There is a need to raise the cap on import duty-free goods to $5,000 (approx. Rwf6 million) from the current $2,000 in value to boost small-scale trade in the East African Community (EAC) under Simplified Trade Regime, a senior official at the East African Business Council (EABC) told The New Times.
"The aim of the proposal is to facilitate small traders so that they can do business and grow,” EABC Executive Director John Bosco Kalisa told The New Times on March 22, indicating that apart from import duty waiver at customs, goods pay other taxes including value-added tax in countries where they are traded.
"You realise that when you impose a duty on a person whose goods are worth $5,000, they will not get profit,” he observed, citing trading in beans from Rwanda to Kenya which can earn the trader a tiny profit-margin.
EABC is an intergovernmental organisation that promotes private-sector business interests across EAC – a bloc currently comprising eight partner states namely DR Congo, Burundi, Kenya, Rwanda, Somalia, South Sudan, Uganda, and Tanzania.
Its proposal was alluded to by Uganda’s first Deputy Prime Minister and Minister for East African Community Affairs, Rebecca Kadaga – speaking on behalf of EAC Council of Ministers – on March 12, during the East African Legislative Assembly (EALA) plenary sitting which was held in Nairobi, Kenya.
The plenary sitting adopted a report of EALA’s Committee on General Purpose on the assessment of the role of women, youth, and vulnerable groups in cross-border trade in the EAC region, which was carried out from January 28 to February 2.
It exposed that over time, some women’s volume of trade has grown above $2,000 and can no longer be facilitated under the current Simplified Trade Regime (STR) arrangement.
Under the Simplified Trade Regime arrangement, goods whose value does not exceed $2,000 are exempted from paying duties as a way to facilitate cross border trade in the region.
EALA recommended in the report to the EAC Council of Ministers to consider the revision of the regime threshold from $2,000 to $3,000 as an affirmative action towards supporting cross-border traders, especially women.
"At the last meeting of the sectoral council on trade and finance, the business council [EABC] wrote a proposal that they want the threshold raised to $5,000, not $3,000 which has been mentioned here [proposed in the EALA committee report],” Kadaga said.
She added, "So, I think as I will meet with my colleagues [members of EAC Council of Ministers], we shall decide between the $3,000 and $5,000.”
According to Kalisa, the need to raise the cap from $2,000 to $5,000 is based on the fact that the current threshold is too low, and small-scale cross-border traders saw it as a limitation to conduct business across the border.
He also suggests that the proposed $5,000 threshold should not be subject to tax procedures including customs duties, which he believes would go a long way to facilitate trade across borders.
Currently, Kalisa said that there is a lack of transparency in the existing Simplified Trade Regime, as well as a limited sensitisation of cross-border traders such as women about it, which makes its implication ineffective.
Kalisa pointed out the need to have dedicated customs procedures to easily facilitate traders who are conducting business under the current Simplified Trade Regime arrangement.
"We requested that there should be a special lane at the border where the eligible regionally produced goods can be cleared,” he said, adding that there should be customs officers at borders in charge of clearing those goods.
MP Alodie Iradukunda, vice Chairperson of EALA Youth Focus told The New Times that increasing the value to $5,000 would help traders such as young people to trade their goods easily.
She indicated that for young people to be easily recognised as businesspeople under Simplified Trade Regime, they should form cooperatives, pointing out that $2,000 was not enough for youth traders under cooperatives.