Ministers across the East African Community (EAC) member States have agreed to implement a 35% Common External Tariff (CET) following a directive to undertake a comprehensive review of the EAC’s CET. This new set of import duties, set to take effect this month, includes different bands that will apply to dairy, meat, cereals, cotton, textiles, edible oils, beverages, and spirits. The region aims to safeguard itself from becoming a dumping ground for finished products by imposing this fourth band of 35% CET for certain goods, promoting local industries in the process. The fourth band is the latest addition to the EAC’s CET structure, which already includes a zero-rated tariff for raw materials and capital goods, a 10% tariff rate for intermediate goods, and a 25% tariff rate for finished goods. 

According to the EAC Council of Ministers, the 35% tariff band is designed to bolster regional industrialisation, intra-regional trade, spur economic growth & integration through the protection, efficiency and competitiveness of local industries by imposing higher duties on products where the EAC has sufficient production capacity to meet regional needs. Additionally, the Council states that the 35% common CET addition is designed to align EAC tariff structures and rates to the current economic realities as well as progressively remove stay of application on CET. The secretariat notes that they reviewed the sensitive list and its applicable rates, taking into consideration the supply capacity within the EAC region.

In conjunction with these changes, amendments to the EAC Customs Management Act are necessary to cater for conditions or criteria to be fulfilled by partner States requesting a stay of application. This will address shortfalls on identified products and explore options for a time-bound programme for their gradual removal. The latest review means that certain goods, such as the ones mentioned above, will now fall under the 35% band, which is expected to have significant implications for both consumers and businesses.

The introduction of the fourth band of 35% CET represents a strategic move to bolster local production. However, the implications of this move are far-reaching, particularly in the context of Kenya’s current political climate, where protests have erupted in response to the controversial Finance Bill, 2024, which introduced new taxes that were met with widespread dissatisfaction. The implementation of the new EAC tariffs coincides with these protests, potentially exacerbating the public’s discontent. Given the current political and social context in Kenya, the increase in the cost of goods due to the new EAC tariffs could fuel further unrest. The protests that began in response to the Finance Bill, 2024, may intensify as Kenyans grapple with the rising cost of goods. This situation calls for a careful and strategic approach to ensure that the objectives of the new tariffs are met without causing undue hardship for the population.

The government might want to consider issuing clear communication explaining the rationale behind the new tariffs and the expected long-term benefits for local industries and the economy. Secondly, it is crucial to also continue to engage with stakeholders to address any challenges that arise from these new tariffs. This includes exploring alternative measures to support local industries, such as providing incentives for local production and ensuring that any additional costs to consumers are minimised. By doing so, the EAC can achieve its goals of promoting local industries while maintaining a balance that supports economic growth and development.