EAC DRS Study Draft Final 112013

of 122
Draft Report
Prepared For
East African Community
Customs Directorate
by
COMPREHENSIVE STUDY ON DUTY REMISSION SCHEMES,
EXEMPTIONS REGIMES AND PREFERENTIAL TRADE SCHEMES
APPLIED BY THE PARTNER STATES IN THE EAC
Dr. Patrick Machyo, Team Leader
Mr. Charles Nuwagaaba, National Consultant, Uganda
Mr. Valerie Siriremera, National Consultant, Burundi
Mr. Nchooro M’mwenda, National Consultant, Kenya
Mr. Steve Mugisha, National Consultant, Rwanda
Prof. Godwin Mjema
Intergrated Development Consultants Ltd
Surveyors Court, Westlands, Nairobi
P.O BOX 1963-06060 Sarit NAIROBI
Tel/Fax : 254-020-4442420
aedc@africaonline.co.ke
November 2013

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TABLE OF CONTENT
LIST OF ACRONYMS .......................................................................................................................... v
EXECUTIVE SUMMARY ................................................................................................................... vi
1.0 Background.......................................................................................................................... vi
2.0 Summary of Recommendations......................................................................................... vii
1.0 Introduction ..........................................................................................................................1
2.0 Approach/methodology applied in the study .....................................................................2
3.0 Duty Remission on imported goods for use in manufacture of goods in EAC Partner
States 3
3.1 Legal basis .............................................................................................................................3
3.2 Economic rationale for duty remission .................................................................................3
3.2.1 Economic rationale for duty remission on goods imported for manufacture of goods
for exports and home consumption..............................................................................................3
3.2.2 Economic rationale for duty remission granted under export promotion schemes –
export competitiveness..................................................................................................................4
3.3 Customs management practises ..........................................................................................5
3.3.1 Institutional arrangement ................................................................................................5
3.3.2 Monitor of end use of subject raw material/industrial input ...........................................7
3.3.3 Customs Controls............................................................................................................7
3.2.3 Recommendations on customs management practices .................................................10
3.2.3.1 Recommendation on Institutional Arrangement .......................................................10
3.2.3.2 Recommendation on Customs Control .....................................................................11
3.2.3.3 Recommendation on EAC capacity building support to Duty Remission Scheme ..11
4.0 Duty remission on imports for manufacture of goods for Home Consumption ...........12
4.1 Scope of coverage................................................................................................................12
4.2 Analytical framework for duty remission on goods imported for use in manufacture of
goods for home consumption .........................................................................................................13
4.3 Duty Remission on imports of sugar for industrial use for use in manufacture of
finished products for home use......................................................................................................14
4.3.1 Policy objective for granting sugar for industrial use duty remission...........................14
4.2.2 Quota Allocation for importation of sugar for industrial use under EAC DRS............14
4.3.3 Quota utilization in production of approved finished products using sugar for industrial
use 15
4.3.4 Impact Assessment of DRS on sugar for industrial use on EAC Economies ...............17
4.3.5 Regional availability of sugar for industrial use ...........................................................18

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4.3.5 Recommendation arising from DRS for Sugar for industry use towards harmonization
of EAC DRS .................................................................................................................................19
4.4 Duty Remission on Paper products for use in manufacture of finished products for
home use...........................................................................................................................................19
4.4.1 Policy objective for granting paper products duty remission........................................19
4.4.2 Quota Allocation for importation of paper products under EAC DRS.........................20
4.4.3 Quota utilization in production of approved finished products using DRS paper
products 20
4.4.4 Impact Assessment of DRS paper products on EAC Economies .................................21
4.4.5 Regional capacity to produce paper and paper products...............................................22
4.4.5 Recommendation arising from DRS paper products towards harmonization of EAC
DRS 23
4.5 Duty Remission on CKDs for motorcycles for use in manufacture of finished products
for home use.....................................................................................................................................23
4.5.1 Policy objective for granting motorcycle CKDs duty remission ..................................23
4.5.2 Quota Allocation for importation of CKD under EAC DRS ........................................23
4.5.3 Quota utilization in production of approved motorcycles using DRS CKD sets..........23
4.5.4 Impact Assessment of DRS motorcycle CKD sets on EAC Economies.......................25
4.5.5 Regional capacity to supply motorcycle CKDs ............................................................25
4.5.5 Recommendation arising from DRS motorcycle towards harmonization of EAC DRS
26
4.6 Duty Remission on Wheat and wheat products for use in manufacture of finished
products for home use ....................................................................................................................27
4.6.1 Policy objective.............................................................................................................27
4.6.2 Impact assessment.........................................................................................................28
4.6.3 Regional capacity to supply hard wheat and other wheat grain....................................28
4.6.4 Recommendation arising from DRS for hard wheat and other wheat grain towards
harmonization of EAC DRS .........................................................................................................29
4.7 Duty remission on assorted items for manufacture of transformers .............................29
4.8 Duty Remission on Raw Material for use by approved manufacturers under Uganda
Lists 29
4.8.1 Policy objective and Scope of coverage........................................................................29
4.8.2 Impact assessment of the Uganda List on Uganda’s economy and the economy of
other EAC Partner States ..............................................................................................................30
4.8.2.1 Impact on production ................................................................................................30
4.8.2.2 Impact on Exports.....................................................................................................31
4.8.2.3 Impact in other EAC economies ...............................................................................32

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4.8.3 Assessment of regional supply capacity of products in the Uganda List of June 2013 33
4.8.4 Recommendations for harmonization of EAC duty remission scheme arising from the
Uganda List of Raw Materials of 2007 and June 2013.................................................................34
4.9 Rwanda’s access and utilization of Duty Remission for manufacture of goods for home
use under various EAC Gazette Notices and under Uganda List...............................................34
4.9.1 Policy objective and scope of coverage ........................................................................34
4.9.2 Impact assessment of the Rwanda List on Rwanda’s economy and the economy of
4.9.2.1 Impact on production ................................................................................................35
4.9.2.2 Impact on Exports.....................................................................................................35
4.9.2.3 Impact in other EAC economies ...............................................................................36
4.9.3 Assessment of regional supply capacity of products in the Rwanda List .....................38
Rwanda List of Raw Materials......................................................................................................39
4.10 Duty Remission on Raw Material for use by approved manufacturers under Burundi list
40
4.10.1 Policy objective and scope of coverage ........................................................................40
4.10.2 Impact assessment of the Burundi List on Burundi’s economy and the economy of
4.10.2.1 Impact on production ...........................................................................................40
4.10.2.2 Impact on Exports................................................................................................41
4.10.2.3 Impact in other EAC economies ..........................................................................41
4.10.3 Assessment of regional supply capacity of products in the Burundi List .....................42
Burundi List of Raw Materials......................................................................................................44
4.11 Duty Exemptions and Duty Remissions under National Laws.......................................44
4.11.1 Duty Exemptions under the EAC CMA (2004)............................................................44
4.11.2 Duty Remissions under National Laws.........................................................................45
5.0 Duty remission for manufacture of good for exports ......................................................47
5.1 Analytical framework for duty remission on goods imported for use in manufacture of
goods for exports.............................................................................................................................47
5.2 Impact assessment ..............................................................................................................48
5.2.1 Threat to EAC industries producing similar raw material/industrial inputs .................48
5.2.2 Impact on export growth and regional market potential ...............................................49
5.2.3 Recommendation on duty remission on imported goods for use in manufacture of
goods for export............................................................................................................................50

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6.0 Duty Remission through Stay application of CET Rate .................................................51
6.1 Legal basis ...........................................................................................................................51
6.2 Customs management practice..........................................................................................51
6.3 Analytical Framework, impact Assessment and proposed harmonization measures ..52
6.3.1 Analytical framework and proposed principles for harmonization of the stay of
application category of duty remission .........................................................................................52
6.3.2 Impact Assessment and proposed harmonization measures .........................................53
6.3.2.1 Product coverage.......................................................................................................53
6.3.2.2 Rice...........................................................................................................................54
6.3.2.3 Wheat and wheat flour ..............................................................................................56
6.3.2.4 Sugar .........................................................................................................................59
6.3.2.4 Motor vehicle for transport of more than 25 persons................................................60
6.3.2.4 Motor vehicles for transport of goods (Gross weight exceeding 5 tons but less than
20tons and gross weight exceeding 20 tons.............................................................................61
6.3.2.5 Impact assessment and proposed policy measures on other products that benefited
from the stay of application category of duty remission...........................................................63
6.4 Recommendation on stay of application of the CET rate...................................................65
7.0 Preferential trade schemes .................................................................................................68
7.1 Analytical framework for PTA scheme................................................................................68
7.2 COMESA FTA trade regime with EAC Partner States .................................................68
7.2.1 EAC Partner States relationship with COMESA trade regime.....................................68
7.2.2 Trade distorting Effect of COMESA FTA in EAC.......................................................69
7.3 SADC Trade regime ..............................................................................................................70
7.3.1 EAC Partner States relationship with SADC trade regime...........................................70
7.3.2 Trade distorting Effect of SADC FTA..........................................................................71
7.4 Recommendations on harmonization of the trade regime between EAC and COMESA
and SADC trading blocks...............................................................................................................71
ANNEXES ...............................................................................................................................................73

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LIST OF ACRONYMS
COMESA Common Market for Eastern and Southern Africa
CET Common External Tariff
CKDs Completely Knocked Down Kits
CMA Customs Management Act (2004)
DRS Duty Remission Scheme
EAC East African Community
FTA Free Trade Area
SCT Single Customs Territory .
SADC South African Development Cooperation

