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Costly import compliance demands blunt Kenya’s regional competitiveness

 
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Costly and lengthy border compliance procedures for imports threaten Kenya’s competitiveness in the region, a new World Bank report showed, pilling pressure for further review of the country’s customs and inspections systems.

Border compliance entails a raft of procedures including customs clearance and inspections by other regulatory agencies.

The World Bank's Doing Business 2019 report indicated that the costs when importing to Kenya stood at about Sh84,466.2 ($833), which is higher compared with the Sub-Saharan Africa’s (SSA) average of Sh69,388.02 ($684.3).

The average time it takes an importer to comply with regulations is also a concern because it would take a trader about 180 hours to do so---way above SSA’s 126.3 hours.

“It tells you we are doing badly in terms of the time taken to clear cargo. It shows that government interventions are taking longer and this is impacting on cost of clearing goods,” Mr William Ojonyo, chairman of the Kenya International Freight and Warehousing Association (Kifwa) said.

These punitive import conditions have dented Kenya’s overall ranking in cross-border trade with the country slipping six places to position 112 out 190 this year compared to the previous year. The country realised a score of 68.06 in cross-border trade for 2019 against a regional average of 53.59. A score above 50 represents a deterioration of business condition.

Contrastingly, Kenya performs well in handling export shipments. For instance, the Doing Business 2019 report showed that it takes just 16 hours for an exporter to comply with border regulations compared to 97.3 hours for SSA.

Kenya’s average cost of border compliance for exports is also estimated at competitive Sh14,500.2 ($143) against SSA’s Sh61,428.12 ($605.8).

The country further ranks well in terms of the hours taken by a trader to comply with export documentation requirements. The time for export documentary requirement averages 19 hours for Kenya against SSA’s 72.8 hours.

The country however ranks poorly in the cost of documentary compliance for exports with the World Bank indicating that this process is worth about Sh19,367.4 ($191) compared to Sh17,116.32 ($168.8) for SSA.

Stung by hitches in cross-border trade, Kenya has in recent years effected a raft of reforms including the introduction of the Kenya National Electronic Single Window System, also known as Kenya TradeNet System, whose overall objective is to facilitate international trade in Kenya by reducing delays and lowering costs associated with clearance of goods at the borders, while maintaining the requisite controls and collection of levies, fees, duties and taxes, where applicable, on imports or exports.

The electronic platform integrates or interfaces the electronic systems of stakeholders involved in the cargo clearance process including Kenya Revenue Authority (KRA), Kenya Bureau of Standards (Kebs), Kenya Plant Health Inspectorate Services (Kephis), Kenya Ports Authority (KPA) and Port Health.

It enable parties involved in trade and transport to lodge standardised information and documents with a single entry point to fulfil all import, export, and transit-related regulatory requirements.

The system has had some gains so far. For example, Kenya reduced the time for import documentary compliance by utilising its single window system, which allows for electronic submission of customs entries.

The Doing Business 2019 report showed that the average time for documentary compliance for imports in Kenya presently stood at 60 hours compared to 97.7 hours for SSA.

“Kenya has improved on usage of single window, but not on customs entry procedure. At the moment, we do not have customs procedures in the platform. It is still being separately handled by the Simba system,” Mr Ojonyo observed.

Traders have observed that despite recent reforms, trade procedures still remain lengthy, cumbersome and costly.

This is partly due to the involvement of many agencies in the approval processes. With more than 20 agencies duplication of duties is prevalent.

Kenya together with other partner East African Community (EAC) states adopted a single customs territory system (SCT) in 2014 which allows for joint collection of customs taxes as part of a strategy to seal revenue leaks and stop dumping of cargo.

Under the SCT arrangement, clearing agents within the EAC have been granted rights to relocate and carry out their duties in any of the partner states as part of a scheme to improve the flow of goods and curb dumping.

Importers of commodities covered under the SCT are required to lodge import declaration forms in their home country and pay relevant taxes to facilitate the export process.

The tax authorities in the respective countries then issue a road manifest against the import documents submitted electronically by the revenue authority of the importing country.

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