to different import duties across countries, further distorting the market.
“The discriminatory taxes and charges of equivalent effect imposed on EAC-originating goods, contravene the EAC customs union and the treaty establishing the EAC,” said Akol.