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EXECUTIVE SUMMARY
1.0 Background
The EAC trade regime, as defined by the EAC Customs Union Protocol and the EAC Customs
Management Act (EAC CMA) and Customs Regulations provides for various duty remission and
exemption regimes. This flexibility was to accommodate various regimes that EAC Partner States
were implementing at the coming into force of the EAC Customs Union on 1st
January 2005. These
regimes include the following: -
i) Duty exemption and remission schemes under various national laws, some of which have been
maintained.
ii) Preferential treatment to trade with the respective Regional Economic Communities (RECs)
where Partner States are members.
iii) National specific duty remission and stay of application as approved by Council from time to time
in accordance with the Customs Union Protocol.
iv) Duty remission and exemption regimes granted across the region in accordance with the EAC
Customs Management Act (CMA) 2004.
Among the key justifications for this study is the concern that the application of these regimes has had
potential negative impact on EAC trade as a result of the regimes being country specific in
nature and discriminatory across sectors and between industries.
Secondly, these regimes are not sustainable in the context of the Single Customs Territory, where the
entire EAC region becomes a domestic market. Continued application of the regimes on country
specific basis undermines the tenets of the Single Customs Territory (SCT).
Taking cue from the above concerns and the dictates of the SCT, this study was commissioned to
review all the duty remissions schemes, exemption regimes and preferential trade schemes applying in
the Partner States. The findings of this review were applied in recommending a methodology to
harmonize the schemes in line with the Single Customs Territory requirements. Detailed analysis of
each of the various regimes, impact and proposed methodologies for harmonization of the regimes are
presented in the report under the following sections:
Section 3.0 – Duty Remission Scheme Legal basis and Customs Management Practise in the
implementation of the scheme
Section 4.0 – Duty Remission on imports of goods for manufacture of goods for home use,
encompassing Burundi, Rwanda and Uganda Lists of Raw Material
Section 5.0 – Duty Remission on imports of goods for manufacture of goods for exports
Section 6.0 – Duty Remission – Stay Application of CET rate Category, Duty Exemptions and Duty
Remission under National Laws
Section 7.0 – Preferential Trade Scheme and the impact on EAC economies
The EAC objectives of Regional Integration, Industrial and Agricultural Development as well
articulated in key EAC policy documents, such us the EAC Customs Union Protocol, Agricultural and
Rural Development Strategy, EAC Food Security Action Plan and EAC Industrial Development
Policy and Strategy provided a framework for guiding policy proposals on various products, raw
material and industrial inputs. At the backdrop of this study is low intra-regional trade in agro-
processed and other manufactured goods, with intra-regional imports for most of these products being
below 10%. This means that EAC has continued to trade among itself less partly due to policies that
do not reflect the regional reality about availability of certain types of raw material. While Duty
Remission is a very good initiative to assist EAC industries access globally sourced raw material and
industrial input at duties lower than the CET rate, where the region has no lacks the subject raw

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material, there lacks the basis for the duty remission and hence need to subject manufacturers to the
annual ritual of seeking approval to import a raw material or product that no one is producing. This
study applies a scientific method to identify such cases and has proceeded to recommend permanent
reduction of the CET rate, putting the burden on the producers of such products or raw material to
proof that they have sufficient output to meet the regional demand. This approach will assist in getting
the concerned producers to strategically look at the EAC market, look out for the manufacturers who
use the raw material/industrial inputs and thus forge strong networks that will drive intra-regional
trade of raw materials and industrial inputs, as well as other finished products that have been subject
of duty remission.
2.0 Summary of Recommendations
1. Customs management practices
1. Institutional Arrangement
a) Predictable cycle of duty remission committee and EAC Council meetings for approval
of duty remission applications
Concerns about delays need to be resolved through fixing specific dates in a month when
applications would be considered by the Committee. With a firm cycle of meetings – national
and regional, it becomes easy for private sector to plan on their raw material requirement.
b) Private sector associations role in application for duty remission
A more explicit role of the private sector in the application process needs to be introduced in
the regulations. As a minimum requiring that applications from the private sector firms are
channelled through the private sector associations where the associations would help their
members to conform to the application requirements in order to avoid rejection of application
on procedure grounds.
2. Customs Control
1. Customs Bonds
To ensure equity in application of duty remission and especially in safeguarding risks
associated with diversion of raw material and industrial inputs to the unintended use, it is
recommended that customs bond requirement which is provided in the Duty Remission
Regulation (2008) be enforced in all EAC Partner States. This is crucial in sustaining the
integrity of the DRS and instilling confidence and trust among the Revenue Authorities in
facilitating trade of finished goods manufactured using the DRS material.
2. Payment of Duty
The provision for payment of penalty on unutilized raw material should be dropped from the
regulation because unutilized raw material imported in good faith may end up not being
utilized because of factors beyond the manufacturer and unforeseen at the time of applying
for the duty remission. After all, full duty is payable on any material not applied for the
intended purpose.
3. Quarterly Returns
Submission of quarterly returns needs to be enforced as provided for in the Duty Remission
Regulation
3. EAC capacity building support to Duty Remission Scheme
To address the challenge posed by capacity related non-compliance with the requirement for
filing of quarterly returns the following interventions are proposed: -
a) Interlinking the data processing systems within the EAC region.
b) Partner States should have an electronic monitoring mechanism e.g. in the SIMBA System,
Ascyuda, with a possibility of conducting reconciliations.
c) Mandatory Installation of stock management system by manufacturers.

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d) Mandatory submission of returns both electronically.
2. Recommendations pertaining to duty remission on imports for manufacture of goods for
home use
A) Methodology for harmonization of duty remission for home use finished products
Duty remission is primarily aimed at mitigating domestic or regional shortage of a raw material
by allowing manufacturers to import the subject raw material from the rest of the world at a tariff
lower than the CET rate. In the context of the EAC Single Customs Territory (SCT), duty
remission would only be justified on the basis of lack of the product, raw material or industrial
inputs.
To determine availability of a product, raw material or industrial input a trade flow analysis based
methodology has been proposed, combined by the argument of statistical significance of a
number. This has been used to develop a threshold that if used can guide in determining cases
where the region has adequate supply potential, which needs to be safeguarded through duty
remission regime.
For every product, it is proposed that its Intra-EAC exports for the past three years as a share of
the EAC total market size of the same product, which is defined as EAC-Intra Exports plus EAC-
Extra imports. If the share is less than 30%, the conclusion is that the region does not have
adequate supply potential of the product, raw material or industrial input to meet the regional
requirement of the manufacturing industry. Such cases require downward review of the CET rate
to reflect the regional supply reality in support of regional manufacturing processes.
On the other hand, if the share is greater than 30%, then the conclusion is that the region has
adequate supply potential meriting periodic application of the duty remission regime for periods
when manufacturer report shortage or lack.
This methodology is easy to administer, especially with the now online available EAC trade flow
data through the EAC Trade Help Desk. It was resorted to in absence of reliable data on
production and the fact that there is strong causal relationship between production and Intra-EAC
exports.
B) Universal access to the duty remission rate by all manufacturers
In order to avoid discriminatory nature of the current EAC duty remission regime, which
undermines the spirit of the SCT, it is proposed that once a product has been determined as
meriting duty remission rate, then any manufacturer in any of the EAC Partner State will be free
to import that product. Vetting of the manufacturers to be done by private sector associations who
forward eligible manufacturers to the Commissioner of Customs. Conditions of eligibility should
build on the criteria already in the EAC Duty Remission Regulation.
If this proposal is accepted, going forward, private sector associations, working with the
manufacturers and EAC Secretariat will determine cases deserving duty remission on the basis of
the threshold rule on raw material that the industry feels is in short supply. The list will be
forwarded to the Council for approval. Uganda June 30, 2013, follows this procedure.
C) Free circulation of finished products for home use manufactured using raw material
imported under duty remission scheme
Given that duty remission rate will be accessible to all manufacturers in the region, irrespective of
which country had submitted the application to EAC, the finished product manufactured using the
subject raw material should be allowed to be trade within the EAC region freely. Universal access

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of the duty remission rate removes the sensitivity that has in the past led EAC Partner States to
erect barriers on finished goods benefiting from duty remission.
D) Proposed harmonization of duty remission on various products that have been granted duty
remission between 2007 and June 2013
The above rule has been applied in determining cases where duty remission should continue or
where the CET rate should be reviewed on account of lack of regional supply potential.
i) Sugar for industry use towards harmonization of EAC DRS
a) The CET for Sugar for Industrial Use (HS Code 1701.99.10) be reduced to zero or 10%.
b) An impact assessment of the sugar industry producers be undertaken to ensure their input to
this policy proposal, especially in view of the regional industrial requirements and the huge
unexploited potential that dictates the required levels of supply. The objective will be to agree
on 0% or 10% but not to retain sugar for industrial use as a sensitive product and to agree on
conditions which once attained, the CET of 0% or 10% can be reviewed upwards.
c) The EAC identifies all manufacturers in the EAC region that use this raw material and register
them as approved manufacturers, for purposes of customs applying the above duty rate for
importation by these firms.
d) The EAC establishes a monitoring system to monitor application of the sugar for industrial use
in manufacturing the approved finished products.
e) Heavy penalty by tied to diversion of the sugar to any other use other than the intended
purpose.
f) Mandatory monthly reporting on level of utilization of the imported products and volume of
finished products produced and used in the domestic market or exported.
g) All products produced using DRS for sugar for industrial use be allowed into all EAC markets
on duty free basis, provided they meet the EAC Rules of Origin.
ii) Paper products towards harmonization of EAC DRS
a) Reduce CET rate for paper and paper products that are shown in Annex 2 to 0% due to
inadequate supply potential
b) Industry consultation be held to ensure a consensus view on the proposed CET rate modality
for future review once the suppliers demonstrate their capacity to meet the regional
requirements.
iii) Motorcycle towards harmonization of EAC DRS
The platform on which the proposed recommendation for the motorcycle CKDs is based is the
over US$100m regional market potential which motorcycle assemblers are targeting. The
proposed motorcycle CKDs recommendation is based on the regional market potential of over
US$100m, forming a target market for motorcycle assemblers. This coupled with regional lack of
requisite parts to support motorcycle assembly plants calls for the following policy measures:
a) Introduce tariff lines, through tariff splits, to accommodate various categories of motorcycle
CKDs in the EAC Tariff book and assign a CET rate of 0% (refer the main report for the
proposed splits).
b) To ensure that the CKDs are imported by genuine motor cycle assemblers, it is recommended
that only motorcycle assemblers registered with the customs through the association of
motorcycle assemblers or private sector association should be allowed to import the CKDs.
c) Among the conditions that the assemblers should meet are industry set standards that the
association will vet all assemblers to ensure compliance before registration. Periodic audit
findings to be the basis for annual renewal of registration of the assemblers.
d) In view of the above recommendations, the June 30 2013 legal notice on motorcycle
assembling should be withdrawn and instead, above policy measures be put in place.

