Independent importers of wines and spirits, cigarettes, motor vehicles and spare parts are set to be hit hard as KRA effects tough new rules to prevent them from using bonded warehouses.
Bonded warehouses allow such importers to hold goods in KRA Customs controlled premises without paying duty until they are ready to sell them in the local or export markets. It also allows them to sell in smaller quantities to customers and pay tax on only what they have sold.
From 12 August 2020, such goods will no longer be warehoused and will attract full custom duty at the time of entry into the country.
Only large manufacturers such as EABL will be allowed to use custom bonded warehouses for wines, spirits and other alcohol related products.
The net effect is that small independent importers, who have provided thriving competition for local brewers in supplying the bar and restaurant industry will technically be knocked out of the market.
The same will apply to importers of second hand cars, spare parts, motorcycle tyres, cigarettes, lubricants and batteries, among others.
The measures are contained in Gazette Notice 3530 of 13 May 2020 and will take effect in 90 days from then; 12 August.
The Gazette Notice bars from customs bonded warehouses:
“Foodstuffs in any form, including bulk commodities, ashes, lubricants and batteries including motor vehicle batteries.”
“Building and Construction materials including stones, paint, nuts, bolts, pipes, metal, electric fixtures and parts, and tools.”
Others include cameras and phones, new and used clothing and textiles, used footwear, office supplies ready for retail such as cartridges and toners for pens and printers.
Also included are tyres for motorcycles and motor vehicles, denatured and undernatured spirits and other goods that the Commissioner of Customs may decide to include on the list.
“The timing of the changes could not have come at a worse time considering the current global pandemic that has negatively impacted businesses’ cashflows and employment opportunitie".
The chairman of the Kenya International Freight and Warehousing Association (Kifwa), Roy Mwanthi, disagreed, saying the country needs the revenues now especially because of reduced imports owing to Covid.
“The percentage of people who will be affected is not huge,”
Kenya is not big on warehousing like Uganda, so the impact might be insignificant.
Uganda, he pointed out, tends to warehouse goods heading for other countries in the region such as DRC, Rwanda, South Sudan among others.
All legislation now requires public participation. Before their entry into force.