Step up war on cigarette smuggling

What is the state of regulation of trade in counterfeit goods and other forms of illicit trade in manufactured products in Kenya?

How effective are the main regulatory bodies such as the Anti-Counterfeit Agency (ACA), the Kenya Bureau of Standards (Kebs), the Weights and Measures Agency, the Kenya Revenue Authority’s department of customs and the Kenya Industrial Property Institute (Kipi)?

I raise these questions as an entry point to a discussion of the recent decision by the government to ratify the WHO Protocol to Eliminate Illicit Trade in Tobacco Products (ITP) under Article 15 of the Framework Convention on Tobacco Control.

In May, we became the 59th signatory to this treaty whose main objective is eliminating all forms of illicit trade in tobacco products through cooperation between countries that have ratified the protocol.

Yet I still feel that ratifying the protocol was just but the easy part. For the signing of the protocol to make a significant impact, we will have to follow it up by introducing new policy, fine-tuning the legal framework, and strengthening the existing mechanisms and institutions mandated to regulate trade in contraband and counterfeit goods. Accurate data on counterfeited and contraband cigarettes and tobacco products in Kenya are hard to come by. However, what is clear from the anecdotal evidence is that cigarette and tobacco products are among the most illicitly traded manufactured products in this country.

The evidence is in the trends you see when you go through reports on seizures and interceptions by law enforcement agencies, especially the ACA and authorities manning border controls.

And, the common denominator in all these seizures and interception of illicitly traded goods is thousands of boxes of cigarettes. Clearly, these frequent cases of seizure along the Eldoret Highway and Mombasa Port are a reflection of a booming black market for tax-evaded cigarettes at our border with neighbouring Uganda.

The reason officialdom has been slow to grasp the seriousness of the problem is that enforcement agencies are not obligated to report seizures of illicit products to a central agency on a regular basis.

Which is a pity because globally, the accepted wisdom today is that cigarettes are a primary target by illicit traders and whose trading must be interrogated keenly for counterfeits and contrabands. Smuggling syndicates target highly taxed fast-moving consumer goods like cigarettes because they are able to take advantage of differences in treatment of taxes between neighbouring countries.

With this region the oxygen nourishing the black market for cigarettes is the huge gap between what Uganda and Kenya charges in excise duty on cigarettes.

In Kenya, the excise duty rate on cigarettes is at Sh3,157 per mille, compared to Sh1,532 per mille in Uganda. Excise duty rates on cigarettes in Tanzania, Rwanda and Burundi are even much lower than the rates in Kenya.

Rwanda, with the lowest rate in the region, imposes an excise duty rate on cigarettes at Sh 1,037 per mille.

One of the main reasons the Kenyan market for cigarettes is flooded by illicit imports from nearly all countries in the region, including Southern Sudan and Somalia, is the disproportionately high excise duty rates in this country.

The policy implications are clear. First, we must increase co-operation with Uganda on a common approach to stemming the flow of illicit goods between our borders.

We will need to agree on a more stringent legal regime for punishing offenders. Indeed, the reason illicit trade in cigarettes thrives in the region as an attractive criminal enterprise is the leniency with which criminal sanctions are applied compared to the punishment to trafficking arms or drugs.

We should deploy diplomacy through the East African Community to expedite ratification of the WHO protocol so that the region can adopt a common approach to solving the problem.