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iv) Hard wheat and other wheat grain towards harmonization of EAC DRS
a) The CET rate on hard wheat and other wheat grain be lowered to 10%, being the rate that the
industry has been granted throughout the review period.
iv) Recommendations arising from the Uganda List of Raw Materials of 2007 and June
2013
a) Duty remission be continued on 19 tariff lines in the Uganda list, that the region has been
determined to have supply potential (refer table 4.24 of the main report)
b) In view of the huge regional market potential for the finished products that are targeted for
production using the raw material/industrial inputs in the Uganda list of 2007 and June 2030,
coupled with absolute lack of regional capacity for production of the same raw material, the
following policy measures are proposed.
 CET rate on some 83 tariff lines (Refer Annex 3) in the 2007 and June 30, 2013 Uganda list
be permanently reduced to 0% on account of the region’s inadequate supply capacity and
recognition that if these goods were available from the region, manufacturers would be
obliged to pay no duty while sourcing the same from EAC Partner States.
 Continuous monitoring of the regional supply capacity be undertaken regularly so that any
material that the region demonstrates as having attained the required threshold of 30% may
have the CET rate reviewed and access of the raw material during seasons of shortage be
managed through the duty remission scheme.
v) Recommendations for harmonization of EAC duty remission scheme arising from the
Rwanda List of Raw Materials
a) Duty remission be continued on 26 tariff lines in the Rwanda list, that the region has been
production using the raw material/industrial inputs in the Rwanda list, coupled with absolute lack
of regional capacity for production of the same raw material, the following policy measures are
proposed:
 CET rate on some 119 tariff lines (Refer Annex 4) in the Rwanda list of approved raw
materials be permanently reduced to 0% on account of the region’s inadequate supply
capacity.
 Continuous monitoring of regional supply capacity be undertaken regularly so that any
v) Recommendations for harmonization of EAC duty remission scheme arising from the
Burundi List of Raw Materials
a) Duty remission be continued on 23 tariff lines in the Uganda list, that the region has been
production using the raw material/industrial inputs in the Burundi list, coupled with absolute lack
of regional capacity for production of the same raw material, the following policy measures are
proposed:
 CET rate on some 70 tariff lines (Refer Annex 5) in the Burundi list of approved raw material
be permanently reduced to 0% on account of the region’s inadequate supply capacity

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 Continuous monitoring of regional supply capacity be undertaken regularly so that any
3. Recommendation arising from the review of the EAC CMA (2004) Duty General
Exemptions (Part B)
1. The following items, which qualify as raw material or intermediate goods should be removed
from the exemption regime and be managed under the duty remission scheme:
Horticulture, Agriculture or Floriculture Input
Inputs for use in the manufacture of agricultural equipment
i) Machinery, Spares and Inputs for Direct use in Oil, Gas and
ii) Unbleached woven fabrics of a width 80 inches and above imported for manufacture of textile
materials
2. The following items may need to be accommodated in the EAC Tariff book through review of
CET rate to 0% based on the objective for which they have been identified for purposes of
inclusion in the exemption regime:
i) Industrial Spare Parts
(i). Packaging Material for Medicaments
(ii). Education
(iii). Splints for use in the manufacture of matches
(iv). Seeds for Sowing
(v). Electrical Energy saving bulbs for lighting also known as Compact Fluorescent Bulbs
4. Recommendations arising from the review of Duty Remission under National Laws
a) EAC Partner States should fold their national duty remission structures under the national laws
and instead have the incentives provided under the EAC CMA.
b) EAC CMA be reviewed to accommodate any national level incentives in the context of the EAC
investment and industrial development strategy.
5. Recommendation arising from review of duty remission on imported goods for use in
manufacture of goods for export
a) Grant duty remission for exports on raw material that the region has demonstrated capacity to
supply
i) Using the above 30% rule, out of the 250 products that Kenya sought duty remission for
export, only 42 products, which appear in annex 6, would qualify for duty remission for
exports. It is recommended that these products be retained in the duty remission for exports
regime for a period of 3 years. Review of the CET rate after three years be done for cases
where regional supply will have responded to regional demand.
ii) The threshold for sale of annual production to the regional market should be raised to 40%
in recognition of the huge export potential currently being serviced by extra-regional
imports.
b) Reduce the CET rate of some 241 products (refer Annex 7), previously in Kenya duty
remission for exports schedule to 0% on permanent basis. Using 30% intra-export principle it

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was established that the region does not have adequate supply capability to warrant periodic
exemption of the CET rate through duty remission regime.
6. Recommendation arising from the analysis of the on stay of application of the CET rate
category of duty remission
a) EAC Duty Remission regulation (2008) be reviewed to include temporary stay of CET rate,
pursuant to the EAC Customs Union Protocol, Articles 12(3) and Articles 39(1) (i) (c).
This revision will be based on the recognition that in EAC, certain finished products experience
seasonal shortages, thereby meriting need for the region to import the same products from rest of
the world at a duty rate less than the CET rate.
b) Proposed duty remission for current cases of the stay of application
On the basis of the 30% intra-EAC exports threshold rule the regional was found to be having
adequate supply potential that merited the following to be granted periodic duty remission
i) Rice
ii) Barley and roasted malt
iii) Sugar
iv) Motor vehicle for transport of more than 25 persons
c) Cases of stay of application of the CET rate that are recommended for permanent reduction
in the CET rate due to lack of demonstrated regional supply potential
i) Wheat – reduce to 10%
ii) EAC Motor vehicles for transport of goods (Gross weight exceeding 5 tons but less than
20tons and gross weight exceeding 20 tons – reduce to 10%
iii) Palm stearin, fractions, Sodium sulphate and Epoxide resins – reduce to 0%
iv) Hand Hoes – reduce to 0%
v) Flat-rolled products of iron or non alloy steel – reduce to 0%
vi) Stranded wires, cables, plaited bands and the like, of cooper, non-electrically insulated –
reduce to 0%
vii) Road guard rails, gabions and gabion mattresses – reduce to 0%
viii) Tractors – reduce to 0%
ix) Road guard rails, gabions and gabion mattresses – reduce to 0%
x) Aluminium conductors and cables – reduce to 0%
xi) Towers and lattice masts – reduce to 0%
7. Recommendations on harmonization of the trade regime between EAC and COMESA and
SADC trading blocks
To address the exposure that EAC Partner States are experiencing due to the implementation of
COMESA and SADC FTA, it is proposed that EAC pursues harmonization of tariff liberalization
between COMESA and SADC regional blocs under the Tripartite FTA. The following formula is
proposed: -
EAC Offer to COMESA countries under the Tripartite FTA
a) EAC Partner States to offer all COMESA countries duty free market access building on Burundi,
Kenya and Rwanda COMESA FTA commitments where duty under COMESA FTA these
countries apply 0% duty on imports from COMESA FTA countries
b) For COMESA countries not willing to offer EAC duty free market access, EAC to offer
reciprocal rate to such countries

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EAC Offer to SADC countries under the Tripartite FTA
a) EAC Partner States to offer all SADC countries duty free market access building on Tanzania
SADC FTA commitments where duty under SADC FTA, where Tanzania applies 0% duty on
imports from SADC FTA countries
b) For SADC countries not willing to offer EAC duty free market access, EAC to offer reciprocal
rate to such countries

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1.0 Introduction
The EAC trade regime, as defined by the EAC Customs Union Protocol and the EAC Customs
Management Act (EAC CMA) and Customs Regulations provides for various duty remission and
exemption regimes. This flexibility was to accommodate various regimes that EAC Partner States
were implementing at the coming into force of the EAC Customs Union on 1st
January 2005. These
regimes include the following: -
vi) Duty exemption and remission schemes under various national laws, some of which have been
maintained.
vii) Preferential treatment to trade with the respective Regional Economic Communities (RECs)
where Partner States are members.
viii) National specific duty remission and stay of application as approved by Council from time to
time in accordance with the Customs Union Protocol.
ix) Duty remission and exemption regimes granted across the region in accordance with the EAC
Customs Management Act (CMA) 2004.
Among the key justifications for this study is the concern that the application of these regimes has had
potential negative impact on EAC trade as a result of the regimes being country specific in
nature and discriminatory across sectors and between industries.
Secondly, these regimes are not sustainable in the context of the Single Customs Territory, where the
entire EAC region becomes a domestic market. Continued application of the regimes on country
specific basis undermines the tenets of the Single Customs Territory (SCT).
Taking cue from the above concerns and the dictates of the SCT, this study was commissioned to
review all the duty remissions schemes, exemption regimes and preferential trade schemes applying in
the Partner States. The findings of this review are to be applied in recommending a methodology to
harmonize the schemes in line with the Single Customs Territory requirements.
The study covers all the duty remission schemes, exemption regimes and preferential trade regimes in
various EAC Partner States. The following specific tasks are articulated: -
a) Take stock of all the duty remission schemes, exemption regimes and preferential trade schemes
in existence in the Partner States.
b) Analyze all the schemes in (a) above in terms of equity, uniformity and trade distortion in the
implementation of the EAC Trade regime.
c) Assess the impact of each scheme on the economies of the other Partner States.
d) Examine the current regional Customs practices on the duty remissions schemes and propose a
policy to manage the remissions.
e) Examine the current preferential trade schemes of COMESA/SADC and its impact on EAC intra-
trade.
f) Based on outcomes (a) and (b) above, formulate the draft proposal on the harmonization of duty
remission schemes.
The rest of this report is organized as follows:
 Section 2.0 details approach and the methodology applied.
 Section 3.0 discusses legal basis and customs management practices for the various duty
remission schemes.
 Section 4.0 focuses on duty remission for home use. It is also extended to cover exemptions and
duty remission under National laws.
 Section 5.0 focuses on duty remission of exports.

