Uganda shields Kenya with new curbs on most smuggled goods.
Uganda has tightened import conditions for a wider range of commonly smuggled items, including toiletries and cosmetic products, wheat flour and grain, mobile devices and phones, tiles, lubricants, and automotive batteries, handing a boost to Kenyan traders and the Kenya Revenue Authority (KRA), long inconvenienced by smugglers from the neighbouring country.
In a new directive by the Uganda Revenue Authority (URA), imports of these six items, as well as pasta, spaghetti, and flavours for soft drinks, will from June 1, 2023, be cleared under the East Africa Community’s Single Customs Territory (SCT), which allows members of the bloc to jointly collect customs taxes.
“The above items are an addendum to the following items that are already restricted for warehousing; sugar, milled and broken rice, motorcycle or vehicle tyres and tubes, dentifrices, and used motor vehicles of 13 years and above from the year of manufacture,” said the URA.
“Customs clearance for the above goods shall be facilitated under the SCT arrangement where taxes shall be paid upon arrival at the first port of entry into the East African Community,” it said in an April 13, 2023 notice to importers.
In the regional SCT scheme, importers in each of the EAC partner states are required to lodge import declaration forms in their respective home countries and pay relevant taxes upfront to facilitate the export process. Respective revenue agencies would then issue a road manifest against the import documents submitted electronically by tax officials of the importing country to allow cross-border movement.
Currently, importers of toiletries and cosmetic products, wheat flour and grain, mobile devices and phones, tiles, lubricants, and automotive batteries destined for the Uganda market are allowed to store their units in holding hubs approved by tax authorities—commonly referred to as bonded warehouses—pending payment of customs duties.
The same privileges are granted to those importing pasta, spaghetti, and spaghetti and flavours for soft drinks into the Ugandan market.
This has been popular with many Ugandan importers of these items because it eases liquidity pressure and encourages them to import more consignments some of which are later dumped in the more lucrative Kenyan market by deceitful traders.
The expanded list of items covered under the SCT scheme comes as a major boost for Kenyan traders who have over the years decried sloppy competition by some cartels who shipped the products into Uganda before smuggling them into the local market.
“Having more items put under the SCT is a plus for us because it may help tame the smuggling from the Uganda side” Peter Njoroge, a dealer in cosmetics products in Nairobi, told Smart Business.
“We have had to deal with a double challenge of cheap Chinese imports and smuggled shipments from Uganda and this has been hurting our business.”
The move by Uganda also means fewer revenue losses by the KRA, which has for decades battled smugglers from the neighbouring country.
A recent study by the National Crime Research Centre showed that sugar accounts for nearly half of the goods smuggled across Kenya’s porous border points.
Other popular products smuggled into the country include alcohol and illicit brews, illegal drugs such as cocaine and heroin, cereals, clothes, shoes and handbags, charcoal/coal, wheat and maize flour.
Sugar is mainly smuggled into the country through eight counties including Busia Trans Nzoia, Garissa, Kajiado Narok and Migori followed by Mandera and Kwale. Notably, Busia and Trans Nzoia border Uganda.
Some of the smuggling cases have previously turned into full-blown trade wars between Kenya and Uganda. For example, Kenya blocked Ugandan sugar and sugar cane deliveries in 2020, costing traders who were exporting raw cane to sugar mills billions of shillings as the raw material was left to rot on trucks at the border.
Since 2002, Kenya has sought to protect the local sugar industry by imposing import quotas from the Common Market for Eastern and Southern Africa.
The extended list of items under SCT is also timely coming in the wake of a decision by the Treasury, which three weeks ago gazetted new excise stamp fees on 14 categories of excisable goods in a move that has further widened the gap between stamp duties paid by manufacturers and importers in Kenya and those paid in Tanzania, Uganda, and Rwanda — raising risks of smuggling.
