ALP Law Series

Taxes, Goods’ Classification and Unfair Trade Practices: Addressing disputes involving Tobacco before the EACJ and National Courts

By ALP Advocate
on
February 22, 2020

Article No 2/2020 of the ALP Law Review Series addresses disputes over customs and trade in the context of regional trade integration in the East African Community (EAC). The article reviews three decisions rendered in 2019 that involved disputes over taxes, classification of goods, and unfair trade practices within the EAC customs union and common market legal regime.

Article No 2/2020 of the ALP Law Review Series addresses disputes over customs and trade in the context of regional trade integration in the East African Community (EAC). The article reviews three decisions rendered in 2019 that involved disputes over taxes, classification of goods, and unfair trade practices within the EAC customs union and common market legal regime. In all three decisions, the “goods” in question entailed tobacco products. The tax dispute before the regional court, East African Court of Justice (EACJ), in British American Tobacco (U) Ltd v Attorney General of Uganda, EACJ Reference No 7/2017 involved higher excise duty rates for BAT cigarettes manufactured in Kenya and imported into Uganda. The EACJ considered the higher excise duty rates for the Kenya-manufactured cigarettes (as compared to the Ugandan locally-manufactured cigarettes) to constitute de jure tax discrimination in violation of the customs union protocol and as inimical to the free movement of goods that requires equal treatment of goods from all Partner States. The EACJ directed Uganda to “align [its] tax laws with Community law applicable to goods from EAC Partner States”.

The other two decisions were of the national courts of Kenya and Uganda in Republic v Commissioner of Customs & Border Control ex parte Jayraj Impex Ltd. [2019] eKLR and Leaf Tobacco & Commodities Uganda Ltd v Commissioner of Customs, Uganda Revenue Authority & Another [2019] UGCommC 7 respectively. In the Jayraj Impex Ltd. case, although the dispute involved classification of imported tobacco and the code under which it was to be classified under the EAC Common External Tariff, an application for judicial review was deemed premature by the High Court of Kenya since an internal review by the Commissioner for Customs was still available under section 229 of the EAC Customs Management Act (with an appeal to the Tax Appeals Tribunal as a follow-up dispute resolution procedure). The decision highlights the fact that the resolution before the national courts of trade and customs related disputes in the EAC is still subject to administrative remedies available under the customs management laws (in particular before relevant national customs officials or authorities). In the Leaf Tobacco case, the dispute concerned whether the national revenue authority, Uganda Revenue Authority, had a duty to prevent unfair trading practices in administering customs services, in light of the allegations that a Kenyan registered company was importing through Uganda into South Sudan cigarette products under Leaf Tobacco’s trademark. Although the High Court of Uganda deferred to absence of reciprocal arrangements as required under the EAC customs management legal regime, the decision is a stark reminder of the attendant difficulties of trade in goods in the EAC, especially in situations of transit of goods to other Partner States and the “gray areas” of unfair trade practices and smuggling. However, the two cases are to be seen as part of a bourgeoning jurisprudence on part of national courts applying EAC Community law to trade and customs disputes.

The detailed Article No 2/2020 is available for download as a PDF file here.