Small-scale importers are pushing back against changes by the Kenya Revenue Authority (KRA) to the valuation of consolidated cargo, warning that the new system could increase the cost of importing goods and ultimately raise prices for consumers.
The new framework, which was initially due to take effect on July 1, increases the benchmark value for general containerised consolidated cargo from KSh2.5 million to KSh3.2 million.
Following lobbying by traders and industry associations, KRA suspended implementation until August 20 to allow for further consultations with importers and other stakeholders.
The disagreement centres on the valuation of goods imported by small traders who pool their consignments because they cannot afford to fill an entire container.
Under the previous system, consolidated cargo was largely assessed using a benchmark of KSh200 per kilogramme. The revised framework places greater emphasis on the actual value of the imported goods, consistent with internationally recognised customs valuation standards.
The World Trade Organisation’s Customs Valuation Agreement identifies the transaction value, meaning the price actually paid or payable for imported goods, as the main basis for determining customs value, subject to applicable adjustments and conditions.
KRA argues that the revised approach is necessary to tackle undervaluation and tax evasion. The authority raised concerns in 2023 that some importers were using consolidated shipments to conceal expensive products, including smartphones, while declaring artificially low values to reduce their tax liability.
Traders, however, say the new valuation regime could significantly increase their operating costs and eventually translate into higher retail prices.
James Mawathe, a Nairobi trader dealing in mobile-phone accessories, criticised what he described as frequent changes in tax policy, saying businesses were already struggling with high operating costs.
Another electronics trader, Joshua Irungu, called on KRA to take into account the difficult conditions facing small businesses when determining the new valuations.
The Kenya International Freight and Warehousing Association (KIFWA) has been involved in discussions with KRA and the Kenya National Chamber of Commerce and Industry (KNCCI) over the proposed changes.
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However, parts of the industry remain opposed to the revised benchmarks as well as a requirement for certain categories of consolidated cargo to be cleared through designated Container Freight Stations.
KRA has introduced some concessions as consultations continue, including waiving storage charges incurred after its July 9 benchmark directive for affected consignments.
Importers who believe their goods have been assigned an excessively high value will also be able to request verification and a fresh valuation.
Dispute Recalls 2023 Cargo Crisis
The latest disagreement bears similarities to the disruption witnessed in 2023, when KRA moved away from weight-based valuation towards transaction-based assessments.
The change resulted in significant cargo backlogs at Jomo Kenyatta International Airport (JKIA) and Eldoret International Airport, disrupting the supply of mobile phones, electronics, cameras and other consumer products.
Cargo flights at JKIA were subsequently suspended for several months before operations resumed in March 2024.
Consolidated cargo remains an important channel for small businesses, allowing traders to combine smaller consignments in a single container rather than shouldering the cost of importing an entire container individually.
The Government has also invested in infrastructure to support the system, including the National Deconsolidation Centre at Nairobi Central Railway Station, which facilitates the collection of cargo transported from Mombasa via the Standard Gauge Railway.
The latest dispute puts KRA in a difficult position as it seeks to increase tax revenues and tackle customs fraud without making formal imports prohibitively expensive for thousands of small businesses that depend on consolidated cargo.