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 Section 6.0 focuses on the duty remission under the ‘stay of application’. In each of the latter
three sections, the study reviews customs control measures and monitor to ensure that imports
under duty remission were used as intended in the manufacture of finished goods for home use or
exports or for use as a final product to meet regional supply shortfall (in the case of stay of
application’. These section also assesses impact of the duty remissions on the beneficiary country
and the economies of the other EAC Partner. The findings are used to guide on harmonized policy
for respective duty remission scheme.
 Section 7.0 Preferential trade regimes (COMESA and SADC FTA), while
2.0 Approach/methodology applied in the study
At the commencement of the study, consultations with the EAC Secretariat were undertaken, where
the scope and approach was agreed upon. Through this interface, critical documents that are outlined
in the terms of reference were obtained for review and use during the course of the study.
In depth review of the EAC Duty Remission Regulation (2008), EAC Customs Union Protocol,
Customs Management Act (2004), EAC Council Reports and EAC Gazettes for the period 2007 to
June 2013 were undertaken. This helped the study team grasp the policies underlying the duty
remission scheme and the legal framework upon which the scheme is based.
Structured questionnaires were designed and discussed with EAC before their application in the field
survey. The questionnaires were designed for the following respondents:
 Revenue Authorities, Customs (because of the role Customs Play in the Duty Remission
Committee)
 Ministry of Finance (because of the role they play in the policy process of the duty remission,
investment incentives and preferential trade arrangements)
 Private sector associations and firms that were listed in the EAC Gazettes as beneficiaries of the
Duty Remission schemes as approved manufacturers
Field survey was conducted, following up on the questionnaires, offering clarification and guidance to
respondents. The list of respondents is appended to this report as Annex 1.
To corroborate primary data from the questionnaires, comprehensive trade flow (export and import)
analysis, using data sets provided by the Revenue Authorities, was undertaken to shed light on the
impact of duty remission and also to guide in the application of the proposed principles for
harmonization of duty remission scheme.

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3.0 Duty Remission on imported goods for use in manufacture of goods in EAC
Partner States
3.1 Legal basis
The legal basis for the EAC duty remission is Section 140 (1) of the EAC Customs Management Act
(2004) which states that ‘The Council may grant remission of duty on goods imported for the
manufacture of goods in a Partner State’. Expounding on this provision, Duty Remission Regulation
(2008) which is derived from the provisions of Article 140(2), shows that the Council may grant
remission of duty on -
i) Goods imported for use in the manufacture of goods for export;
ii) Such goods imported for use in the manufacture of approved goods for home consumption
a) Duty remission on goods imported for use in the manufacture of goods for exports
The only country seeking duty remission for exports under Section 140 of the CMA is Kenya.
This practise began in 2010 when the country mainstreamed its national law based duty remission
scheme under the Tax Remission for Export Office (TREO) scheme into the EAC framework.
The duty remission on goods imported for use in the manufacture of goods for exports is granted
on the following conditions, which are derived from Article 25 of the Customs Union Protocol: -
i) The finished goods benefiting from duty remission shall primarily be for export outside the
EAC
ii) In the event that such goods are sold in the customs territory (EAC), such goods shall attract
levies and other charges provided in the EAC Common External Tariff
iii) The sale of goods in the Customs territory (EAC) shall be subject to authorization by a
competent authority and such sale shall be limited to 20% of the annual production of the
company (manufacturer).
The Regulation, in a bid to ensure the spirit of this incentive is upheld, i.e. duty remission for
export only, requires manufacturers to: -
i) Pay duty on any imported goods that are not used in the manufacture of goods for export
or where the goods so manufactured are not exported;
ii) Submit returns quarterly, to the Commissioner to facilitate monitor of the application of
the raw material or industrial input and production of the approved finished products.
b) Duty remission on goods imported for use in the manufacture of approved goods for
home consumption
To encourage production of approved goods for home consumption, duty remission is granted to
EAC Partner States for raw material/industrial input, of which they face significant shortage or
complete lack.
The Regulation, in a bid to ensure the spirit of this incentive is upheld, i.e. duty remission for
promotion of competitiveness of approved goods for home use, requires manufacturers to: -
i) Pay duty on any imported goods that are not used in the manufacture of goods for which such
goods were approved
ii) Submit returns quarterly, to the Commissioner to facilitate monitor of the application of the
raw material or industrial input and production of the approved finished products.
3.2 Economic rationale for duty remission
3.2.1 Economic rationale for duty remission on goods imported for manufacture of goods for
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According to EAC Customs Union Protocol, Article 25, the aim of duty remission is to support EAC
industries in production of competitive exports. The fundamental point to note here is that the
duty remission on raw material or industrial input is premised on unavailability or shortage of
the raw material in the EAC Partner State, which gives credence for remission of the CET rate.
Hypothetically, if the raw material was available in the EAC region, the industry would resort to
regional sourcing at the intra-regional duty of 0%. There would be no justification remission of the
CET rate, as this would be causing injury to industries that are producing the raw material or
industrial input.
On the other hand, duty remission on raw material/industrial input is granted to EAC Partner States to
encourage production of approved goods for home consumption. As is the case with duty remission
for use in manufacture of goods for export, the fundamental point to note is that the duty remission is
granted on raw material/industrial inputs which are in short supply or unavailable in the EAC Partner
States. This policy enhances competitiveness of EAC industries finished products thus making them
competitive, not only in the EAC market against extra-regional imports of similar finished products,
but also in the external markets, should a manufacturer get some market opening.
Going by this analysis, there is no economic justification for distinguishing between duty remissions
on imported goods for use in manufacture of goods for exports or goods for home consumption. From
an economic point of view, the common denominator is regional availability of the subject raw
material/industrial input at the intra-regional duty rate of 0%. Shortage or non availability of the raw
material/industrial input from the region is what triggers the application for duty remission, because
importation of the same from outside the EAC region renders EAC finished products, whether for the
home consumption or exports outside the EAC region less competitive.
Duty remission granted on the basis of shortage in supply or lack of the specific raw material in the
region will be granted under Duty Remission for industrial competitiveness scheme.
3.2.2 Economic rationale for duty remission granted under export promotion schemes – export
competitiveness
EAC Customs Union Protocol encourages export promotion through the following export promotion
scheme: -
a) Duty and value added tax remission schemes
b) Manufacturing Under Bond Schemes
c) Export Processing Zones
d) Any other export promotion scheme that the EAC Council may from time to time approve
The cross cutting principles that govern administration of export promotion scheme include the
following: -
i) The schemes support acceleration of development, promotion and facilitation of export oriented
investments, production of export competitive goods, development of an enabling environment
for export promotion schemes and attraction of foreign direct investment
ii) Goods benefiting from export promotion schemes shall primarily be for export.
iii) In the event that such goods are sold in the customs territory such goods shall attract full duties,
levies and other charges provided in the Common External Tariff.
iv) The sale of goods in the customs territory shall be subject to authorisation by a competent
authority and such sale shall be limited to 20 per centum of the annual production of a company.
Out of the above three specific schemes, the one that relates to the subject of this study is Duty and
Value Added tax remission scheme, and to be specific, the duty remission component of the scheme.

