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Kenya in talks with EU for tax refunds

17 October 2014, 09:24

Nairobi - Kenya is currently in discussions with the European Union (EU) in order to get a refund on duties paid for the country's exports to the EU since Oct. 1, a government official said on Thursday.

Principal Secretary in the Ministry of Foreign Affairs and International Trade Karanja Kibicho told a news conference in Nairobi that Kenyan exporters are currently paying about 7.5 million U.S. dollars monthly after losing preferential trade status on Oct. 1.

"Now that we have reached an agreement on the Economic Partnership Agreements (EPA), Kenya will be seeking a refund in order to cushion exporters," Kibicho said. "Our interest is to ensure that the trade volumes between the two regions does not reduce."

Kenya, together with the other East African Community (EAC) partners states have been negotiating with the EU for more than a decade for a new trade agreement to replace the previous regime.

Last month, the East Africa Community (EAC) Council of Ministers meeting held in Tanzania and agreed on the language for the outstanding issues. However, a proposed a joint ministerial meeting with the EU to conclude and sign the agreement failed to materialise before the deadline.

Also read: East Africa countries reach trade deal with EU

On Oct. 1, Kenyan exports to the EU started attracting Generalized System of Preference (GSP) tariffs while the other four EAC Partner states moved to the Everything But Arms (EBA) arrangement by virtue of them being Least Developed Countries (LDCs). Kenya is ranked as a developing country.

Under the new GSP system, Kenyan flower exporters must attach a form indicating the origin of the flowers to benefit from duties that go as high as 8.5 percent. Only carnations exported to the EU from Kenya do not attract duty under the GSP.

The change of regime to GSP meant this privilege of duty-free flower exports is a reserve for countries that have ratified EPAs concluded with the EU.

Kenyan agricultural goods, including cut flowers, will in the meantime be subject to various EU GSP tariffs until the EPAs are fully implemented in January, 2015. These products include vegetables, beans, sweet corn and processed juice.

Kibicho said that it will take a minimum of three months for Kenyan goods to the reinstated into the preferential trade regime with the EU.

"The next stage will be to ensure that the agreement conforms to the World Trade Organization standards," he said.

Kibicho said that the final process will be for the EU and EAC senior government officials to sign before it is ratified by the EU parliament and the EAC member states' parliaments.

EU Head of Delegation to Kenya Lodewijk Briet said that the EPA's will open 100 percent of EU's market to EAC goods. "However, the EAC will open its markets gradually to the EU," he said.

 - Xihnua

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