East Africa's tariff policy changes gradually phasing out second-hand clothing and footwear imports

East African Community (EAC) partner countries have agreed to waive the three-year duties and VAT apparel and textile manufacturers, the products involved in the tax exemption for the production of investment in equipment not available locally, fabrics and accessories. The move is to promote local production and reduce production costs. This is to promote the textile and leather industry as well as one of the strategies to slow the import of second-hand clothing, footwear and other leather goods from outside the area.

The East African Community partner countries will now adopt a three-year strategy (from 2017-2019) to phase out second-hand clothing and footwear imports. To achieve this goal, they will increase the tax on these products, require importers to obtain import licenses in accordance with EAC standards and achieve classified imports of each bundle. A proposal on the promotion of the textile and leather industry development method states that, over the next three years, EAC should increase domestic supply quota for all export processing zone enterprises in 20% of the basis of existing.

In the unloading part, companies should pay the necessary common external tariffs (CET) and must strictly abide by the rules of origin of the EAC. In addition, the policy also states that partner countries will establish lint banks based on Uganda cotton (14905, -155.00, -1.03%) buffer stocks to protect lint demand in spinning mills and downstream value-added industries.

All partner countries that produce lint will set a goal that the local value added of domestic lint will reach 30% and the threshold will increase to 50% within five years. The East African Community has set up a four-part tariff structure for cotton, textiles and clothing to promote veil and fabric production. The details are as follows: the import tax on raw materials that is not available in the region is 0, the input for intermediate products is 10%, the fabric is 25%, and the garment is 40% or 5 USD/kg. According to the document, the relevant departments should review the current common external tariffs and adopt the above new tax rates.

This recommendation follows the instructions of the East African Community Head of State last year, which refers to research on ways to promote the development of the textile and leather industry, as well as the establishment of mechanisms to stop the import of second-hand clothing, footwear and other leather products from outside East Africa. To implement these two directives, the Secretariat conducted two studies, one to study the value chain of cotton, textiles and clothing, and the other to study the value chain of leather and footwear.

The study found that the cotton trade has great potential but has not yet been developed. “Suzhou Shangqiao New Foreign Trade” New Shortcuts for SMEs' Foreign Trade The East African Community has the potential to become a major player in regional production and cotton, textile and apparel trade. By 2025, the potential trade volume of the textile industry in the region will reach $3 billion, while the region’s exports in 2013 totaled $340 million.

In addition, research indicates that the growth in second-hand clothing imports has hampered the development potential of the industry. Overall, imports of second-hand clothing and footwear have grown in all East African Community partner countries, and trade in 2015 reached $151 million, accounting for 8% of global imports. Second-hand clothing and footwear are mainly imported from the United States, the United Kingdom and Canada. Second-hand clothing and footwear imports in Africa, about 40 percent of the decline in production and the employment rate decreased by 50%.