How graft lords defy Uhuru crackdown - Daily Nation

Dealers in fakes defy Uhuru graft crackdown

Tuesday August 14 2018

counterfeit goods

Seized counterfeit goods at the Anti-Counterfeit Agency godown in Nairobi. PHOTO | FILE NATION MEDIA GROUP 

By MUTUMA MATHIU
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By JOHN KAMAU
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Sub-standard goods are pouring into the country, putting the public at risk and undermining the government’s crackdown on corruption.

Importers of cheap, low quality goods are colluding with pre-shipment inspectors, quality inspectors at the port of Mombasa and some tax officials to turn Kenya into a huge dumping ground for fakes, factory rejects and expired goods.

According to a pile of documents that the Nation has seen, these dumped products include rice, cooking fat, bicycle and truck tyres, children and adult diapers, shoes, sanitary pads, and alcohol. Others are stationery, detergents, textiles, electronics, spare parts and foodstuff.

For instance, between April and August 5, Customs allowed several traders to pass 135 20-foot containers of broken rice that had already failed the Kenya Bureau of Standard test but which Kenya Revenue Authority taxed at Sh200 million and allowed into the country. It is suspected that this damaged rice is later mixed with genuine high-grade Mwea Pishori and sold to unsuspecting Kenyans.

FAILED QUALITY TESTS

The multibillion racket, which goes beyond the port of Mombasa, shocked and puzzled the Nation: goods that are clearly classified as having failed Kebs quality tests and which should either be returned to the country of origin or destroyed, are later allowed into the country by customs officials, who collect duty in disregard of the mandatory Kebs certification.

Why pre-shipment companies certify substandard goods is also not clear.

Even more puzzling is the fact that Kebs does not appear to have taken any action against the pre-shipment verification companies — which receive hundreds of millions of shillings to do the job — for allowing through goods which, on later testing, prove to be of poor quality.

On Monday, a Kebs spokesperson said that goods that have failed their test are not released into the market. “We arrange for their destruction and some of them are shipped back.”

Kenyan manufacturing has been brought to its knees by a flood of cheap fakes, mainly from Asia. Premier manufacturers, such as Eveready, closed their factories because they could not compete against fakes.

REQUIRE INVESTIGATIONS

The Kenya Revenue Authority could neither confirm nor deny the existence of the racket and requested “two days to confirm the issues raised with various departments in the organisation”.

“I would also request that (if) you have any data on activities that require investigations that you could share them with our investigations team,” KRA said in their brief reply.

From the documents, the problem appears to start from the port of export where the pre-shipment verification bodies contracted by Kebs to ensure that the goods conformed to standards, inspect the fakes and issue importers with certificates of conformity (COC) which allows them to ship the goods to Kenya.

Anti-Counterfeit Agency

Anti-Counterfeit Agency officers sort through fake goods at the Export Processing Zones Authority, Athi River, on May 31, 2018. PHOTO | FILE | NATION MEDIA GROUP

The Kenya Bureau of Standards has contracts with five companies which are supposed to ensure that all goods meet the Kenya standards before they are imported.

These companies are China Certification and Inspection Group Company whose local representative is a Ms Stacy Njeri Wahome; Societe Generale Surveillance SA represented locally by a Mr Isaac Kwoba and Cotecna Inspection represented by Johan Mertens and Godfrey Nyambu. Others are Intertek International Limited whose local representative is Douglas Nyamori and Thiery Metzger and Bureau Veritas GSIT whose contract was signed by Arnand de LaMotte.

REPUTABLE COMPANIES

Many of these are internationally reputable companies, used by many countries and it is not clear why some of the goods they have cleared are failing Kebs tests, according to documents seen by the Nation.

When the pre-shipment system was mooted, it was intended to protect local industries from unfair competition from substandard imports and prevent the country from becoming a dumping ground for contraband. It was also to ensure that public health, consumer safety and environment are protected.

Ordinarily, any shipment that fails the local Kebs quality test should be shipped back to the country of origin or should be seized and destroyed. But although these goods fail tests at the port of entry, they are allowed into the country in a racket that has been going on for ages — if records seen by the Nation are anything to go by.

It is also not clear when, or how, the vital systems of the country collapse so totally and without detection by various investigative and oversight bodies.

TERMINATE CONTRACTS

Also yet to be clarified is why Kebs continues to use the services of quality inspection companies which allow fakes through. The regulator has tight contracts with the firms which allows it to terminate the contracts and force them to pay hefty penalties.

A senior government official, who declined to be quoted on a matter that might be the subject of a criminal investigation, said the pre-shipment inspection companies should be investigated. He termed the dumping of fake goods a “multi-billion-shilling multinational scandal”.

“Some of these pre-shipment companies might not have the capacity to test the goods,” the official said, adding: “It is standard in these types of contracts to provide that for every failure, there are penalties to be paid to the government. Has Kebs been penalising these companies after the goods fail the test?”

QUALITY STICKERS

Kebs has been in the eye of a storm in the recent past. In June, the Nation exposed a racket within Kebs, where an Indian firm contracted to print mark-of-quality stickers made stickers that aided smugglers and counterfeiters to pass goods as genuine products. The scandal led to the arrest and arraignment in court of senior Kebs officials, including Managing Director James Ongwae.

According to Kebs, under the pre-export verification of conformity (PVoC) programme, goods are supposed to be inspected at the country of origin.

This means that the testing is done before they are exported to Kenya. At the moment, only 10 per cent of the imports are subjected to destination inspection, a loophole that leaves Kenyan consumers at the mercy of pre-shipment inspection companies. While 90 per cent of the imports go through the PVoC testing and inspection programme, it now appears that many of these products can hardly pass the local test.

SAMPLING AND TESTING

Regular sampling and testing is done on PVoC covered products to cross-check the performance of Kebs inspection agents, but it appears that this is now just a routine exercise and most of the products that fail the test in Mombasa are usually allowed in and taxed by KRA.

From March this year, all importers of consolidated cargo were required to register with the Kebs and KRA and under new regulations, KRA and Kebs appointed agents were to inspect all consolidated cargo at the port of origin and a Certificate of Inspection before they are sent to Kenya.

This new loophole also allowed consolidated goods to enter the country with no further checks.

Issuance of a CoC for non-conforming products is supposed to attract a penalty equivalent to 10 times the verification fees charged or chargeable by the contractor for the consignment in which the product was shipped.

The Nation’s police sources would not confirm that there is an active criminal investigation into the fakes scam but conceded that the authorities were “aware” of the problem.