EAC CUSTOMS UNION: UPDATE ON TARIFFS

UNCLAS DAR ES SALAAM 001185 SIPDIS STATE FOR AF/E AND AF/EPS PASS TO USTR BILL JACKSON E.O. 12958:N/A TAGS: ETRD PREL ECON EFIN ECIN KTEX TZ SUBJECT: EAC CUSTOMS UNION: UPDATE ON TARIFFS REF: STATE 110285 ¶1. Per reftel, econoff and commercial FSN spoke with the East African Community (EAC) Director of Customs, Peter Kiguta, and with Dr. Kaboyoka of the Tanzanian Ministry of Industry and Trade (MIT) to solicit information on updated tariff rates under the EAC's Common External Tariff (CET). ¶2. At the Heads of State Summit held in Arusha May 14, the EAC was directed to consider proposals from member states and other stakeholders regarding changes to the CET. Kiguta explained that the EAC has received the proposals and has come up with informal agreements on some tariff changes. The new rate is still subject to further review and final decision by the EAC Council of Ministers of Trade, Finance and Investment, which will meet in Arusha next Monday, June ¶20. Technical meetings will begin in Arusha on June 18 to discuss the proposals and come up with the recommendations for consideration by the EAC Council of Ministers. The EAC Council will not only discuss the CET but will discuss other issues in connection with implementation mechanisms and rules of origin. If the EAC Council approves the tariff rate changes, they will go into effect on July 1, 2005. -------------- USED CLOTHING -------------- ¶3. While Kenyan and Ugandan budget speeches noted that duties on imported used clothes would be significantly reduced, Tanzanian Trade Minister Mramba did not mention the change in his speech. According to Kiguta at the EAC, stakeholders have agreed to reduce duty on used clothing (mitumba) from 75 percent or 60 US Cents per kg to 45 percent or 30 US Cents per kg. (Note: In Tanzania, the value of used clothing is calculated by weight at the rate of 55 US Cents per kg, making the 30 US Cents per kg effectively a 55 percent tariff.) GOT officials support the reduced rate (which remains higher than the pre-Customs Union rate). -------------- PHARMACEUTICALS -------------- ¶4. Kiguta also noted that Kenya announced a unilateral suspension on duties on pharmaceutical products, adding that only the EAC Council of Ministers can legally suspend the duty. Kaboyoka of Tanzania's MIT reported that Tanzania petitioned the EAC Secretariat for clarification on Kenya's move to suspend the 10 percent tariff on pharmaceutical products (as well as duties on diapers, sanitary pads, liquid petroleum gas and computer software). The GOT has submitted its case to the EAC for settlement, arguing that only essential drugs for HIV-AIDS, TB and Malaria should be zero-rated and that there was no need to suspend tax on other finished pharmaceutical products, diapers and sanitary pads because it will only deny the government revenue. ¶5. Comment: Of the CET tariff rate changes, only used clothing has gotten particular attention in Tanzania, both from local dealers and US exporters. Pharmaceuticals are generally imported as donations through tax-exempt NGOs. On other items, Tanzania is likely to support higher tariff rates if supported by the other member states in order to maximize revenue. End comment. OWEN