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In order to avoid confusion with duty remission on manufacture of goods for home use, which as is
evidenced in this study also get’s sold in the EAC market or is exported outside the EAC region, there
is need for clear distinction from the duty remission on goods for manufacture of goods for export.
Duty remission for export should be limited to raw material/industrial inputs which are in
sufficient supply in the region but which industries would still wish to import from outside the
EAC for purposes of producing for the export market. The rationale for firms to seek duty
remission on raw material/industrial inputs which the region has sufficient supply would include
client preference in the destination market, quality, requirements of large volumes within a very short
period as dictated by export orders, among others. Clearly, products produced using these raw
material/finished products would primarily be for exports, as envisaged in the EAC Customs Union
Protocol Article 25.
Companies which have this type of export business would then be required to be registered under
EAC Duty Remission for Export Scheme. Before gazetting of the companies under this scheme, an
assessment of the region’s availability of the raw material/industrial input will have been undertaken
through a web enabled portal where users and producers of the raw material post their requirements
and production estimates. Where statistics demonstrate that the region has sufficient supply, then
concerned industry will be alerted and informed that the duty remission is purely for production of
goods for export only or sale of up to 20% of annual production into the EAC market. Once the
industry has consented then the specific raw material/industrial input gets gazetted for importation
under Duty remission for export scheme for a period of 3 years without need for quota allocation
because of the customs controls governing the use of the raw material, further to the provisions
of Article 25 of the EAC Customs Union Protocol.
3.3 Customs management practises
The EAC Duty Remission Regulation (2008) sets out the procedure for administration, monitoring
and control of the duty remission scheme. Critical provisions relate to: -
a) Institutional set up and responsibility – the Duty Remission Committee
b) Customs controls, which include: -
i) Security for duty waiver in form of customs bond, (pursuant to EAC CMA Section 106 and
107) until proof that the raw material has been applied in production of approved goods for
exports or home use.
ii) Import duty payment for raw material not applied in production of goods for exports or
production of approved goods for home use. Manufacturers are liable to pay penalty of 10%
of value of DRS raw material that is not used in the production of approved goods for export
or home use.
iii) Mandatory quarterly returns
iv) Firm level book keeping subject to customs inspection
The study sought to establish customs management practises in all EAC Partner States in the context
of the above provisions of the Regulation. The findings are detailed in the sections below.
3.3.1 Institutional arrangement
The regulation provides for establishment of National Committee on Duty Remission to consider duty
remission issues including recommendation of new applications, renewals, appeals as may be required
under the regulations and any other issues as the Commissioner may consider necessary.
With exception of Uganda, Duty Remission Committees have been established in the rest of the EAC
Partner States. The committees are constituted as prescribed by the Regulation by representatives
from the following institutions: -

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 The ministry responsible for Finance;
 The ministry responsible for Trade and Industry;
 The body representative of Manufacturers;
 The Customs.
It was also established that the Committees meet regularly to process duty remission request from the
private sector. In all countries the representative from Customs played the role of the secretary to the
Committee and was responsible for custody of the records of the Committee.
Procedure for lodgment of application to the Commissioner varied across the EAC region as
illustrated in the table below. In Burundi, Kenya and Uganda, applications are channeled through
private sector associations, while Tanzania and Rwanda, private sector firms apply directly to the
Commissioner.
Table 3.1: Procedure for lodgment of duty remission application
EAC Partner
State
National level DRS application process Criteria for evaluating
applications
Burundi Companies apply through Private Sector Association
which forwards the applications to the Commissioner
through Ministry of EAC
Being developed
Kenya Companies apply through Kenya Association of
Manufacturers which forwards the applications to the
Commissioner
Yes. Very
comprehensive and
objective, touching on
companies capacity to
cope with the rigorous
DRS reporting
requirements
Rwanda Individual private sector firms submit their application
direct to the Commissioner
Yes. Duty Regulation
2008 based
Uganda Companies apply to the Commissioner through
Uganda Manufacturers Association. The
Commissioner undertakes due diligence and forwards
successful applications to EAC for the EAC Council
approval process
Customs has inspection
checklist
Tanzania Private sector firms apply through the Ministry of
Industry and Trade, which submits the application to
the National Tax Force at the Ministry of Finance
Yes.
The Duty Remission Regulation is silent about the role of private sector associations in the application
process. The private sector never raised an issue with this omission. There is however a strong case
for duty remission applications to be channelled through private sector associations.
First, is their statutory responsibility to participate in the Duty Remission Committee, as provided for
in the Duty Remission Regulation (2008).Since one of their roles role at this committee is to defend
the applications submitted by private sector firms, bringing industry specific angle to the committee to
ensure that the decisions to be made are based on industry realities, there is a case for the applications
to be channelled through the associations.
Secondly, given that the association are petitioned by the aggrieved firms when the firms are denied
the quotas they apply for or when the goods that have been manufactured using DRS raw material
face EAC market access challenges, there is need for the associations to be involved during the
application process.

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There were specific concerns raised during the study on the institutional arrangement of the Duty
Remission Scheme. These concerns include the following: -
 Delays getting timely approvals for the duty remission application associated with infrequency of
the National Duty Remission Committees and The EAC Council meetings for approving the
applications submitted by EAC Partner States.
 Reduction of duty remission quotas by the committee was a source of concern to the private
sector firms who argued that “The quota applied for should not be reduced because the users
know their capacity and therefore it is unfair for the Duty Remission committee to reduce the
quantities applied for”.
 Vetting and approval of duty remission application is an operational matter that does not
necessitate formation of a Duty Remission Committee. These were views from Uganda Customs
Office responding to the DRS questionnaire.
This view is however weakened by the reality that customs may not have the entire purview of the
economy that would need to be taken into account in order for the country to forgo the duty that
was to be collected from the raw material. An all inclusive committee, as foreseen in the Duty
Remission Regulation (2008) remains valid.
3.3.2 Monitor of end use of subject raw material/industrial input
In all cases of duty remission for approved manufacturers, with exception of the Burundi, Rwanda and
Uganda list, the Council stipulates the specific raw material that is subject of duty remission by
description of the good and applicable HS Code. Further, pursuant to Section 140 (3), the Council also
stipulates the quantity to be imported and the period. The Council also specifies the finished product
to be produced using the DRS raw material. The description of the finished product is however
general, being name only without reference to appropriate HS Code. To appreciate the gravity of this
omission, we have a case of raw material such as sugar for industrial use (HS Code 1701.99.10)
where the finished product is identified as confectionery. According to customs nomenclature,
confectioneries are many and have several HS codes.
The effect of this omission is that it makes it hard to monitor exports manufactured using raw
material/industrial input that has benefitted from duty remission. This ambiguity fuels mistrust on the
EAC duty remission scheme, leading to frustration of intra-trade in goods produced using the DRS
raw material.
It is therefore recommended that the EAC Gazette specifies the finished goods in terms of customs
nomenclature (Description and HS Code) as is the case with raw material. This will make it easy to
facilitate tracking of goods produced under the DRS for purposes of assessing impact and introducing
transparency in the regional trade of such products.
3.3.3 Customs Controls
Customs control in the three areas that are stipulated in the Duty Remission Regulation varied across
the EAC Partner States, despite there being no legal basis for variation. The status as reported by
Customs during the study is as follows: -
Table 3.2: Customs control measures for cases of duty remission
Customs control measure Status in EAC Partner States
Burundi Kenya Rwanda Uganda Tanzania

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Customs control measure Status in EAC Partner States
Burundi Kenya Rwanda Uganda Tanzania
Customs Bond on:
 Raw material for manufacture goods
for exports
N/A Yes N/A Yes N/A
for home use
No Yes No Yes No
1. Payment of import duty for unutilized
raw material or bi-product, scrap or
waste material1
In all countries, this ensured through inspection audits
or comprehensive audit through Post Clearance Audit
procedure where there is suspicion of irregularity
2. Quarterly Returns for:
for exports
N/A Yes N/A Yes N/A
for home use
No Yes No Yes No
3. Control of
 Goods manufactured for exports that
end up being exported to EAC
N/A No N/A No N/A
 Goods manufactured for home use
that end up being exported to EAC
No No No No No
1. Customs Bonds
Customs bond to secure raw material imported for manufacture of goods for exports or home use
is only applied in Kenya and Uganda in fulfilment of the Duty Remission Regulation (2008)
requirement. The rest of the EAC countries are not observing this requirement.
The effect of this is to create uneven playing field, with private sector in Kenya and Uganda
complaining about the cost associated with customs bond for DRS raw material, which firms in
other EAC countries are not subjected.
Failure to apply the customs bond requirement also fuels suspicion on possible diversion of raw
material to unauthorized end use that may threaten other industries in the region. The omission
also creates suspicion of possible diversion of unapproved finished products produced using the
1
This is in accordance to the provisions in the Duty Remission Regulation (2008) “Where a by-product, scrap
or waste of commercial value results from a process of manufacture or production utilizing goods subject to
duty remission, duty shall be payable on the prevailing value of the by- product, scrap or waste in
accordance with the Act, unless the by-product, scrap or waste is exported or destroyed under the
supervision of the proper officer”.

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raw material into the EAC region to the detriment of industries that are usually protected through
the CET.
2. Control of end use of raw material and industrial inputs imported under DRS
In all EAC Partner States, control of end us application of DRS raw material is ensured through
inspection audit of firms granted duty remission for importation of approved raw material. Post
Clearance Audit is administered in cases that are considered irregular.
Human resource constraint was however mentioned in Burundi, where Customs finds
administration of duty remission scheme among firms that are granted import quotas rather
difficult due to shortage of customs officials to conduct site visits.
3. Quarterly returns
Although the regulation requires the manufacturers to submit quarterly returns, this requirement is
not enforced. With exception of Kenya and Uganda, responses from customs indicated that such
returns are not obtained.
This compromises the effectiveness of monitoring and control of duty remission, which as
stipulated in the duty remission manual entails: -
 Need to ensure that the manufacturer maintains proper records
 Committee’s access to production, import and export related records
 Quarterly returns on utilization of goods imported under these regulations indicating stock of
raw materials, work in progress, finished goods at hand and goods exported.
This lapse undermines the integrity of duty remission schemes and denies Partner States data to
assess the impact of the schemes in terms of promoting production of goods for home use and
exports. The gravity of this problem is evident in the field survey, where in all Partner States there
was no data on production and export of goods benefiting from duty remission. While the customs
were efficient in capturing data on raw material and industrial inputs imported under duty
remission schemes, they did not have system of capturing output data – production and exports.
This creates avenue for possible diversion of goods imported under duty remission for unintended
use purely due to weak/lack of effective reporting and monitoring system.
The lapse is attributed to lack of capacity within Customs to manage duty remission schemes to
the standard required by the regulation. In Kenya, for instance, the Customs indicated that such
returns are submitted in hard copies but are never analyzed.
Given the noble goal of duty remission scheme in enhancing competitiveness of the EAC Partner
States exports and goods for home consumption, it is recommended that this lapse be addressed
through a robust system linking customs administration and duty remission user firms to facilitate
online submission of records. This linkage should be a condition tied to the granting of duty
remission.
4. Customs control of exports to EAC of finished products manufactured for exports or home
use, using DRS raw material
i) Customs control of goods for manufactured for exports that end up being exported into
the EAC
Kenya is the only EAC country that applies and is granted duty remission on raw material or
industrial inputs that are explicitly meant for production of goods for exports. The other
countries reported using export incentive schemes such as Duty Draw Back, Manufacturing
under Bond (MUB) Scheme, which do not require duty remission.

