Kenya and Uganda have petitioned the East African Business Council (EABC), over the new law that has raised import taxes on goods from non-EAC countries to 35 percent.
They say that some basic commodities outside the band have also been affected.
In May, the EAC trade and finance ministers adopted 35 percent as the maximum rate for products classified under the 4th Band of the EAC common external tariff.
The band features dairy and meat products, cotton and textiles, iron and steel, edible oils, soaps and beverages and spirits imported from outside the EAC.
Other commodities covered are furniture, leather products, fresh cut flowers, fruits and nuts, sugar and confectionery, coffee, tea and spices, textiles and garments, headgear, ceramic products and paints.
While the 35 percent duty on imported finished products was mooted as having the potential of growing intra-EAC trade, Kenya and Uganda now say the new tax has pushed up the cost of importation, spilling over onto basic commodities.
Kenyan furniture manufacturer PG Bison Kenya Ltd says the increase of import duty on raw materials used to produce furniture products has forced it to increase prices of products.
“Due to these policy decisions, and along with the recent increases in fuel-related logistics and a rapidly depreciating local currency, our prices will change effective Friday, July 8, 2022. A revised price list will be issued and distributed accordingly,” the company told its customers in a notice.
Uganda is also facing challenges exporting surplus industrial sugar within the region yet Rwanda and Burundi are facing a shortage.
The Kenya Association of Manufacturers (KAM) has cited the new law, which took effect in the new financial year in July, as one of the major causes of high cost of living.
EAC states domesticated the new tax measures in the Finance Act 2022, which became operational on July 1.
“Some of the tax measures in the Finance Act 2022 are set to have an impact on the manufacturing sector,” said Mucai Kunyiha, KAM chairman. “This is unlikely to spur growth in the agriculture and manufacturing sectors.”
John Bosco Kalisa, EABC’s chief executive, said they have received letters from organisations raising concerns over the implementation of the common external tariff.
“Kenya is raising concerns over wood products while Uganda is concerned about industrial sugar. We are going to address the complaints after deliberations,” said Kalisa.
Kenya has been importing wood from EAC partner states, including the Democratic Republic of Congo, after the government banned logging. Now, with the new CET band, imported wood is fetching the same price as finished furniture already in the market.