Trade between the East African Community (EAC) and India is poised to get better following an agreement aimed at easing clearance of goods between the two regions.
The agreement on a Joint Action Plan between the EAC and the Government of India will pave the way for a full Mutual Recognition Agreement (MRA) between the two parties, to aid faster clearance of their goods and lower costs of running their business.
A statement from EAC said that once the MRA is realised, it will benefit companies under the Authorised Economic Operators (AEO) Programme run by the EAC Partner States under the coordination of the EAC Secretariat since 2008.
AEOs are business operators and trade facilitators involved in international trade, which are granted preferential treatment by customs agencies. They apply and get this status after exhibiting high levels of compliance to trade regulations.
It works on the principle of compliance, trust and partnership whereby, economic operators that demonstrate compliance with Customs supply chain security standards, are recognised as low-risk clients with whom Customs enters into a partnership arrangement.
According to the World Customs Organization, Authorized Economic Operators include manufacturers, importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors.
The Chairman of the Central Board of Indirect Taxes and Customs of India, Ajit Kumar, said his country is pushing for a robust, safe and largely digitized system, on one hand, and a pool of trusted and validated trading entities on the other hand.
“A fully digitized system and valid trading entities would guarantee security in the entire supply chain in trading across borders, and an AEO-MRA agreement was one such endeavour,” says Kumar.
The EAC says the selection of India as an MRA partner was based on the principle of mutual recognition and the fairly steady trade between the EAC and India over the past five years (2014 – 2018), before Covid-19 disruptions, which cumulatively amounted to over 30 billion dollars.
India’s major exports to EAC include motor vehicles, cycles, wires, cables, industrial machinery, electrical machinery or equipment, iron and steel parts, tools, packaging, food processing, and electrical items and parts. Trade between the two is highly imbalanced, with India exports to EA amounting to more than 6 billion dollars, against imports with less than 2 billion, mainly tea, petroleum minerals and spices.
This MRA will enable facilitation of EAC traders under the AEO Programme while in India and vice versa, enabling fast clearance of their goods and as a result savings in costs and time.
Currently, there are 135 AEOs under the EAC Regional AEO programme eligible for facilitation in any part of the EAC where they are conducting business. The EAC Director General for Customs and Trade, Kenneth Bagamuhunda said that the MRA, once finalised and implemented, would have a big impact on the flow and growth of trade between East Africa and India.
“Besides the optimism, however, we are aware that the path to an MRA is usually lengthy, meticulous and tedious.
The signing of the Joint Action Plan which we are doing today, signals an important milestone in this journey that we have started, and we are delighted to undertake it,’’ said Bagamuhunda.
The AEO programme is a concept derived from the World Customs Organisation (WCO) SAFE Framework of Standards, an instrument that was adopted by the WCO Council in 2005 to enhance facilitation and security of global trade.
One of the key benefits of being an AEO is reduced Customs controls when transacting business with Customs Authorities, and recognition as a low-risk and reliable business partner by other traders and government agencies.
“Further to saving trading costs and time, the MRA between the EAC and India is set to foster growth in sustainable trade between the two trade partners while eliminating non-tariff barriers and enhancing cooperation between the Customs administrations of EAC and India,” added the statement from the EAC Secretariat.
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