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The duty remission is granted to Kenya approved manufacturers for production of good for
exports is granted under the following conditions, which pursuant to EAC Customs Union
Protocol Article 25: -
a) The finished goods benefiting from duty remission shall primarily be for export outside
EAC
b) In the event that such goods are sold in the customs territory (EAC), such goods shall
attract duties, levies and other charges provided in the EAC Common External Tariff
c) The sale of goods in the Customs territory (EAC) shall be subject to authorization by a
competent authority and such sale shall be limited to 20% of annual production of the
company (manufacturer).
Customs officials responding to questions on how customs enforces the above conditions
revealed challenges that have made it hard to ensure effective enforcement. These challenges
were cited as follows: -
 There is no arrangement for facilitating exports of the 20% of production that is allowable
by law to the EAC market. Firms use export declaration without distinction of whether the
goods being exported are in the 20% category or normal exports. Customs comes in at the
point of bond discharge where they will require proof of export through export certificate
so that the bond can be cancelled. While this is a good measure for protection against
revenue loss, it would have been very helpful if measure to help firms export the 20% of
production is put in place by customs so that it instils faith in the goods that firms declare
as 20% of their production among customs authorities in the destination market.
This omission has created problems for approved manufacturers of exports that benefit
from DRS raw material and industrial goods in the destination EAC market, where they are
denied market access, merely because they are listed in the EAC Gazette.
 Logistical and manpower challenges.
 Manufacturers do no isolate raw materials imported under the Duty Remission and those
duty paid
4. Customs control of goods for manufactured for home use that end up being exported into
the EAC
In all EAC Partner States, there was no specific measure taken to distinguish exports of finished
goods manufactured for home use through duty remission raw material/industrial input. Instead,
the monitor was same as that of all other exports, where the declaration system was used. There
was no condition requiring the exporter to indicate whether the finished product was
manufactured using duty remission raw material.
3.2.3 Recommendations on customs management practices
3.2.3.1 Recommendation on Institutional Arrangement
1. Predictable cycle of duty remission committee and EAC Council meetings for
approval of duty remission applications
Concerns about delays need to be resolved through fixing specific dates in a month when
applications would be considered by the Committee. Monthly meetings should suffice so
that private sector firms plan with specific and known dates. EAC Council meetings to
approve applications for duty remission should also be programmed to take place
quarterly to consider applications processed at Partner States in the last three months.
With a firm cycle of meetings – national and regional, it becomes easy for private sector
to plan on their raw material requirement.

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2. Private sector associations role in application for duty remission
A more explicit role of the private sector in the application process needs to be introduced
in the regulations. As a minimum requiring that applications from the private sector firms
are channelled through the private sector associations where the associations would help
their members to conform to the application requirements in order to avoid rejection of
application on procedure grounds.
3.2.3.2 Recommendation on Customs Control
4. Customs Bonds
To ensure equity in application of duty remission and especially in safeguarding risks
associated with diversion of raw material and industrial inputs to the unintended use, it is
recommended that customs bond requirement which is provided in the Duty Remission
Regulation (2008) be enforced in all EAC Partner States. This is crucial in sustaining the
integrity of the DRS and instilling confidence and trust among the revenue authorities in
facilitating trade of finished goods manufactured using the DRS material.
5. Payment of Duty
The provision for payment of penalty on unutilized raw material should be dropped from
the regulation because unutilized raw material imported in good faith may end up not
being utilized because of factors beyond the manufacturer and unforeseen at the time of
applying for the duty remission. After all, full duty is payable on any material not applied
for the intended purpose.
6. Quarterly Returns
Submission of quarterly returns needs to be enforced as provided for in the Duty
Remission Regulation
3.2.3.3 Recommendation on EAC capacity building support to Duty Remission Scheme
To address the challenge posed by capacity related non-compliance with the requirement for filing of
quarterly returns the following interventions are proposed: -
a) Interlinking the data processing systems within the EAC region.
b) Partner States should have an electronic monitoring mechanism e.g. in the Simba System,
Ascyuda, with a possibility of conducting reconciliations.
c) Mandatory Installation of stock management system by manufacturers.
d) Mandatory submission of returns both electronically and in hard copy.

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4.0 Duty remission on imports for manufacture of goods for Home Consumption
4.1 Scope of coverage
A review of EAC Gazette shows that all EAC Partner States have throughout the review period, 2007
– 2013, accessed duty remission on various raw materials for production of a variety of approved
finished products.
An analysis of the duty remission under the ‘home use’ category reveals two broad classifications of
the duty remission granted. The first is short term duty remission which runs for one or two years. In
all cases, the Council approves manufacturers, raw material (including specific volume to be imported
during the period) and finished goods to be produced using the raw material.
The principal raw material that have been gazetted over the years for importation on duty remission
basis include: -
a) Sugar for industrial use, approved for importation by approved manufacturers for manufacture of
an assortment of approved finished products
b) Paper and paper products
c) Completely Knocked Down Kits (CKDs) for motorcycles and bicycles
d) Wheat grain and Hard Wheat
e) Assorted parts for manufacture of transformers.
The other category is long term spanning five years. This appears in the Uganda, Burundi and
Rwanda lists. One key feature with these lists, which distinguishes the long term duty remission from
the annual duty remission, is that there are no annual quotas as is the case with annual duty remissions
schemes.
We also note in the case of Burundi and Rwanda lists a rider in the Legal Notice relating to export of
the finished products into the EAC region, where such exports are expected to attract CET: ‘The sale
of the above finished products shall be subject to the condition that in the event that such goods are
sold in the Customs territory (EAC), such goods shall attract duties, levies and other charges
provided in the EAC Common External Tariff (EAC Gazette 30 June 2011 Legal Notice No. 26 and
27 respectively’. By definition, therefore, finished products under Burundi and Rwanda lists can be
sold into the EAC market provided the CET rate is paid. This is in contrast to the condition given for
duty remission on raw material for use in production of exports, where the sale to the domestic (EAC)
market is restricted to only 20% of the finished goods produced using the DRS raw material. As an
example, we have this stipulation in the EAC Gazette of 24th
May 2011, Legal Notice No.13: ‘The
sale of goods in the Customs territory (EAC) shall be subject to authorization by a competent
authority and such sale shall be limited to 20% of the annual production of the company
(manufacturer)’.
Responses from Customs Departments in all the five EAC Partner States indicate that duty remission
sought under Section 140 of the CMA is meant for home use. However, as evidenced in the case of
Rwanda and Burundi, it is an acknowledged fact that there may be possibility of the export of the
finished products into the regional market. This fact is further collaborated by responses from
Customs during the field survey, where it was indicated that such a possibility does exist.
The issue of concern in regard to the possible sale of finished products produced using DRS raw
material is whether there is a system to monitor such sales and thus give appropriate certificates of
origin to facilitate exports of these products with a caveat that triggers application of the CET in the
destination country. There was no such system in all EAC Partner States. This leaves the region
exposed to possible diversion of such goods on duty free basis.

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In the context of the EAC SCT framework, goods manufactured for home use should not be subjected
to any CET because the region is one domestic market. The concern that underpins the policy that
motivated charging of CET rate to such goods is addressed in this study through appropriate policy
measures that make such a policy irrelevant on account of a level playing field that the new policy
measure introduces.
4.2 Analytical framework for duty remission on goods imported for use in
manufacture of goods for home consumption
Duty remission on raw material/industrial inputs for use in manufacture of goods for home use, as
observed earlier, is motivated by the need to promote competitiveness of the finished product in the
domestic market. The argument that upholds the case for the duty remission on the raw
material/industrial input is that the region is facing periodic shortage or lack of the raw material
requiring complementary supplies from imported sources at the duty rate of 0% instead of the EAC
CET rate.
Presently any EAC Partner State that projects periodic shortage of the raw material in its economy
applies for the duty remission. The application is usually granted. The processing of the application is
not subjected to assessment of regional availability of the raw material as would be required in the
context of a Single Customs Territory. As a result, products manufactured under duty remission for
home consumption are treated with suspicion if exported to any of the countries, often being charged
duty at the CET rate. This challenge requires a regional approach, which is built on the SCT
framework.
To facilitate this process, we have adopted the following conceptual framework; leading to principles
which if applied will ensure equity in the use of duty remission on imported goods for manufacture of
goods for home consumption.
The fundamental point in evolving an objective policy for duty remission for home consumption is
determination of the region’s supply capacity. As already observed elsewhere in this report, regional
production/supply data is not readily available to facilitate an objective analysis. In absence of this
data, trade flow data is used as proxy. EAC countries intra-exports to the EAC region is used as a
proxy for the region’s supply capacity, while EAC intra and extra EAC imports of a specific product
is used as proxy for the regional market size that has to be met through international trade sourcing.
The choice of trade flow is influenced by availability of data and the reality that a country is able to
trade on the basis of established supply capacities.
Using intra-EAC exports as a basis for determination of the region’s supply capacity, and the
statistical significance threshold of 30% of the EAC market size (intra-EAC exports plus extra-EAC
imports) the following principle is proposed to guide on the decisions of whether to grant duty
remission on a specific raw material/industrial input or not:
i) If the share of intra-EAC exports in total EAC market size is less than 30% for the last three
consecutive years, then the region is considered as not having sufficient capacity to meet regional
demand. In view of this, all raw material/industrial inputs that fall under this category need not be
subject of duty remission. Instead, and in the interest of promotion of manufacture of these
products, whether for exports or domestic consumption, the Council should reduce the CET rate to
0%, being the rate that the industry would have sourced the raw material/industrial input from
within the EAC region had the supply been sufficient.
Application of this principle helps identify raw material which needed not be subjected to duty
remission for home consumption, mainly because the region has no production capacity and there
is no threat to any industry.

