The UK has demanded that its exports to Kenya be exempted from the newly raised East African Community (EAC) tax charges that took effect on July 1, posing a big dilemma for Nairobi, which is bound by the regional bloc’s decisions.
Trade Principal Secretary Johnson Weru said the UK demands that Kenya abide by the provisions of an Economic Partnership Agreement (EPA) signed between the two nations—a request that, if granted could trigger similar demands from other nations.
In a deal struck on May 5, 2022, by the Partner States of the EAC, the Common External Tariff (CET) for imports entering the bloc has been raised by up to 35 per cent from July 1.
The levy is imposed on imported finished products from non-member States in a strategy to stimulate local industry and production.
Mr Weru said the UK had sought assurance “that the EAC-CET 2022 will not apply to them on the basis of the standstill provisions of the Kenya-UK EPA, which entered into force prior to the amendment. This presents a challenge to the implementation of the new CET to ongoing trade agreements.”
Fresh cut flowers
The new levy affects a tax band of products that also includes iron and steel, edible oils, furniture, leather products, and fresh-cut flowers.
Other products on the raised CET tax band include fruits, nuts, sugar and confectionery, coffee, tea, spices, head gears, ceramic products and paints.
This means that from July 1, imports of commodities entering Burundi, Kenya, Rwanda, South Sudan, Uganda, and Tanzania now cost more.
Based on its EPA with Kenya, the UK wants Kenya not to apply the CET levies on its products.
Kenya signed the EPA with the UK on December 8, 2020, before it was ratified by the UK Parliament on March 5, 2021, and by the Kenya National Assembly on March 9, 2021.
Kenya is pursuing a new bilateral trade deal with the UK post-Brexit, hoping to cushion its economy after partner states of the EAC failed to conclude an EPA with the EU. Only Kenya signed and ratified the deal.
Until the end of the Brexit transition period, Kenya enjoyed duty-free, quota-free access to the UK’s markets through the EU’s Market Access Regulation (MAR).
As the UK did not replicate the MAR at the end of the transition period, Kenya would have faced an increase in tariffs without a trade agreement or other measures in place.