The Treasury raised the stamp duty on beer from Sh1.50 to Sh3, while the charges on spirits have been increased to Sh5 from Sh2.80, that on juice has been set at Sh2.20 from Sh0.60, duty on cosmetics has been raised to Sh2.50 from Sh0.60 while that on tobacco is now Sh5 from Sh2.80.
In comparison, businesses in Tanzania pay a stamp duty of between Sh0.96 and Sh1.21 on beer, Sh2.21 on spirits, Sh1.26 on juices, Sh2.21 on tobacco, and none on bottled water and cosmetics.
In Uganda, businesses pay a stamp fee of Sh1.16 for beer, Sh3.55 for spirits, Sh0.68 for juices, Sh3.55 for tobacco, and none for bottled water and cosmetics. Meanwhile, Rwanda does not charge stamp duty except on tobacco, which is charged a duty of Sh1.30.
Last year, Kenyan car dealers also got some relief after URA said imported vehicles above 13 years from the year of manufacture would not be cleared under the warehouse system but the SCT effective July 1, 2022.
Most of the used cars sourced from Uganda, though cheaper, are much older than those in the Kenyan used vehicles market because Kampala had not put an age limit on imported second-hand automobiles.
This implied that one would ship in a much older car through Uganda, declare low custom value, and pay much lower taxes compared to direct importation into Kenya where the maximum age limit on used cars has been set at eight years — meaning that the car market in Kenya has newer and pricier vehicles.
Kenya is also the only East African country with strict age limits on car imports, making vehicles costly and lucrative for the black market trade of selling cars meant for export locally.
EAC member-states have failed to enforce proposals to lower the age limit for imported used cars to five years by 2021.
Uganda’s move is a measure to bring the country’s car age limit closer to the EAC resolution that had recommended the slashing of the age limit for imported cars to five years by 2021.
It was only in 2018 that Uganda passed a law limiting the importation of vehicles manufactured more than 15 years ago.
Kenya has been pushing regional countries towards adopting the EAC recommendation and has already announced plans to limit the age of used vehicles with engine capacity above 1500cc imported to five instead of the current eight years.
Uganda shields Kenya with new curbs on most smuggled goods
Uganda has tightened import conditions for a wider range of commonly smuggled items, including toiletries and cosmetic products, wheat flour and grain, mobile devices and phones, tiles, lubricants, and automotive batteries, handing a boost to Kenyan traders and the Kenya Revenue Authority (KRA), long inconvenienced by smugglers from the neighbouring country.
In a new directive by the Uganda Revenue Authority (URA), imports of these six items, as well as pasta, spaghetti, and flavours for soft drinks, will from June 1, 2023, be cleared under the East Africa Community’s Single Customs Territory (SCT), which allows members of the bloc to jointly collect customs taxes.
“The above items are an addendum to the following items that are already restricted for warehousing; sugar, milled and broken rice, motorcycle or vehicle tyres and tubes, dentifrices, and used motor vehicles of 13 years and above from the year of manufacture,” said the URA.
“Customs clearance for the above goods shall be facilitated under the SCT arrangement where taxes shall be paid upon arrival at the first port of entry into the East African Community,” it said in an April 13, 2023 notice to importers.
In the regional SCT scheme, importers in each of the EAC partner states are required to lodge import declaration forms in their respective home countries and pay relevant taxes upfront to facilitate the export process. Respective revenue agencies would then issue a road manifest against the import documents submitted electronically by tax officials of the importing country to allow cross-border movement.
Currently, importers of toiletries and cosmetic products, wheat flour and grain, mobile devices and phones, tiles, lubricants, and automotive batteries destined for the Uganda market are allowed to store their units in holding hubs approved by tax authorities—commonly referred to as bonded warehouses—pending payment of customs duties.
The same privileges are granted to those importing pasta, spaghetti, and spaghetti and flavours for soft drinks into the Ugandan market.
This has been popular with many Ugandan importers of these items because it eases liquidity pressure and encourages them to import more consignments some of which are later dumped in the more lucrative Kenyan market by deceitful traders.
