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Cost of imports to go up soon following KRA order on cargo

 A container being offloaded from a cargo ship at Lamu Port. [Omondi Onyango, Standard]

Prices of imports are set to go up in the coming weeks after the Kenya Revenue Authority (KRA) directed that Small and Medium Enterprises pay taxes based on the value of products and not their weight.

According to the new directive which took effect on March 1, consolidated cargo will not cost Sh200 per kilo as has been the case. The pricing will be based on the Transaction Value as per the World Trade Organisation (WTO) General Agreement on Tariff and Trade.

KRA will support consolidation of cargo as per the law on carriage from country of supply, but once they arrive in the local ports they must be deconsolidated and declared as per the law on Transaction Value.

KRA says the order is geared towards ensuring fairness, equity and effectiveness to all taxpayers.

This implies that once goods are consolidated from the origin and shipped to Mombasa/Nairobi, they will be deconsolidated and declared by the individual importers. This will be done with their pins and duty paid as per the invoice value of the goods.

Kenya International Freight and Warehousing Association (Kifwa) recently raised concerns on cargo clearance.

"This directive comes a day after someKifwa directors specialising on conventional cargo clearance (cargo declared based on Transaction value) decried unfair competition from those clearing consolidated cargo, citing gross undervaluation," noted tephen Ragui a senior staff at the Superb Cargo Shipping Agency Limited in a letter to their partners.

Kifwa chairman Roy Mwanthi said they welcomed any move or business plan by KRA that will facilitate easy clearance of cargo at the Port of Mombasa.

"What we will not allow is the undercutting and unfair competition from those clearing consolidated cargo through gross undervaluation and lowering of prices by agents," said Mwanthi

In an earlier interview with The Standard, KRA board chairman Anthony Mwaura noted that there would be increased vigilance and a system that would seal the loopholes people use to undervalue imports.

"In the Port of Mombasa alone, we lose sh428 billion per year, this is a huge haemorrhage from one of the tax arteries," he said.

Mwaura had said KRA was considering doing valuation at the port of entry before goods are shipped in to avoid undervaluation.

An insider told The Standard that the old system gave some unscrupulous traders room to evade taxes and sneak in counterfeits.

In 2019, KRA dropped the Simba System and launched a new Integrated Customs Management System (iCMS) a 'robust intelligent system that consolidates all customs cargo clearance processes to one point of access with a view to improving customer experiences.

This it noted was a bid to streamline customs operations as well as automate manual operations. ICMS systems modules include manifest, clearing, licensing, exemption, bonds, valuation, tariffs, gates, CFS Modules, border process and Risk Management.

A few months later in the same year, KRA together with Kenya Bureau of Standards and Kenya Ports Authority made it mandatory for any consolidator to be registered in Kenya. The move was aimed at addressing complaints by some importers who had been using brokers as consolidators in various foreign countries.

The new directive by KRA is likely to push up the prices of imported goods.

The move comes at the same time with the rise in excise duty stamp that will push up the prices of water and soda. This came after the High Court in Nairobi dismissed an application by the Law Society of Kenya (LSK) which had sought to block the increase.

Justice Hedwig Ong'undi's ruling means that the government can now pass the cost of the stickers to consumers, resulting in a price hike for water and soda.

The proposed stamp cost also affects beer, Cider, Perry, Mead, Opaque beer, and mixtures of fermented beverages with non-alcoholic beverages from Sh1.5 to Sh3 per stamp.

Wines including fortified wines, and spirits exceeding 10 per cent will rise from Sh2.8 to Sh5.0 per stamp.

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