The beverage firm is among importers suffering clearance delays at the Mombasa port in an inspection audit and crackdown on illicit goods.
The Coca-Cola executive reckons that even though the penalties so far accrued as a result of delays in clearance will increase the company's cost of production, the firm will not pass it on to consumers.
Soft drinks processor Coca-Cola is locked in a bitter dispute with the taxman and the Kenya Bureau of Standards (Kebs) over goods worth Sh500 million detained at Mombasa port in an ongoing government crackdown on illicit goods.
Coca-Cola Beverages Africa (CCBA) managing director Daryl Wilson says the goods, mainly consisting of white sugar and resin, have been lying at container freight stations in Mombasa since July causing the company Sh100 million loss in demurrage costs.
“The Sh500 million (is) an approximation of the total value of goods (sugar, resin) that’s been held for clearance. The penalties we’ve accrued are approximately Sh100 million,” said Mr Wilson.
“We primarily have industrial white sugar and resin in these containers. The goods subject to the delay are many and varied — some more susceptible and sensitive to storage for this amount of time than others.”
Kebs and the Kenya Revenue Authority (KRA) issued a notice in May to all importers of consolidated air and sea cargo to register with the standards agency to have their goods inspected under a new procedure created in 2005.
The procedure, which saw 20 firms approved to import as consolidators, has been targeting cargo containing a wide range of products.
It also targets merchandise in small quantities or parcels belonging to several consignees who have assembled their parcels to form one consignment and which may be declared as belonging to one importer at the port of destination.
Illicit goods
The new procedure, aimed at checking the inflow of fake products into the country, requires all consolidated cargo to be inspected by Kebs-appointed agents and issued with a Certificate of Inspection (COI) in the country of origin before importation.
Mr Wilson confirmed that the beverage firm is among importers suffering clearance delays at the Mombasa port in an inspection audit and crackdown on illicit goods.
The Coca-Cola executive reckons that even though the penalties so far accrued as a result of delays in clearance will increase the company's cost of production, the firm will not pass it on to consumers.
“These penalties make the cost of production higher for us, because it means our inputs cost more. So yes, our raw material inputs have become more expensive — and industrial white sugar is a primary raw material in beverage production.
However, this doesn’t impact our consumers because our pricing does not change,” he said. The involvement of the multi-agency team of the KRA, Kebs and the Anti-Counterfeit Agency (ACA) in the fight against importation of substandard goods and tax evasion has made it difficult for many importers to get through the ports of entry.
Small importers have particularly been affected by the KRA’s directive that any counterfeit or concealed goods found in a container leads to forfeiture and destruction of entire consignments.
Shared containers
Most small traders import their goods in shared containers that are cleared as single consignments.
However, the three agencies have stuck to their guns, managing to confiscate illicit and counterfeit goods valued at Sh8.5 billion between May and early October.
This points to rampant losses in tax revenues as well as a health scare to the public.
Early this month, the ACA executive director, Elema Halake, said that about 40 per cent of Kenya’s market share is dominated by counterfeit products, costing government billions of shillings in foregone tax revenue.
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