Tanzania has blocked preferential access for Kenyan textile goods manufactured outside the Export Processing Zone (EPZ), citing unfair competition for its own manufacturers.

“This is informed by the fact that Kenya has allowed textile and apparel manufactures operating in the EPZ to off load their final textile products in the Kenyan market duty free,” Tanzania stated in a communiqué from a joint meeting on September 2 in Dar es Salaam to iron out trade wrangles between the two countries.

“This in effect may hinder similar products from Tanzania from being competitive when sold in the Kenyan market.”

Kenya in May cleared firms operating in its EPZs to sell up to an expanded 40 per cent of their products in the local market as part of strategy to boost sales and help prop the struggling industry.

The EPZ firms were initially only allowed to sell 20 per cent of their products in the Kenyan market with the rest sold under the African Growth and Opportunity Act (Agoa) – a trade pact that allows US buyers to import goods from a number of sub-Saharan African countries without paying taxes.

Dumping products

The gesture has, however, sparked a trade spat between the two countries amid concern that the Kenya’s expanded domestic market sales quota for EPZ firms could lead to dumping of products in the Tanzanian market.

“Tanzania is not according preferential treatment to Kenya because it is now enjoying a stay of application for textiles and footwear. Moreover, 96 per cent of textile produced in Kenya is sold under AGOA market and thus the mechanism for monitoring such export is difficult,” Tanzania stated in the communiqué.

According to the document, Kenya raised concern that textile and apparel goods manufactured outside its EPZs were being denied preferential access to the Tanzanian market despite provisions of Legal Notice No. 84 of 2017 by the East African Community (EAC).

Tanzania nonetheless argued that as per the Legal Notice, Kenya was granted a stay of application of the common external tariff (CET) rate on garments and leather footwear manufactured in the EPZ on the 20 per cent of the annual production allowed in the protocol to be sold within the domestic Kenyan market for one year, duty-free.

Charges

As a result the sale of these products in any of the EAC states is subject to duties, levies, and other charges provided in the CET when exported, Tanzania argued.

Kenya objected the assertions and requested Tanzania to grant access to her textile and apparel products as long as the Kenya Revenue Authority (KRA) issued a certificate of origin and a list of firms operating both within and outside the EPZ.

Tanzania stood its ground and undertook to audit Kenya’s dual tax regime to ascertain the impact on her textile sector.

Legal Notice No. EAC/84/2017

THE PROTOCOL ON THE ESTABLISHMENT OF THE EAST AFRICAN COMMUNITY CUSTOMS UNION

LEGAL NOTICE

IN EXERCISE of the powers conferred upon the Council of Ministers by Articles 12 (3) and 39(c) of the Protocol on the Establishment of the East African Community Customs Union, the Council of Ministers has granted the Republic of Kenya a stay of application of the CET rate on garments and leather footwear manufactured in EPZ on the 20% of the annual production allowed in the Protocol to be sold within the domestic Kenya market for one year.

The sale of the above finished products shall be subject to the following condition:

In the event that such goods are sold in Burundi, Rwanda, Tanzania or Uganda, such goods shall attract duties, levies and other charges provided in the EAC Common External Tariff.

This Notice shall come into force on the 1st day of July 2017.

Chairperson Council of Ministers.

Joint Communiqué of the bilateral trade meeting between the United Republic of Tanzania and the Republic of Kenya

6-8 September, 2017, Dar es Salaam

1. As agreed during the bilateral meeting between Tanzania and Kenya held in Namanga on 3rd August 2017, a bilateral technical meeting to address trade-related concerns between the two countries was convened on 06th-08th September 2017 in Dar es Salaam.

2. The meeting was co-chaired by Prof. Adolf Mkenda, Permanent Secretary of the Ministry of Industry, Trade and Investment of the United Republic of Tanzania, and Dr. Chris Kiptoo, Principal Secretary in the Ministry of Industry, Trade and Cooperatives of the Republic of Kenya.

3. During the meeting, which was held in a friendly and cordial atmosphere, the two sides noted the impetus to enhance and ease bilateral trade between the two countries that has been given by the two Heads of State, His Excellency Dr. John Pombe Joseph Magufuli, President of the United Republic of Tanzania and His Excellency Uhuru Muigai Kenyatta, President of the Republic of Kenya.

4. The two sides underscored the significance of having regular bilateral meetings to discuss concerns and opportunities with a view of promoting trade in the two countries for the mutual benefit of the two countries and its people.

5. During the meeting, the two sides deliberated on inter-alia, concerns related to the retail sector, customs, freight forwarding, market access, administrative bottlenecks, and implementation of the relevant East African Community directives. In this regard, the two sides called for the effective and timely implementation of the agreements reached in the bilateral meeting with a view to ease the flow of goods and services.

6. Overall, the meeting noted with satisfaction the smooth conduct and flow of trade between the two countries, and that the Presidential Directives regarding the free flow of LPG, wheat flour, milk and milk product have been implemented. Among other things, the two sides agreed to the following:

• The Management of Uchumi and Nakumatt Supermarkets should work with their suppliers to come up with a roadmap on how to settle the outstanding payments, and policy measures should be instituted to ensure that the retail sectors do not face a recurrence of similar challenges;To implement the SCT system to speed up clearance of goods, and in particular perishable goods;

• To speed up the development and adoption of regional cargo tracking system;

• To encourage the Chiefs of Immigration Services in the two countries to convene a meeting to resolve immigration issues between the two countries;

• To conduct verification exercise on lubricants, edible oils, cement and textiles produced outside EPZs in order to ascertain the origin of the product, and fair competition issues on textiles in particular; and,

• To ratify and implement EAC SPS Protocol, which requires EAC Partner State to establish regulatory institutions and harmonize SPS control measures. KEBS and TFDA to cooperate on harmonization of SPS measures.

7. In addition, a sideline meeting for wheat farmers and millers from Tanzania and Kenya was held on the margins of the bilateral meeting, and was equally co-chaired by Prof. Mkenda and Dr. Kiptoo. The meeting brought together key wheat stakeholders from the two countries to jointly discuss measures to support wheat farming in both countries. The meeting agreed to prioritize wheat produced locally in order to support the farmers. Thus, while the Namanga agreement stands Millers have agreed to voluntarily mop up wheat grains produced locally (Tanzania and Kenya) before importing from outside the region.

8. Following the conclusion of the meeting, the co-chairs signed the minutes of the bilateral meeting and the sideline meeting for wheat stakeholders outlining the way forward.

9. It was agreed that the next bilateral trade meeting will be held in November, 2017 in the Republic of Kenya.