US embassy cable - 05DARESSALAAM1185

UNCLAS DAR ES SALAAM 001185 
 
SIPDIS 
 
STATE FOR AF/E AND AF/EPS 
PASS TO USTR BILL JACKSON 
 
E.O. 12958:N/A 
TAGS: ETRD, PREL, ECON, EFIN, ECIN, KTEX, TZ 
SUBJECT: EAC CUSTOMS UNION: UPDATE ON TARIFFS 
 
REF: STATE 110285 
 
1. Per reftel, econoff and commercial FSN spoke with the 
East African Community (EAC) Director of Customs, Peter 
Kiguta, and with Dr. Kaboyoka of the Tanzanian Ministry of 
Industry and Trade (MIT) to solicit information on updated 
tariff rates under the EAC's Common External Tariff (CET). 
 
2. At the Heads of State Summit held in Arusha May 14, the 
EAC was directed to consider proposals from member states 
and other stakeholders regarding changes to the CET.  Kiguta 
explained that the EAC has received the proposals and has 
come up with informal agreements on some tariff changes. 
The new rate is still subject to further review and final 
decision by the EAC Council of Ministers of Trade, Finance 
and Investment, which will meet in Arusha next Monday, June 
20.  Technical meetings will begin in Arusha on June 18 to 
discuss the proposals and come up with the recommendations 
for consideration by the EAC Council of Ministers.  The EAC 
Council will not only discuss the CET but will discuss other 
issues in connection with implementation mechanisms and 
rules of origin. If the EAC Council approves the tariff rate 
changes, they will go into effect on July 1, 2005. 
 
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USED CLOTHING 
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3. While Kenyan and Ugandan budget speeches noted that 
duties on imported used clothes would be significantly 
reduced, Tanzanian Trade Minister Mramba did not mention the 
change in his speech.  According to Kiguta at the EAC, 
stakeholders have agreed to reduce duty on used clothing 
(mitumba) from 75 percent or 60 US Cents per kg to 45 
percent or 30 US Cents per kg.  (Note: In Tanzania, the 
value of used clothing is calculated by weight at the rate 
of 55 US Cents per kg, making the 30 US Cents per kg 
effectively a 55 percent tariff.)  GOT officials support the 
reduced rate (which remains higher than the pre-Customs 
Union rate). 
 
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PHARMACEUTICALS 
--------------- 
 
4. Kiguta also noted that Kenya announced a unilateral 
suspension on duties on pharmaceutical products, adding that 
only the EAC Council of Ministers can legally suspend the 
duty. Kaboyoka of Tanzania's MIT reported that Tanzania 
petitioned the EAC Secretariat for clarification on Kenya's 
move to suspend the 10 percent tariff on pharmaceutical 
products (as well as duties on diapers, sanitary pads, 
liquid petroleum gas and computer software). The GOT has 
submitted its case to the EAC for settlement, arguing that 
only essential drugs for HIV-AIDS, TB and Malaria should be 
zero-rated and that there was no need to suspend tax on 
other finished pharmaceutical products, diapers and sanitary 
pads because it will only deny the government revenue. 
 
5. Comment: Of the CET tariff rate changes, only used 
clothing has gotten particular attention in Tanzania, both 
from local dealers and US exporters.  Pharmaceuticals are 
generally imported as donations through tax-exempt NGOs.  On 
other items, Tanzania is likely to support higher tariff 
rates if supported by the other member states in order to 
maximize revenue.  End comment. 
 
OWEN