By Okoth Agonda
NAIROBI, Kenya, Aug 30 – Kenya’s customs administration has a responsibility of facilitating legitimate trade while protecting the borders and government revenue. For small-scale importers, this balance is particularly important. Many depend on imported goods for their livelihoods, and efficient customs processes can determine whether their businesses remain viable.
Kenya Revenue Authority (KRA) recognises this reality and has supported measures that make legitimate trade easier, faster and more affordable. Cargo consolidation is one such measure.
Institutionalised in Kenya in 2016/17 as a deliberate trade-facilitation initiative for small-scale importers, cargo consolidation allows parcels belonging to several traders to be pooled into one container and declared by an approved consolidator. This enables traders to share logistics costs and reduces the administrative burden associated with individually clearing numerous small consignments.
The facility has played an important role in supporting small traders. But precisely because it is valuable, its integrity must be protected. The recent revision of the minimum yield for general consolidated cargo to KSh3.2 million should be understood in this context.
A significant part of the controversy appears to arise from misunderstanding what the minimum yield represents. The valuation of imported goods for Customs purposes is governed by law. Under Section 122 and the Fourth Schedule of the East African Community Customs Management Act, Customs duty is assessed primarily on the transaction value of goods, consistent with Kenya’s adoption of the World Trade Organization Customs Valuation Agreement.
Where an import declaration is supported by proper commercial documentation, Customs assesses the goods based on their declared transaction value, subject to applicable legal and risk-management requirements.
The minimum yield serves a different purpose. Under the simplified consolidation arrangement, it provides a reference point for determining whether containers carrying commonly imported general goods meet the minimum expected tax yield for simplified clearance.
It is not the actual tax liability of every container or trader. The actual tax payable depends on the nature, value and classification of the goods in accordance with applicable customs and tax laws. Simply put, the KSh3.2 million figure is a risk-management reference, not a blanket tax imposed on small traders.
The previous minimum yield was last revised in the 2022/23 financial year. Since then, the trading environment has changed significantly. Factors that influence customs value such as cost of goods, freight and insurance, changes in exchange rates, freight charges and national and East African Community tax laws have altered the operating environment.
It was therefore necessary to review the minimum yield to ensure that the simplified arrangement remains relevant to prevailing economic and trading conditions.
One reason the benchmark is necessary is the risk of abuse within a simplified clearance system. Among the common risks associated with consolidated cargo is undervaluation and misdescription. In some cases, high-value goods may be described on shipping documents as lower-value or cheaper items, resulting in lower taxes than would ordinarily be payable. There is also the risk of concealment, where illegal or high-tax goods are hidden among standard consolidated cargo to evade detection and customs controls.
Such practices are not representative of legitimate consolidators or small traders. However, they demonstrate why a simplified system must have safeguards. Abuse does not only deprive the country of revenue. It creates an unfair advantage for non-compliant operators over businesses that accurately declare their goods and pay the required taxes. A compliant trader should not have to compete with another who reduces costs through undervaluation, misdescription or concealment.
The simplified consolidation arrangement is a facilitation option, not the only avenue available to importers. A trader may opt out and request Customs to verify the container and determine applicable taxes based on the actual contents, correct Customs value and proper classification.
Alternatively, cargo may be de-consolidated into individual consignee parcels, allowing importers to make individual declarations and pay the requisite taxes directly to KRA based on their goods.
The debate should ultimately focus on what small traders need most: predictable processes, affordable logistics, efficient clearance and a fair market.
KRA should continue engaging traders, monitoring implementation and addressing genuine operational challenges. However, the answer to concerns should be evidence-based engagement rather than rejection of a measure intended to strengthen the integrity of a trade-facilitation arrangement.
Cargo consolidation has helped open international trade to small-scale importers. Its sustainability depends on ensuring that it remains both a facilitator of legitimate commerce and a system resistant to abuse.
Small traders should therefore give the revised benchmark an opportunity to work.
A customs system that facilitates legitimate trade, protects government revenue and ensures compliant businesses compete on a level playing field ultimately serves traders, consumers and the wider economy.
The Writer is a Tax Communication Expert and Advisor.
