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Your Guide to Export Trade Corner
Tariffs and customs classification Each country has a tariff schedule, or list, indicating various tariff rates. However, a product may have several rates. For example, there is often a rate applicable to MFN (Most Favoured Nation), a non-MFN, or preferential, according to the specific trade agreements. The tariff structures of countries vary. Tariffs tend to be high in developing countries and lower in developed countries. Tariffs on agricultural products tend to be higher than on others. It is important for the exporter to obtain the most updated schedule for information on the major tariffs and duties of the target market. Most trading nations have adopted the HS system (the Harmonized Commodity Description and Coding System) to assign a product a code that is recognizable by customs officials in other nations. The HS system is an international six-digit commodity classification developed under the auspices of the Customs Cooperation Council. Individual countries have extended it to ten digits for customs purposes, and to 8 digits for export purposes.

“Made-in” and rules of origin

Today’s supply chains are global. This means the activities required to get a product from the point of its conception to its design, production, distribution and so on, are undertaken by various firms or links along the chain that are spread across geographic regions.
Materials may be sourced in one county, the pieces put together in a second and third country, and the distribution managed from another country.

Due to the fact that regional trade agreements give preference or apply tariffs according to agreements between countries, governments have to know the product’s country of origin. If it passes through processes in many different countries, customs must use the rules of origin to know which agreement applies. Thus governments demand stamps/marks of “Made in Kenya” to be put on the product.

For imports under preferential agreements, the importing country has to make sure the lower rate is applied if it originates from the country that is supposed to receive the preference. Therefore, they need evidence to indicate clearly that the product was produced either entirely, or at least substantially, in the preference-receiving country.
National systems used to determine rules of origin vary. However, they are based on the two following principles:


1. Value added: a product is considered to have been manufactured in the country where a specified percentage (40-60% - it depends on the national legislation; e.g. under COMESA raw materials or value added component be above 35%) of the product value has been added.
2. System of classification (HS): a product is considered to have originated in the country where, as a result of processing, its tariff classification changes.

AGOA (African Growth and Opportunity Act) and rules of origin

One of the key issues for African textiles manufacturers in the extension of AGOA was the renewal of a provision that excludes African beneficiaries from complying with the normal, stringent rules that define where textiles and apparel products are made to determine if they are eligible to receive AGOA benefits – the so called ‘Rules of Origin’. AGOA III extends this waiver to 2008. In effect the designated African country beneficiaries known as the ‘Lesser Developed Beneficiary Countries’ (LDBCs) under the Act can continue using fabrics produced in countries not covered by AGOA (so-called third country fabrics) in the production of clothing products for export to the US. Kenya is deemed to be an LDBC for this purpose.
International standards

Countries require that imported goods conform to mandatory quality, health, safety and environmental standards. Standards are an important tool in international marketing of products and services because they convey information that makes it easier for the buyer to understand and trust in their quality and specifications. Buyers may be hesitant to purchase products that are based on standards which are different from the buyer’s own country. Standards also exist to protect the health and safety of populations as well as the environment.
Complying with international standards makes it easier to access foreign markets. Like everything else, standards change and exporters should stay on top of these changes. Stay in touch with Kenya Bureau of Standards and they can provide you with the latest information on standards.

 
 
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