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ii) If the share of intra-EAC exports in total EAC market size is equal to or greater than 30% for the
last three consecutive years, then the region is considered as having sufficient capacity to meet
regional demand and hence the Council should grant duty remission on the raw material for
manufacture of goods for home use. The duty remission should be 0%, being the rate that would
have been applicable if the raw material were to have been sourced from within the EAC.
To ensure equity in terms of universal access of duty remission throughout the EAC region, the
following principles are proposed: -
 Any manufacturer, who meets criteria set in the EAC Duty Remission Regulation, will be
eligible to import the subject raw material on duty free basis. Approval of manufacturers will
be premised on the Gazetted raw material. This introduces flexibility that presently lacks in the
current duty remission, where manufacturers who wish to be approved have to wait for
considerable time, often at the risk of missing duty remission based production cycle.
 Finished products manufactured for home consumption using duty remission raw
material/industrial inputs should be sold in any EAC Partner State without being subjected to
any import duty. The only condition that such products should be subjected to is the EAC
Rules of Origin, which if met, the products should then be sold on duty free basis.
These principles are applied in analysing the duty remission for home consumption in EAC to
establish the impact and propose recommendations to ensure a harmonized approach throughout the
EAC countries.
4.3 Duty Remission on imports of sugar for industrial use for use in manufacture of
finished products for home use
4.3.1 Policy objective for granting sugar for industrial use duty remission
Sugar for industrial use, which in customs classification is assigned HS Code 1701.99.10, is classified
in the EAC Tariff Book as sensitive and therefore attracts a CET rate of 100% or US$200/MT
whichever is higher.
Responses from the field survey among the revenue authorities of the beneficiary countries and firms
that were granted duty remission to import sugar for industrial use on preferential basis gave the
following as the rationale in support for the duty remission: -
 Lack of sufficient and quality supplies from within the regional market.
 Need to ensure the finished products are competitive. The duty remission confers the
competitiveness through reduced cost of raw material as a result of the import duty waiver.
The applicable duty after duty remission was 10%.
4.2.2 Quota Allocation for importation of sugar for industrial use under EAC DRS
As evidenced in the table below, over the review period, a total of 911,391 metric tonnes had been
allocated for importation by 149 approved manufacturers from Burundi, Kenya, Uganda and
Tanzania.
Table 4.1: EAC DRS allocation for sugar for industrial use for use in manufacture of finished
products for home use
Country 2007 2008 2009 2010 2011 2012 2007 - 2012 No of

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period total Approved
Manufacturers
Uganda 701 0 0 0 0 28073 28,774 57
Kenya 50100 26170.
5
145151 132964 151611 9000 514,997 53
Tanzania 0 73000 0 30550 110571 142400 356,521 37
Burundi 0 0 0 0 0 11,100 11,100 2
Regional total 50,801 99,171 145,151 163,514 262,182 190,573 911,391 149
As depicted in the above table and the chart below, the level of allocation varied across the three EAC
countries, with Kenya taking the lead, followed by Tanzania, Uganda and Burundi. The variation is
explained by the country level industrial demand for the raw material and sugar industry sensitivity.
In Uganda, for instance it is worth noting that DRS for sugar for industrial use has been utilized for
two years only and at a very limited scale compared to Kenya and Tanzania.
4.3.3 Quota utilization in production of approved finished products using sugar for
industrial use
A review of the various EAC Gazettes revealed that a total of 149 approved manufacturers were
allocated quotas for importation of industrial sugar for use in manufacture of several types of finished
products for home use.
The types of finished products varied widely across the three EAC Partner States, with exception of a
few that were similar.
Table 4.2: Number of approved manufacturers and types of approved finished products
Count
ry
Number
of
approved
manufact
urers
Years Finished products
0
20000
40000
60000
80000
100000
120000
140000
160000
2007 2008 2009 2010 2011 2012
EAC DRS Quota allocation for sugar for industrial use, 2007-2012
(figures in MT)
Uganda
Kenya
Tanzania

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Count
ry
Number
of
approved
manufact
urers
Ugand
a
57 2007
&
2012
1. Confectionery
products
2. Sweets
3. Soft drinks
4. Dairy
Products
5.
6. Soft
beverages
7. Beverages
8. Biscuit
Manufacturin
g
9. Alcoholic
Beverages
10. Juice and
Wines
11. Beer
Bakery
products
12. Water
13. Pharma
ceutical
s
14. Ice-
Cream
Kenya 53 2007 -
2012
1. Tomato
sauces
2. Various
Medicaments
3. Carbonated
soft drinks
4. Bread
5. Boiled
Confectionery
and Powdered
Tablets
6. Juices
7. Medicinal
products
8. Processed
Pineapple
Products
9. Quencher
cordials,
ready to drink
and Juices
10. Medicines
11. Energy
Drinks,
12. Squash syrup
13. Biscuits
14. Confecti
onary
Bubble
gums,
hard
boiled
candy
toffees,
icing
sugar
15. Beer &
Non
alcoholi
c drinks
16. Cerelac
17. Jams,
18. Sauces,
19. Desserts
and
canned
products
20. Cordials
Tanza
nia
37 2008,
2010,
2011
and
2012
1. Biscuits
2. Juices
3. Sukaritamu
KK
4. Candies
5. Soda syrup
6. Confectioneri
es
7. Ice cream, Ice
lolly,
8. Fresh Fruit
juices,
9. Artificial
juices
10. Carbonated
soft drinks
11. Biscuits,
breads and
14. Jams &
Chutney
15. Chilli sauces
16. Malt based
drinks
17. Sparkling
water, Still
water,
Flavoured
sparkling
water &
mixes
18. Hard boiled
candies,
19. Plumpynut,
Nutributter &
Supplementar
y plumpy
20. Coffee
candies
&
Toffees
21. Pressed
sweets
Mintos
&
Bubble
gum
22. Milk/But
ter
candies
23. Cookies
&
chocolat
e
24. Flavou
25. Tablets,
dry
syrups
& oral
liquids
26. Powder
ed
drinks
27. Beer
28. Tablets,
dry
syrups
& oral
liquids
29. Carbona
ted
drinks
30. Biscuits

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Count
ry
Number
of
approved
manufact
urers
wafers
12. Juice
concentrated
13. Tomato sauce
red
candies
Milk/But
ter
candies,
31. Beer
32. Bubble
gum,
Candies
&
sweets
Burun
di
2 2012 1. Beer
2. Juices
4.3.4 Impact Assessment of DRS on sugar for industrial use on EAC Economies
a) Production of approved finished products
Industry wide data to demonstrate volume of finished products that were produced by approved
manufacturers using the DRS sugar for industrial use was not available. This is attributed to the
weakness in the DRS monitoring system as pointed out earlier in this report.
Efforts to get this information from the industry were limited by poor response from the target firms.
For instance only 13 firms that were allocated quotas for importation of sugar for industrial use over
the period 2007 to 2008 responded by completing the structured questionnaire seeking to establish the
utilization of the raw material in production. The distribution of these firms by country is as follows:
Burundi (2 firms), Kenya (5 firms), Uganda (3 firms) and Tanzania (3 firms).
The findings from these firms illustrate the following points which are crucial in determining the
future DRS policy for sugar for industrial use:
i) Necessity of sugar for industrial use in manufacture of the target finished products for home use
due to regional shortage. One of the respondents indicated that: ‘This is a pharmaceutical grade
sugar used only in the manufacture of specific medicines. Since all pharmaceutical raw materials
are duty exempt, this one should too’. Another respondent decried: ‘Non availability of refined
industrial sugar manufacturer in the EAC region’
ii) As a primary raw material to the production of the finished product, the DRS contributes towards
enhancing competitiveness of EAC industries, which is crucial in ensuring that the industry
competes effectively against similar products imported from rest of the world.
iii) Impressive firm level production statistics among the few firms that provided the data shows
feasibility of a robust monitoring system that can be used in monitoring firm level application of
duty remission raw material in production of finished products.
iv) Acknowledgement among some respondent firms that even though the finished products were
meant for home use, they ended up exporting some to the EAC region. This fact is collaborated
by firm level data that was availed on their exports to the EAC and our macro trade flow analysis
of the finished products using data provided by customs. The outcome of this analysis is discussed
in the section on exports below.

