The millers have accused Kenya officials at the borders of letting zero-rated wheat from Tanzania enter the country, yet Kenyans pay up to 50 per cent duties when exporting their products to East Africa.
“If we export to other countries we pay taxes, but Tanzanians are bringing in zero-rated wheat products. We have at least 10 trucks from Tanzania every day,” a miller who requested anonymity told journalists in Nairobi.
Cereal Millers Association chairman Nick Hutchinson said Tanzania imports its wheat, hence should not enjoy tax incentives under the East Africa Community Customs Union (rule of origin), which gives preferential treatment to locally produced goods.
“We need equal treatment. We can only do this by making sure duty is paid on Tanzania wheat flour. Informal imports brought in through the borders are affecting Mombasa and Nairobi,” Hutchinson said.
He said Kenyan millers are supporting local farmers by buying 10 per cent of their stocks locally. This has made Kenyan products more expensive giving Tanzania an edge over Kenya.
“In Tanzania, everything is imported so their costs are low compared to Kenyan millers. We would like to see Tanzania pay duty to Kenya. We pay taxes when taking our products to Uganda and other countries,” he said.
The Kenya-Tanzania borders of Namanga, Loitokitok, Lunga Lunga and Isibania (Sirare) have been named the notorious cross points in the trade.
“The wheat flour from Tanzania is brought in sacks and sold directly to bakers,” Hutchinson said.
The move, the Kenyan millers say, is likely to render the Kenyan mills redundant if a level playing ground is not created. A 50-kilo bag of wheat flour from Tanzania is sold at an average KSh2,400 in Mombasa.
Under the EAC customs union rule of origin 2015, goods shall be accepted as originating in a partner state where the goods are wholly produced in the partner state.
Kenyan wheat exports to Tanzania, classified under HS Code 1101.00.00, attract 50 per cent import duty.
EAC rules of origin are still not applicable to wheat flour due to the difference in duty rates across the region. The Kenya Association of Manufacturers CEO Phyllis Wakiaga said though the 2015 rules are better than the older regime, there are still loopholes.
“In some cases rules have been used as NTB (Non-Tarif Barriers),” Wakiaga said.
Kenyan 42 millers pay 10 per cent duty on imported wheat. “Our neighbours are taking advantage of the price difference,” Hutchinson said.