By Jackson Okoth

 Ugandan importers using Mombasa port have threatened to take legal action against Kenya Revenue Authority (KRA) over a directive that they deposit a cash bond equivalent to the value of imported cargo or bank guarantee before clearing their goods.

Last week, KRA directed that all transit sugar and motor vehicle imports, whose capacity exceeds 2000cc, must pay a cash bond equivalent to the value of imported cargo or bank guarantee before leaving the port of Mombasa.

However, in a letter dated September 17, 2012, Uganda’s Minister of Trade, Industry and Co-operatives protested to Kenya’s ministries of Trade and Industry threatening retaliatory measures against Kenyan imports to Uganda if the cash bond is not withdrawn.

“I have been informed by the Uganda business community that KRA, under notice CUS/L&A/LEG/1, has unilaterally decided on a requirement for a cash bond/bank guarantee on transit sugar and motor vehicles of 2000cc and above,” said Amelia Kyambadde,  (pictured) Uganda’s trade minister.

The letter, also copied to the Uganda High Commission in Nairobi, warned that KRA’s action constitutes another non-tariff barrier imposed by Kenyan authorities on its transit cargo.

It said the directive contravenes East African Community Customs Union protocol and decisions reached by the Council of Ministers in March 2012, on removal of non-trade barriers in the community.

“If Kenya needs an instrument to regulate regional trade in sugar and other products, a cash bond is not the instrument to apply,” said Kyambadde.

While KRA’s motive could have been to prevent dumping of transit sugar and motor vehicles destined for neighbouring countries, failure to alert the Ugandan government of the action in good time might work against it.

Although officials from Uganda Revenue Authority (URA) held closed-door meetings with KRA in Nairobi, last week, it appears a mutual solution was not found.

Clearing and forwarding agents, most of who handle transit goods, have accused a senior KRA official of skipping a crucial meeting to discuss the matter.

 “We are still having a stalemate as most traders are not able to meet these new conditions imposed by KRA, especially the cash bond,” said Boaz Makomere, Secretary General-Kenya International Freight and Warehousing Association (Kifwa).

While a copy of the memorandum of understanding signed between KRA and URA, seen by Business Weekly, indicates that the new KRA requirements have been suspended, the agents claimed nothing has changed.

On the other hand, Uganda has accused Kenya of importing huge tonnes of cooking oil and sugar, under duty remission, implying that there is a domestic shortfall. Kenya then re-exports these non-originating products through a number of channels into Uganda without KRA imposing any taxes or non-tariff barriers.

Dumping of vehicles

KRA is thought to have come up with these ‘punitive’ measures to prevent shipments of transit sugar and vehicle imports, destined for Uganda, from being diverted to the local market.

Efforts to obtain a comment from KRA communications department were fruitless by the time of going to press.

However, credible sources at KRA said trail huge tonnes of imported sugar on transit from Mombasa port to Kampala were finding its way back to the Kenyan market. It is also thought that transit vehicle imports of more than 2000cc engine capacity, were being diverted to the local market.

However, clearing and forwarding agents have rejected the claim saying revenue authorities in Kenya and Uganda have the necessary paper trail to establish whether transit cargo was being diverted.

 “Dealers in the sugar import business are usually few and large operators, a fact that makes it easy for revenue authorities to trace their activities. Imposing a punitive cash bond will not help,” said Makomere.

And as result of the dispute, transit sugar to Uganda is piling up at the Mombasa port.

A crisis meeting between KRA and officials from the Uganda Revenue Authority officials appears to have yielded little progress, with an apparent lack of communication noted during these high level consultations.

The KRA directive, which was issued on August 29, applies to all sugar imports and cars. Until recently, the normal practice has been through insurance bonds and not cash. “These new guidelines by the customs department were done without any consultations with other stakeholders, creating serious ramifications on regional trade,” said William Obonyo, the Nairobi branch Kifwa chairman.

Poor communication

The agents have also complained of poor communication from KRA on the new requirements, including the fact that it is unclear how soon cash is refunded once the transit cargo is cleared.

Uganda is the biggest user of the port of Mombasa, accounting for over 75 per cent of all transit cargo.

 “I urge for a consultative forum that will bring together all stakeholders to discuss the best route to take, taking into account the World Trade Organization rules and the EAC protocol,” said Obonyo.