Concerns have arisen over the entry of imported refined edible palm oil disguised as crude palm oil through Mombasa Port to evade taxes.
Kenya has reportedly lost Sh62 billion in revenue over the past three years due to this practice, with the oil primarily sourced from Malaysia and Indonesia.
Refined palm oil, intended for East African Community countries including Kenya, Uganda, Tanzania, and Rwanda, attracts higher taxes: a 35 percent duty, 2.5 percent Import Declaration Fee (IDF), 1.5 percent Railway Development Levy, and 16 percent VAT.
In contrast, semi-refined palm oil is taxed at only 10 percent duty.
Parliamentary documents reveal that the company Louis Dreyfus Company (LDC) imported a blend of 60 percent crude palm oil and 40 percent refined palm oil, declaring it as crude palm oil.
This misdeclaration led to significant revenue losses: Sh16.5 billion in 2022 from 233,000 metric tonnes, Sh32.54 billion in 2023 from 387,868 metric tonnes, and Sh13.83 billion in 2024 from 163,567 metric tonnes.
The documents also indicate that LDC, a company with limited contact information, is among those misrepresenting the product to evade taxes.
The blending of refined and crude palm oil, which contradicts World Customs Organization guidelines, allows importers to avoid higher duties and processing costs.
Palm oil from Malaysia and Indonesia, major global exporters, comes in several forms including RBD Palm Olein, RBD Palm Stearin, crude palm kernel oil, and others.
By misdeclaring refined oil as crude, importers not only evade higher import duties but also benefit from lower local processing costs.
Indonesia and Malaysia have imposed a $70 per ton duty on crude palm oil exports but none on refined oil, making refined palm oil more appealing for importers who then misdeclare it to avoid Kenya’s 35 percent duty on refined products.
This practice not only impacts government revenue but also affects local industries that rely on processed palm oil by-products.
