Certificate of origin rule to hit hard SMEs, consolidators and revenues

While the new directive is construed as a measure to safeguard or boost revenue, its full impact on import transactions and the economy remains uncertain. Implementation could slow down access to raw materials, raise import costs, and delay cargo clearance.

The impressive Sh879 billion import duty raised, in 2024, risks declining as importers take a wait-and-see approach. Other import revenues through the Kenya National Single Window System and Import Declaration Fee and port charges by Kenya Ports Authority will also be affected.

As the grace period approaches fast, no designated authorities have been identified by the KRA to issue CoOs. The taxman should notify the public, particularly shippers and freight forwarders, about the arrangements it has established with agencies in exporting countries.

This will help guarantee the legitimacy and credibility of the issued certificates, ensure seamless validation of their authenticity, prevent bottlenecks, and deter possible exploitation and frustrations.

The mandatory CoO will certainly attract a charge, raising a valid question of why we should be compelled to enrich external institutions by paying for a certificate that offers neither preferential treatment nor safeguards against revenue leakages.

This directive is short of the fact that there are many importers bringing in goods through various countries where suppliers serve as consolidators.

The hard-hit traders of the proposed directive are small and medium enterprises and consolidators who source imports from diverse locations, manufacturers and exporters who import inputs and raw materials for production and subsequently exporting or selling in the local and regional market.

They will now struggle to secure the certificates for each item. This challenge also extends to returning residents and relief agencies based in Kenya, who often source goods directly or through global consolidations.

The East African Community Customs Management Act is the main law governing imports across the region.

Under the Act, a certificate of origin is required only when goods are seeking preferential treatment.

However, the Finance Act 2025 introduces penalties for failing to present a CoO, including the risk of forfeiture. This creates a conflict, since Section 210 of the Act, which stipulates what is liable for forfeiture does not include absence of CoO.

The Finance Act 2025 should be reviewed to remove the certificate of origin requirement due to administrative challenges, potential revenue loss, and added burdens. The KRA be adequately be resourced and instructed to address the possible revenue leakages and engage stakeholders.

The idea to secure revenue is noble, the approach not appropriate.

The best intervention would have been through an administrative mechanism-enforcing adherence to the East Africa Community Common External Tariff (CET), enforcing compliance and proper documentation in conformity with the correct Harmonized System Code (HS), a globally standardized system for classifying trade products.

Other measures could include ensuring accurate product descriptions, applying risk profiling to identify suspicious goods, and establishing appropriate redress mechanisms.

These may involve enhanced surveillance at ports of entry and strict adherence by all stakeholders to accurate declarations, with stern penalties for non-compliance.

Additional mechanisms include the use of the Pre-Export Verification of Conformity (PVOC) programme and Destination Inspection (DI), both administered by the Kenya Bureau of Standards, as well as the existing imports permit approval processes by various, relevant government agencies.

Given the administrative challenges, potential revenue reductions and the burden this Act present, it would be appropriate to seek for the review of the Finance Act 2025, expunge this requirement on the CoO and in the short term, seek that the Kenya Revenue Authority grants further grace period of one year, to allow further consultations and or amendments.

The writer is the CEO, Shippers Council of Eastern Africa and chair, Mombasa Port and Northern Corridor Community Charter.