Recently, the East African Community (EAC) issued the latest statement, announcing that the EAC finance and trade ministerial officials formally adopted the fourth level of common external tariffs (CET) in early May and decided to set the common external tariff rate. Set at 35%.
According to the statement, the reviewed fourth level of the EAC’s common external tariff rate will be officially implemented in July 2022.
01 Uniformly impose a maximum import tariff of 35%
It is reported that after the new regulations take effect, furniture, ceramic products, paints, leather products, textiles, cotton, steel and other products will be uniformly levied with import tariffs of up to 35%.
The statement said that EAC ministerial officials believe that looking into the future, the highest tariff rate of 35% in the fourth level is the most appropriate tax rate, which will have the most positive impact on regional economic growth.
Currently, the EAC common external tariff tax rate structure is divided into three levels, with import tariffs on raw materials, means of production and finished products being 0%, 10% and 25% respectively.
The current EAC Secretary-General Peter Mathuki called this a positive step towards promoting the development of the industrial sector and maximizing the benefits of the African Continental Free Trade Area (AfCFTA).
The move will stimulate intra-regional trade by encouraging the development of local manufacturing and increasing product value-added and industrialization.
02 Intra-EAC trade revenue will increase by US$18.9 million
According to Rwanda’s “New Era”, after the maximum common external tariff rate is raised from 25% to 35%, intra-EAC trade revenue will increase by US$18.9 million, the employment rate will increase by 0.03%, and the trade revenue of each member state will increase by 5.5%.
It is understood that the EAC was first established in 1967, and its member states include Tanzania, Rwanda, Kenya, Uganda, Burundi, South Sudan and the Democratic Republic of the Congo.
One of its goals is to establish a customs union, common market, etc. to achieve sustainable economic and social development of member countries.
Some professionals have analyzed that raising tariffs can enhance the diversification of local products and expand the possibility of intra-regional trade; but at the same time, raising external tariffs may also lead to an increase in the cost of consumer goods and industrial products, which will have a negative impact on import-dependent companies and consumers in the short term. Causes labor pains.
03 Chinese companies will increase tariff costs
Taking Chinese ceramic companies as an example, the EAC has set the fourth-tier tariff rate at 35%. Ceramic exports will increase a series of tariff costs, and may even be subject to controls, which may double the market pressure.
In fact, in addition to tariff pressure, my country’s ceramic tile exports have been subject to foreign anti-dumping investigations for many years. Exporting ceramic tile companies have been living in turbulent external quarrels. Therefore, a number of brand companies and equipment companies have changed their thinking and set up factories overseas. Continuously expand the market.
For example, Xinzhongyuan invested US$150 million to establish eight “intelligent and automated” ceramic tile production lines in Uzbekistan.
Keda’s international layout is even more extensive. In addition to working with Xinzhongyuan and Nengxing Holdings to build the Philippines’ largest ceramic production base in Subic Bay with the Philippine Ayala Group, it also has wholly-owned facilities in India and Africa (Kenya, Ghana). factory.
Weimei Group invested in building a ceramic tile production base in Tennessee, USA; Jinyitao Group formally signed a cooperation framework agreement with the MML brand of Malaysian Synthetic Group to explore the international market by setting up factories.
Companies such as Xinghui Ceramics have also cooperated with companies from Mexico, France, the United States and other countries to sell products to the EU.
In addition, Dongpeng, Mona Lisa, and Eagle have also set up overseas exhibition halls in overseas markets such as Vancouver, Canada, Malaysia, Thailand, Australia, and Italy.
In a sense, anti-dumping can force companies to reflect and work hard on differentiation (product differentiation, scene differentiation, service differentiation), continuously improve technology, and continuously innovate to derive more, better, and higher-quality products.
What needs special reminder here is that Kenya and Uganda have always been areas with high incidence of commercial fraud in Africa. After the tariff adjustment, the import cost will increase. Please be sure to pay attention to the risk prevention when exporting to relevant areas!
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