The East African Community in its June 30th Gazette released amendments to Article 26th of the 5th Schedule to the East Africa Customer Management Act that provided for the current duty exemptions for Solar and Wind Generation products.
The practical impact of this as far as GOGLA is aware is that Solar Lanterns are likely to immediately attract a 25% import duty charge. Further, the LED lights within a Solar Home System Kit will also attract 25% Import Duties. It is noted that accessories i.e. radios, TVs and USB cables included with Solar Home Systems were already attracting import duties.
Previously Article 26 as amended in 2016 provided exemptions for “Specialised equipment for development and generation of Solar and Wind Energy, including accessories and deep cycle batteries which use and/or store solar power.”
The 30th June gazette amendments provide for:
- deleting the words “development and” coming immediately after the words “equipment for” and before the word “generation”
- inserting the words “Photovoltaic (PV) Modules, Direct Current Charge Controllers, Direct Current Inverters and Solar” immediately after the word “Energy” and immediately before the words “Deep Cycle Battery which use and/or store solar power”.
We at GOGLA would like to note that:
- The amendments are already being implemented, effective 1 July 2020 and apply to affected imports coming into the EAC with confirmation received on its application in Kenya and Uganda
- The exact interpretation and full impact these changes remains to be confirmed.
- The interpretation of what part of a solar or wind technologies constitutes development versus generation is uncertain and the intended application in this change
- The specific provision for PV modules, DC Charge controllers, DC inverters and Solar Deep Cycle Batteries do ensure that exemptions will continue to be provided. However, the exclusion of LED lights indicates a change from existing policy with respect to the treatment of SHS kits.
- The consistency in interpretation and application by the customs authorities across the EAC partner states remains to be confirmed. Initial indications are that there may be some inconsistency in this regard.
- The treatment of Solar Lanterns remains unclear. With the recent introduction of 14% VAT on solar products in Kenya, any application of the 25% Import Duty for Solar Lanterns raises immediate concern, representing a 39% new cost impact on solar lanterns, significantly impacting affordability undermining the policy goals of the EAC partner states for clean energy access and commitments towards green energy solutions under international agreements.
We have initiated engagement with the EAC, the EAC Partner States and other stakeholders to seek clarification on the intent and application of these amendments and would like to:
- Alert all members on these changes
- Request members to inform Patrick Tonui, the East Africa Regional Representative at email@example.com on your experiences and any changes arising from these amendments including any interpretation and application of these changes on their products
A meeting of the East Africa Policy Working Group will be conducted shortly to review the ongoing changes in the policy and regulatory environment for the sector in the region.