PUBLISHED ON July 25th, 2014


Industrialization in the country continues to be among the potential prime movers of the economy after the agricultural sector. With numerous construction and infrastructure projects like the standard gauge railway construction on the pipeline, growth in the manufacturing sector is expected to increase tremendously . Growth in the manufacturing sector brings increased competition and more complex supply chains to provide the cost-effective mix of sourcing, manufacturing and supply operations that entail the cross-border movement of goods.

With the highly increasing desire to participate constructively in international trade, industries need to seek trade strategies to reduce costs as they continue to rely on imported machinery — and some on deficient raw materials in order to mitigate the risks of cross-border trade for manufacturing operations. Accordingly, customs and trade considerations are vital for manufacturing firms to support growth and reduce risk and cost.

The key areas to consider are customs planning, customs compliance, post clearance customs audits and customs controversy. Effective customs planning is an important strategy for firms that seek to reduce costs to gain a competitive edge or serve a particular market segment in the economy by foreign sourcing raw materials, inputs, equipment and finished goods. For instance, free trade agreements (FTAs) provide preferential tariffs for goods sourced from Free Trade Area member countries, provided that the FTA-specific rules of origin and other requirements are followed.

Additionally, qualifying exports to the US and EU markets can benefit under the African Growth and Opportunity Act and the Cotonou Agreement, respectively. This can enhance the economy as export promotion is furthered. Cash flow Additionally, the customs rules of the East Africa Community provide a variety of customs regimes and procedures that aim to provide cash flow savings, such as: Manufacture Under Bond, Export Processing Zones, Tax Remission for Export Office, Duty Remissions and Duty Exemptions, Storage in Bond and Temporary Importation Customs compliance involves conformity to the customs rules and requirements.

The clearing agent on behalf of the taxpayer prepares files and lodges the single administrative document/ customs entry together with the relevant supporting documentation (for example commercial invoice, bill of lading). Additionally, the clearing agent computes taxes payable by establishing the customs value in accordance with on the customs valuation rules, tariff classification and country of origin of the imported goods. At the same time, the company is liable for any incorrect declarations to the customs authorities made by the clearing agent on the company’s behalf.

For this reason, it is important that the company monitors the information reported on the customs declaration. The importance of customs compliance is further emphasized by Kenya Revenue Authority’s increased use of the post-clearance customs audit. Country of origin During these audits, Kenya Revenue Authority reviews the document trail to support the customs valuation, tariff classification, quantity and country of origin reported on the customs declaration to determine whether all due taxes were paid.

To mitigate any exposure to non-compliance, companies should conduct periodic internal reviews of their customs declarations so that remedial measures can be taken prior to being discovered by the customs authorities as that may impede their production activities. In the event that the customs authorities impose an additional tax assessment on the company as a result of the post-clearance customs audit, the company has the opportunity to prepare an objection to the assessment.

If the objection is not resolved during the audit reconciliation meetings with Kenya Revenue Authority to their satisfaction, the company can either go to court or to the tax local committee/tribunal for further consideration. Proactively managing the customs and trade aspects of business can provide significant competitive advantages both in terms of costs and supply chain speed.

Source: The People

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.