EU refuses refunds of import duties to Kenya
The EU will not offer refunds to Kenya for the duties the African country pays on the European market in the interim phase until the ratification of the Economic Partnership Agreement (EPA) between the old continent and the East African Community (EAC).
The “EPA (…) has enormous potential which will be achieved if we ratify and conclude it as soon as possible. However, we cannot provide export tax refunds for the period Kenyan exporters will be paying duty as our laws do not provide for that,” EU Trade Commissioner Karel De Gucht told reporters in Nairobi last week.
The EPA between the EU and the five East African countries Burundi, Kenya, Tanzania, Uganda and Rwanda was finalised on 16 October 2014. According to the EU, negotiators from both regional blocs initialled the EPA deal, which “is now going to be presented for approval according to the domestic procedures of each partner.”
Because the EPA negotiators failed to meet a deadline on 1 October 2014, in the period until formal approval, Kenya’s exports to the EU are categorised under the latter’s Generalised System of Preferences (GSP), which implies higher tariffs on Kenyan exports and thereby is less favourable than the duty-free quota-free scheme, from which the four least developed country members of the EAC currently benefit under the Everything But Arms regime.
Observers have highlighted that two-thirds of Kenya’s exports to the EU are now facing duties under the EU GSP, ranging from 4 to 24 percent and amounting to approximately 5.7 million euros per month in customs duties. They further note that the most affected products are cut flowers (8.5 percent duties), processed vegetables and fruits (over 15 percent), fish (6 percent) and pineapple and other fruit juices (11.7 percent).
Possibility of alternative compensation
Especially the Kenyan flower industry has voiced concerns over the shift to the less generous GSP: Jane Ngige, chief executive of the Kenya Flower Council, is reported to have affirmed that flower shipments for next year’s Valentine’s Day starting in December will be adversely affected by duty payments, reducing profits in the industry which depends on the Valentines period for 60 percent of its annual revenues.
While praising last month’s conclusion of the EPA, also the Kenya Association of Manufacturers called for a swift implementation of the deal in order to place the country on an equal footing with the LDC members of the EAC.
Addressing Kenya’s concerns in Nariobi last week, EU Trade Commissioner De Gucht said “I understand your problems and wish to solve them as soon as possible. I expect Kenya to regain duty free and quota free treatment by January at the earliest.”
For the meantime, De Gucht hinted at the possibility of an alternative compensation mechanism: "It is possible for the EU to channel funds earmarked for overseas development for compensating exporters.”
Sources: The Star: European Union says no to Kenya’s plea for export tax refund, November 4, 2014; Xinhua : EU says Kenya’s exports to enjoy duty free status by early 2015, November 1, 2014; East African Business Week: Kenyan exporters welcome last minute EU agreement, October 16, 2014.