How Kenya can handle rising customs valuation disputes

The Kenya Revenue Authority (KRA) is now at the centre of a surge in disputes over customs valuation, with claims amounting to millions of shillings from various companies in import duties.

As Kenya’s trade sector continues to grow, disagreements over how customs valuation rules are applied have become a common challenge, emphasizing the urgent need for consistent and transparent practices.

Customs valuation forms the foundation for determining the duties and taxes importers must pay when bringing goods into the country.

The East African Community Customs Management Act (EACCMA) provides a comprehensive framework for customs valuation, in alignment with international standards under the World Trade Organisation (WTO) Agreement on Customs Valuation.

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These rules are designed to ensure fairness, uniformity, and adherence to commercial realities by emphasizing the use of actual transaction values as the basis for determining customs duties.

The EACCMA outlines a hierarchical process for customs valuation, starting with the transaction value — the price paid or payable for goods sold for export to the importing country.

If this value cannot be determined, alternative methods, such as the value of identical or similar goods, deductive value, computed value, and fallback methods, must be applied in sequence. These steps aim to promote fairness and reflect the true market value of goods.

Despite clear guidelines, KRA has faced criticism for the inconsistent application of valuation methods.

For instance, reports indicate that KRA has arbitrarily increased declared customs values for certain consignments while accepting similar goods at their declared values.

This unpredictability creates confusion and raises questions about the agency’s adherence to the EACCMA’s prescribed valuation framework.

Recent data shows a significant increase in customs valuation disputes, with the tax appeals tribunal and local courts repeatedly ruling in favour of importers where the KRA failed to follow established procedures. Such inconsistencies undermine trust and create an unpredictable business environment.

Arbitrary increases in customs values by the KRA have far-reaching consequences:

Increased costs: Importers face higher duties and taxes, raising business costs and reducing competitiveness in local and global markets.

Supply chain disruptions: Lengthy disputes delay goods clearance, disrupting supply chains and causing potential financial losses for businesses.

Eroded confidence: Inconsistent application of valuation rules undermines transparency, creating uncertainty and discouraging investment and trade.

KRA must adhere to the principles outlined in the EACCMA and WTO guidelines to address these challenges and foster a predictable trading environment.

The following measures are recommended:

Capacity building: Regular training for customs officers on valuation methodologies to ensure consistency and professionalism.

Transparent processes: Introduce a public reporting mechanism for valuation disputes to promote accountability and provide insights into recurring issues.

Independent arbitration: Establish a neutral arbitration body to efficiently and impartially resolve customs valuation disputes.

Digital systems: Leverage technology to enhance transparency in customs declarations, ensuring clear documentation and traceable valuation decisions.

Stakeholder engagement: Facilitate ongoing dialogue between the KRA, importers, and trade associations to identify challenges and improve processes.

Customs valuation must avoid arbitrary methods, upholding fairness, consistency, and neutrality. Kenyan courts have consistently emphasized the importance of adhering to the EACCMA, reaffirming the need for a rules-based customs administration.

By aligning practices with international standards, Kenya can build its reputation as a reliable trade partner, attract investment, and support economic growth.

As Kenya seeks to facilitate trade, KRA must prioritise efficiency, transparency, and predictability in its customs valuation processes.

Streamlining these systems is not just a regulatory obligation—it is a vital step toward fostering confidence among importers and advancing national economic goals.

In the spirit of fair trade and economic growth, we urge the taxman to address these challenges through meaningful reform, ensuring balanced and efficient customs administration for all stakeholders.

- The writers specialise in tax controversy and dispute resolution, and customs and international trade respectively, at PwC Kenya