East Africa Court of Justice halts implementation of 25% duty on glass imports imposed by Kenya

TANZANIA – Tanzanian glass container manufacturer, Kioo Limited breaths a sigh of relief following the East Africa Court of Justice (EACJ) halting the implementation of the 25 percent excise duty on imported glass bottles into Kenya from the other East Africa Community (EAC).

In March 2020, Kenya amended its Excise Duty Act 2015 by imposing a 25 percent duty on imported glass bottles, excluding packages for pharmaceutical products.

Kioo Ltd challenged the decision in the EACJ, arguing that the amendment would discriminate against glass products manufactured in the other EAC partner states and give preferential treatment to locally-manufactured glass bottles in Kenya which are not subject to excise duty.

“This ruling is expected to give a reprieve to other companies importing glass into Kenya from the EAC, as we wait for final determination of the matter.”

Faith Macharia – lawyer representing the Kioo Ltd at the EACJ

In the application, the company said imposition of the excise duty was a beach of various provisions of the EAC Treaty, the Customs Union Protocol as well as the Common Market Protocol.

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The regional court granted an interim order to prohibit the government of Kenya from implementing the amendment.

“Imposition of excise duty on your products meant that glass products from Tanzania became more expensive compared to similar products that are locally manufactured in Kenya – and, therefore, Kenyan companies refrain from importing glass products from Tanzanian companies, or are imported at a higher landed cost, which has a direct impact on their cost of doing business in Kenya,” the Court stated.

Kioo Ltd exports almost 60 percent of its production to the EAC partner states. “This ruling is expected to give a reprieve to other companies importing glass into Kenya from the EAC, as we wait for final determination of the matter,” said Faith Macharia, a lawyer and partner at ALN Kenya which represented the firm at the EACJ.

Other than restricting glass manufacturers from other countries to access the Kenyan market, the newly imposed excise tax is also seen to hinder operations of the Kenyan glass purchasers who will have to rely on supplies from the two glass producers in the country.

To this end Kioo argues that they, together, cannot meet the total domestic demand but also do not currently have the capability to supply the technology that it offers.

This was the same notion held by Kenyan brewers who joined hands with other glass bottle users to protest the excise tax introduced, saying it will be punitive since the industry relies heavily on imports.

In a memorandum presented to the Departmental Committee on Finance and National Planning, the glass users comprising the Kenya Breweries Limited (KBL), Coca-Cola beverages Africa, UDV Kenya Limited, Kenya Wines Agency Limited (KWAL) and Trufoods Limited have asked that the excise duty be removed for being counterproductive.

“Local glass making companies do not have the capacity to serve increased orders. They lack modern glass technology, which prevents them from switching from one type of glass to the next efficiently and the protection of glass manufacturing companies in Kenya violates the principle of equity and fairness in the taxation of excisable goods.”

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“It will increase the cost of alcoholic products and soft drinks beverages in a season when household disposable income is facing the greatest negative impact due to the Covid-19 pandemic,” the manufacturers wrote.

On the flip side of the situation Kenyan glass manufacturers Consol Glass and Milly Glass have backed the 25% duty citing it is away for the government protecting the local industry.

“This is the government protecting local industry and if you look at our investment in glass in the region it has had a slow growth because of imports that are being dumped from Egypt, the Middle East and Comesa countries,” said Consol Glass Managing Director Joe Mureithi.

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