The expanded list of items covered under the SCT scheme comes as a major boost for Kenyan traders who have over the years decried sloppy competition by some cartels who shipped the products into Uganda before smuggling them into the local market.
“Having more items put under the SCT is a plus for us because it may help tame the smuggling from the Uganda side” Peter Njoroge, a dealer in cosmetics products in Nairobi, told Smart Business.
“We have had to deal with a double challenge of cheap Chinese imports and smuggled shipments from Uganda and this has been hurting our business.”
The move by Uganda also means fewer revenue losses by the KRA, which has for decades battled smugglers from the neighbouring country.
A recent study by the National Crime Research Centre showed that sugar accounts for nearly half of the goods smuggled across Kenya’s porous border points.
Other popular products smuggled into the country include alcohol and illicit brews, illegal drugs such as cocaine and heroin, cereals, clothes, shoes and handbags, charcoal/coal, wheat and maize flour.
Sugar is mainly smuggled into the country through eight counties including Busia Trans Nzoia, Garissa, Kajiado Narok and Migori followed by Mandera and Kwale. Notably, Busia and Trans Nzoia border Uganda.
Some of the smuggling cases have previously turned into full-blown trade wars between Kenya and Uganda. For example, Kenya blocked Ugandan sugar and sugar cane deliveries in 2020, costing traders who were exporting raw cane to sugar mills billions of shillings as the raw material was left to rot on trucks at the border.
Since 2002, Kenya has sought to protect the local sugar industry by imposing import quotas from the Common Market for Eastern and Southern Africa.
The extended list of items under SCT is also timely coming in the wake of a decision by the Treasury, which three weeks ago gazetted new excise stamp fees on 14 categories of excisable goods in a move that has further widened the gap between stamp duties paid by manufacturers and importers in Kenya and those paid in Tanzania, Uganda, and Rwanda — raising risks of smuggling.
The Treasury raised the stamp duty on beer from Sh1.50 to Sh3, while the charges on spirits have been increased to Sh5 from Sh2.80, that on juice has been set at Sh2.20 from Sh0.60, duty on cosmetics has been raised to Sh2.50 from Sh0.60 while that on tobacco is now Sh5 from Sh2.80.
In comparison, businesses in Tanzania pay a stamp duty of between Sh0.96 and Sh1.21 on beer, Sh2.21 on spirits, Sh1.26 on juices, Sh2.21 on tobacco, and none on bottled water and cosmetics.
In Uganda, businesses pay a stamp fee of Sh1.16 for beer, Sh3.55 for spirits, Sh0.68 for juices, Sh3.55 for tobacco, and none for bottled water and cosmetics. Meanwhile, Rwanda does not charge stamp duty except on tobacco, which is charged a duty of Sh1.30.
Last year, Kenyan car dealers also got some relief after URA said imported vehicles above 13 years from the year of manufacture would not be cleared under the warehouse system but the SCT effective July 1, 2022.
Most of the used cars sourced from Uganda, though cheaper, are much older than those in the Kenyan used vehicles market because Kampala had not put an age limit on imported second-hand automobiles.
This implied that one would ship in a much older car through Uganda, declare low custom value, and pay much lower taxes compared to direct importation into Kenya where the maximum age limit on used cars has been set at eight years — meaning that the car market in Kenya has newer and pricier vehicles.
Kenya is also the only East African country with strict age limits on car imports, making vehicles costly and lucrative for the black market trade of selling cars meant for export locally.
EAC member-states have failed to enforce proposals to lower the age limit for imported used cars to five years by 2021.
Uganda’s move is a measure to bring the country’s car age limit closer to the EAC resolution that had recommended the slashing of the age limit for imported cars to five years by 2021.
It was only in 2018 that Uganda passed a law limiting the importation of vehicles manufactured more than 15 years ago.
Kenya has been pushing regional countries towards adopting the EAC recommendation and has already announced plans to limit the age of used vehicles with engine capacity above 1500cc imported to five instead of the current eight years.
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