Kenya Revenue Authority (KRA) is embroiled in a new tussle with shippers over newly introduced rules that require cargo owners to file additional documents to clear goods at the port.
The new regulations require importers to file cargo manifests together with a bay plan from the port of origin indicating quantities, to ensure proper tax is paid for all imports. (RELATED: Rising costs force shippers to give port a wide berth)
Shippers and importers are opposed to the new Manifest Management System (MMS) which involves filing of the two documents through the unified KRA Simba and Kwatos (Kenya Ports Authority) systems, citing the additional delays and penalties.
Disagreement over the documentation, which has since reportedly slowed down the pace at which cargo is moving out of the Mombasa port, is costing shippers millions of shillings in demurrage charges that may soon hit consumers through increases in retail prices.
Tax officials said previous failure to access the description of goods from ports left big loopholes for customs revenue leakages besides allowing the entry of illegal items such as narcotics and weapons.
Ships have only been presenting manifests with Kenya Revenue Authority (KRA) while the port got the bay plan.
The Manifest Management System allows KRA to compare the bay plan filed by the port of origin with the ship manifest to determine whether there is wrongful declaration of contents — subject to a five per cent allowance.
Random samples of variances in weight compiled by KRA showed in one instance that a container carrying 30,100 tonnes, reflected under the bay plan, had only 2,508 declared in the manifest filed for customs payment. That meant it would have paid tax for 17 per cent of the content.
“We couldn’t understand why different data was given for the same consignment,” Customs commissioner Rose Namu told a meeting called to address the concerns of shippers and shipping lines. “We have come to realise our concerns were legitimate and genuine.”
She told the meeting that shipping line Maersk had confirmed to her that such discrepancies do not occur in Western countries.
Customs is levying charges on ships that fail to provide the bay plan for inspection but shippers contend that this is delaying landing of cargo. The authority last week declined to suspend both the fine and the bay plan requirement as requested by shippers.
“We have asked KRA to suspend the fines until a taskforce is set up to sort out the challenges,” said James Mackay, chairman of the Kenya Ships Agents Association.
Mr Mackay said most ports have no capacity to determine the weight of containers, resulting in congestion during verification and additional costs that must be passed on to consumers.
KRA has so far only agreed to the formation of a stakeholders’ committee and the drafting of a notice for forwarding to global ports on the new requirement.
Shippers insist that delays in securing the bay plans is costing them large sums of money in demurrage charges for containers kept in the port awaiting arrival of the documents.
A number of containers were removed from the port and their whereabouts are unknown after KRA gave shippers three weeks to comply with the rule. This has raised suspicions over the nature, value and import status of the contents in the containers. Compliance has, however, since increased.
Official statistics show that at the beginning of this month, the proportion of approved cargo grew to 97 per cent from an earlier rate of 85 per cent.
But the shippers said the new rules had only added to the inefficiency at the port with huge cost implications.
“Trade is being frustrated. The shipping line has no control over cargo because the shipper gives bare minimum information,” said P.J. Shah, a representative of the Kenya International Freight and Warehousing Association (Kifwa).
Mr Shah termed the new measures impractical, saying under-declaration is a port of origin problem that should not be passed on to importers through penalties.
Kenya Maritime Authority managing director Nancy Karigithu confirmed reports that trade was being affected but KRA said it would address the issues as they arise.
Mr Mackay, who is also the vice chairman of shipping line East Africa Inchcape Shipping Services, admitted that recent suspension of some shipping lines’ services from Mombasa had nothing to do with the manifests rule.
A bay plan provides a general description of position and weight of containerised goods in a ship and although shippers say it is not part of the customs documents, KRA insists the system has been effective in the US, Canada and China in deterring tax evasion and illegal imports.
Ms Karigithu, however, said opposition to the rules may be coming from players who have things to hide.
“The bay plan is not a customs document but why wouldn’t it agree with the manifest?” she asked.
KRA brought the new rules into force in April although the East African Community Customs Management Act 2004 Section 25 requires it for risk management purposes.
Clearing and forwarding agents have also expressed reservations over the new measure.
Hezron Awiti of Kifwa said KRA had other means of detecting underdeclaration, including random scanner checks.