Smuggled cigarettes threaten to smoke out local manufacturers

Cigarette smuggling into Kenya is on the upsurge, exposing local manufacturers to unfair competition and denying the government a huge source of revenue.

This year the Kenya Revenue Authority (KRA) has seized three consignments of cigarettes concealed in containers declared to be carrying other goods like cotton buds and electronic equipment, raising fears that similar cargo may have passed through the port of Mombasa undetected. 

Two months ago, the taxman intercepted two 40-foot containers packed with cigarettes with a tax liability of more than Sh50 million.

Cigarettes, like alcohol, are subject to high import and excise duty.

This, according to Kenya International Freight and Warehousing Association (Kifwa) chairman Gerald Kagumo is persuasive enough to make unscrupulous importers risk bringing in the product concealed in other goods to avoid paying the levies.  

Cigarettes are slapped with a 25 per cent import duty with the excise fee charged per 1,000 sticks, normally referred to as a mill.

Super high quality cigarettes, equivalent to the Embassy brand, are charged Sh2,500 per mill. A brand like Sportsman would attract excise duty of Sh1,500 per mill.

Supermatch and filterless cigarettes attract excise duties of Sh1,200 and Sh1,800 per mill respectively. 

Last month, the authority seized a 40- foot container with smuggled cigarettes worth Sh41 million at a container freight station in Mombasa. The consignment had been disguised as cotton buds worth only Sh2 million.

According to KRA officials, even if such a container were scanned, the contents would easily pass as cotton buds as the two are likely to have similar images.  

Commissioner of customs Wambui Namu said the cigarettes were purportedly manufactured by British American Tobacco Kenya but were imported from China and had a duty and tax value of Sh32 million. 

Only 104 cartons contained cotton buds, while the bulk of the cargo - 720 cartons - were Sportsman brand cigarettes with fake KRA excise stamps, fake Kenya Bureau of Standards mark of quality and the Ministry of Health warnings similar to those appearing on genuine packs.

According to Ms Namu, the authority relies on an importer’s profile, and in case officials detect an anomaly, a container is supposed to go for a 100 per cent verification to establish its actual content.   

Last week, KRA seized 610 cartons of cigarettes (Richman) a rare brand in Kenya with a tax liability of Sh24 million.

The consignment had been hidden in a container declared to have electronic goods.

The trader had declared and paid an import duty of Sh724,000 for the electronics. 

“The importer declared the weight of the container as 17 tonnes and for a 40-foot container with such goods, this led to suspicion and prompted 100 per cent verification that discovered the concealed cigarettes,” said KRA commissioner in charge of communication in southern region Yusuf Fatma.  

The brand came from Dubai according to the bill of lading.

There was the possibility that the cargo was meant for another market which KRA officials could not immediately establish.

Customs corruption

Early this year, a consignment of 470 cartons of smuggled counterfeit Supermatch cigarette brand, meant for Southern Sudan, was seized at the port.  

According to Mr Kagumo, some importers collude with clearing agents and corrupt customs officials to clear smuggled goods. In some incidents, he said, a clearing agent may not be involved as they only get the documents to clear the cargo that has already arrived in the country. 

“You cannot establish the actual content of the cargo from the documents and one relies on what has been declared,” said Mr Kagumo.

He said that Kifwa has now embarked on educating its members to be more careful when dealing with importers especially those who have opened new companies by asking them details of their firms and location of their businesses.  

There are importers who are registering new companies that are discarded after importing one or two consignments, said Mr Kagumo. 

“However, KRA can easily identify the faces behind these companies since one cannot operate or even open a bank account without giving vital documents such as certificate of registration and KRA PIN certificate,” he said. 

Kifwa vice chairman Peter Mambembe said that unscrupulous importers collude with some customs official station and CFS operators, who are now handling all domestic cargo, to import counterfeit goods.

Verify contents

Some CFSs, he said, do not have sufficient equipment such as scanners to verify the content of the containers.

KRA has not arraigned in court any of those that had their containers seized this year since investigations have not been completed according to an official involved who cannot be named as he is not allowed to speak to the media.