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Revised warehousing rule good for supply chain- KAM

KRA has lifted restrictions on customs bonded warehouses.

In Summary

•The 2020 decision had an impact on about 17 types of products.

•Goods affected included wines and spirits, second-hand motor vehicles, clothing and textiles, office supplies, foodstuffs ,cigarettes, toiletries and spare parts.

Containers being offloaded from a ship at the Port of Mombasa .
BUSY: Containers being offloaded from a ship at the Port of Mombasa .
Image: JOHN CHESOLI

The lifting of restrictions on the use of customs bonded warehouses in the country will help stabilise the supply of imported goods, local manufactures have affirmed.

In a gazette notice dated April 15, 2021, Kenya Revenue Authority (KRA) revised an earlier order issued in May 2020, widened the scope of goods that were not eligible for customs bonded warehouses.

A customs bonded warehouse is a warehouse licensed by the commissioner of customs for the storage of goods imported, into the region, pending the payment of duties.

The 2020 decision had an impact on about 17 types of products, which had been locked out of the warehousing system with importers forced to pay duty upon arrival of goods into the country.

Goods affected included wines and spirits, second-hand motor vehicles, clothing and textiles, office supplies, foodstuffs of any form including bulk commodities, cigarettes, toiletries, and spare parts.

Others were construction materials, electrical parts, cameras, phones, tyres, lubricants, used footwear, and furniture, which all attracted full customs duties on arrival.

According to the Kenya Association of Manufacturers (KAM) the country does not have the capacity to produce a wide range of imported products including lubricants, alcoholic beverages and building and construction materials.

"Warehousing ensures continuous production as raw materials are kept within the country rather than imported when required,” KAM chief executive Phyllis Wakiaga told the Star.

She said lifting the restrictions is critical in stabilising the supply of imported finished goods and raw material, a time when the Covid-19 pandemic has disrupted the global supply chain.

It will also cushion traders from the high cost of doing business (payment of duty on arrival), and boost cash flows especially during the pandemic period when businesses are struggling with low sales.

"Manufacturers can continue storing their goods in a warehouse in readiness for stock replenishment without necessarily having to wait for new imports," Wakiaga said.

Warehousing provides businesses with benefits such as stock management.

The restrictions had threatened to make Kenya uncompetitive and less attractive to investors compared to other EAC partners states whose warehousing requirements had not changed.

According to consulting firm PricewaterhouseCoopers (PwC), the initial decision to stop warehousing of goods in bonded facilities caught many investors by surprise, forcing businesses to re-evaluate whether they would continue serving their customers across the region from Kenya.

“Given the challenges currently facing businesses, it is imperative for tax policymakers to ensure tax laws are not changed frequently, ” says Maurice Mwaniki, Indirect Taxes Associate director at PwC Kenya.