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b) Exports of finished products meant for home use and produced using sugar for industrial
use
In absence of comprehensive data from a monitoring system on end use of the finished products
manufactured using sugar for industrial use, we assigned HS codes to the finished products that are
listed in the EAC Gazettes to enable an assessment of the exports using data availed by Revenue
Authorities. The assumption here is that some of the exports must be from the firms manufacturing
under the DRS. This analysis helps in the appreciation of the impact of DRS in boosting the
beneficiary countries’ exports as well as in demonstrating the necessity of the DRS in increasing the
share of regionally sourced finished products in a market that is dominated by imports from outside
the EAC.
As evidenced in the table below, the four DRS Sugar for industrial use recipient countries exports into
the EAC market of finished goods produced using this raw material increased from US$122mn in
2008 to US$231mn in 2012. Over the same period exports of these products to the rest of the world
recorded a decline from US$204mn in 2008 to US$189mn in 2012. This is a clear manifestation of
the significance of the regional market for the four countries industries that are producing under DRS
sugar for industrial use. Despite these countries making in-roads into the EAC market, their share in
the EAC market is quite small, averaging less than 15% over the review period (2008 – 2012)
Table 4.3: Exports of Burundi, Kenya, Uganda and Tanzania (DRS sugar for industrial use
countries) and EAC extra regional imports of finished products subject of
production using DRS sugar for industrial use (Refer Annex xx for the detailed
table showing product specific data)
2008 2009 2010 2011 2012
Exports to EAC (Intra-EAC Exports) 122,434,606 127,409,074 143,356,706 166,945,336 231,729,309
Exports to RoW (Extra EAC Exports) 204,898,313 131,402,695 169,991,455 153,433,957 189,022,178
Total EAC Exports 327,332,919 258,811,769 313,348,161 320,379,293 420,751,487
Imports from RoW 790,887,035 716,743,414 912,679,509 1,225,469,360 943,931,970
Total EAC Market (proxied by intra exports
and Extra Imports
913,321,641 844,152,488 1,056,036,215 1,392,414,696 1,175,661,279
EAC Exports share in the EAC market 13% 15% 14% 12% 20%
The above analysis underscores need to focus debate on DRS for industrial sugar to promotion of
intra EAC exports targeting the US$1.2bn market that is current dominated by imports from rest of
the world, to the tune of 80% or over US900m!
4.3.5 Regional availability of sugar for industrial use
Duty remission on sugar for industrial use is based on the assumption that the shortage or lack of
sugar for industrial use is a periodic phenomenon to be resolved through regional supply within a
given period, usually one to two years. This assumes existence of regional supply capability.
Using the 30% market intra-EAC export market share rule, this assumption was tested to determine,
whether indeed the region has adequate supply capability to warrant periodic duty remissions.
As illustrated in the table below, it is evident that the region does not have sufficient capacity to
supply sugar for industrial use. Intra-EAC exports accounted for only 0.4% of the EAC market
requirement for this raw material.

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Table 4.4: intra-exports and extra imports of sugar for industrial use
HS Code Description-raw
material
Trade Flow 2008-2012 Period
total in US$
% share
1701.99.10 Sugar for Industrial Use
Intra-Exports 3,231,113 0.4%
Extra Imports 769,834,859 99.6%
4.3.5 Recommendation arising from DRS for Sugar for industry use towards harmonization
of EAC DRS
As already alluded to in the above analysis, if EAC is to take advantage of the EAC market for
various finished products that are produced using sugar for industrial use, then the DRS for sugar for
industrial use should be considered as a necessity and as a rule rather than an exception. To that
extent, it is proposed as follows: -
i) The CET for Sugar for Industrial Use (HS Code 1701.99.10) be reduced to zero or 10%.
ii) An impact assessment of the sugar industry producers be undertaken to ensure their input to
this policy proposal, especially in view of the regional industrial requirements and the huge
unexploited potential that dictates the required levels of supply. The objective will be to agree
on 0% or 10% but not to retain sugar for industrial use as a sensitive product and to agree on
conditions which once attained, the CET of 0% or 10% can be reviewed upwards.
iii) The EAC identifies all manufacturers in the EAC region that use this raw material and
register them as approved manufacturers, for purposes of customs applying the above duty
rate for importation by these firms.
iv) The EAC establishes a monitoring system to monitor application of the sugar for industrial
use in manufacturing the approved finished products.
v) Heavy penalty by tied to diversion of the sugar to any other use other than the intended
purpose.
vi) Mandatory monthly reporting on level of utilization of the imported products and volume of
finished products produced and used in the domestic market or exported.
vii) All products produced using DRS for sugar for industrial use be allowed into all EAC markets
on duty free basis, provided they meet the EAC Rules of Origin.
4.4 Duty Remission on Paper products for use in manufacture of finished products
for home use
4.4.1 Policy objective for granting paper products duty remission
A review of the EAC Gazettes for the period 2007 to 2012 shows that duty remission on paper
products has been granted to 42 products/tariff lines (going by the EAC Tariff Book of 2012). Out of
this, 8 products/tariff lines attract a CET rate of 10% while the rest, 34 products/tariff lines attract a
CET of 25%.
Industry survey and responses from the customs authorities reveal the following to be the main
reasons behind the application for DRS for paper products: -
a) Lack of raw material within the region.
b) Increasing competitiveness of the final products. To quote some of the respondent firms:
 ‘10% duty rate on certain tariffs of paper and paper board for Non TREO transactions will
make products competitive in the region’.
c) Enhancement of cost effective production and competitiveness.

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Duty remission that has been granted over time has been 0%, meaning reduction from 10% and 25%
to 0%.
4.4.2 Quota Allocation for importation of paper products under EAC DRS
Over the review period, a total of 69 manufacturing firms from Kenya and Tanzania were allocated a
total 456,558 metric tonnes to import on duty free basis over the review period (2007 – 2012). A bulk
of these (73%) were allocations to Kenya approved manufacturers.
Table 4.5: Quota allocation for importation of paper and paper products under duty remission
2007 2008 2009 2010 2011 2012 Period (2007 – 2012)
total
Number of
firms
Kenya 15,520 95,528 126,517 83,868 8,269 3,835 333,537 49
Tanzania 34,430 0 0 47,908 40,683 0 123,021 20
Total 49,950 95,528 126,517 131,776 48,952 3,835 456,558 69
The paper and paper products were to be used in the manufacture of finished products for home use.
The various types of finished products that were approved for production are listed in the table below.
Table 4.6: Number of approved manufacturers and approved finished products for
manufacture using paper and paper products imported under EAC DRS
Country Number of approved
manufacturers
Finished products
Kenya 49 1. Books
2. Text books
3. Exercise books
4. Booklets
5. Book Covers
6. Exam Papers
7. Exercise books
8. Inner boxes
9. Cartons
10. Boxes
11. Packing Material
Scratch cards
Tanzania 20 1. Books
2. Text Books
3. Cover papers
4. Exercise Books
5. Exercise books
Book Covers
4.4.3 Quota utilization in production of approved finished products using DRS paper
products
Data on volume of production of the finished products was not available. This is attributed to the
weakness in the DRS monitoring system, where the firms are either not required to file quarterly
returns (as is the case in Tanzania) or where even though the firms file annual returns (as is the case in
Kenya) no analysis or monitoring is done. This problem is also inherent in the DRS quota allocation
where firms are not required to give an estimate of expected volume of finished products to be
produced using the DRS raw material.

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Efforts to get this information from the industry were limited by poor response from the target firms.
For instance only 4 firms that were allocated quotas for importation of paper for industrial use over
the period 2007 to 2008 responded by completing the structured questionnaire seeking to establish the
utilization of the raw material in production. The distribution of these firms by country is as follows:
Kenya (2 firms), Tanzania (2 firms).
Despite this limitation, the following observations from the 4 lead regional firms in manufacture of
paper products will contribute towards policy proposal for harmonization of DRS for paper products.
a) DRS on the paper and paper products is crucial to reduction of the cost of producing the finished
products. This contributes towards enhancement of competitiveness and supporting regional
industrial capacity for production of essential paper products such as exercise books for use in the
education sector. DRS therefore contributes towards making learning material affordable.
b) Contradiction in tariff regime where finished products and products used by regional industries to
manufacture the finished products in the region are subjected to the same tariff rate of 25%. This
has the effect of killing the regional industries and making EAC import dependent on products
that the region has capability of producing. Through DRS, manufacturers have been spared and
are clamouring for rationalization of CET to reflect this reality.
c) There are cases of finished products for home use that have ended up being exported to the
regional market. This should be accommodated under the EAC SCT framework, where such
goods should be allowed to be traded intra-regionally freely.
d) The significance of DRS in EAC industrial and trade development is evidenced in firm level
responses. The following is a quote from one of the respondents on the perceived benefits from
the DRS:
 “We have benefited from the reduction of production costs due to our firms procurement of
100% inputs imports under EAC duty remission scheme.
 We have been able to compete internationally with other firms from within and without.
 We have been able to use our installed capacity due to the affordability of the inputs under
this scheme.”
4.4.4 Impact Assessment of DRS paper products on EAC Economies
The EAC intra regional exports of raw material paper and paper products that benefit from duty
remission averaged around US$25m over the review period, with total exports in 2012 standing at
US$21m.
Table 4.7: Exports of DRS raw material paper and paper products to EAC region, figures in
US$
2008 2009 2010 2011 2012
Kenya 13,021,264 4,092,060 2,369,862 1,955,630 1,674,829
Rwanda 149 172,297 3,276 5,173 531
Uganda 324,375 292,002 268,163 88,421 2,243,626
Tanzania 19,723,819 20,379,388 19,344,060 25,555,409 17,244,736
Total 33,069,607 24,935,747 21,985,361 27,604,633 21,163,722
The analysis of the performance of EAC’s finished paper and paper products in the EAC market
shows the need to address the industry’s capacity to compete with extra regionally sourced finished
products. As indicated in the table below (Table 4.8), EAC’s share of the regional market averaged
39% over the review period.
This finding implies that although EAC Partner States are trading intra-regionally on the raw material
for production of finished paper and paper products, there exists market potential for over 61% of

EAC DRS Study Draft Final 112013

EAC DRS Study Draft Final 112013

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