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Economy

Importers, KRA in dispute over import charges

Phyllis Wakiaga, Martin Chesire
KAM chief Phyllis Wakiaga, Kenya Accreditation Service CEO Martin Chesire (centre), and Industrialisation principal secretary Francis Owino at an SME policy review in Nairobi on January 22, 2020. PHOTO | DIANA NGILA 

The controversy surrounding the State’s order on foreign inspection of imports has taken a new turn after local firms claimed raw materials ordered outside the programme are being subjected to higher charges.

Manufacturers said the Kenya Revenue Authority (KRA) has been treating industrial materials and intermediate goods exempted from Pre-Verification of Conformity (PVoC) requirements as finished imports, thereby subjecting them to maximum import fees and levies.

Under PVoC, goods are inspected and issued with quality clearance certificate at the source markets by Kenya Bureau of Standards (Kebs) agents.

The Finance Act, signed into law on November 7, slashed Import Declaration Fee (IDF) on intermediate goods and raw materials used by manufacturers from two to 1.5 percent, and increased the rate on finished goods from two to 3.5 percent.

The law further increased the Railway Development Levy (RDL) for finished goods imports to two percent from 1.5 percent. In a letter to Treasury secretary Ukur Yatani, the Kenya Association of Manufacturers (KAM), however, said the KRA has been relying on PVoC certification as basis for determining goods which qualify for lower import fees and levies.

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This, KAM adds, has hit factories in sectors whose materials are not directly under the watch of Kebs and its five agents in foreign markets such as those in veterinary and pharmaceuticals which are regulated by Veterinary Medicine Department (VMD) and Pharmacy & Poisons Board (PPB).

“Raw materials and intermediate goods under Duty Remission Scheme and EAC stay of application like industrial sugar and timber are also not in the PVoC list of exemptions,” KAM chief executive Phyllis Wakiaga says in the letter dated January 21.

“However, KRA continues to rely on PVoC list of exempted raw materials and intermediate goods to award lower rate of IDF and RDL. The PVoC list doesn’t actually capture all the raw materials and intermediate goods as approved by Kebs.”

While IDF and RDL are a considerable source of revenue for the KRA, generating tens billions of shillings annually, industrialists see the charges, alongside power costs, as factors making Kenyan products less competitive in regional markets.

“No legislative framework for refund mechanism has been provided by the National Treasury for the extra IDF and RDL paid by manufacturers due to implementation challenges,” the lobby says.

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