Fresh Produce Exporters Lose Customs Levy Suit

Fresh produce exporters have lost a petition to stop the implementation of a 0.25 percent levy on the customs value of consignments introduced two years ago.

Nairobi High Court Judge Anthony Mrima quashed their plea to have the levy that was effected in January last year removed, saying the producers had only made blanket claims. The judge said the exporters did not disclose the types of levies and names of the licenses.

The exporters, under the Fresh Produce Consortium of Kenya, Fresh Produce Exporters Association of Kenya (FPEAK) and the Avocado Exporters Association of Kenya, had sued the Ministry of Agriculture, the Attorney-General and the Horticultural Crops Directorate in the matter.

“The alleged oppressive manner occasioned by the impugned levies had to be empirically demonstrated at least by an expert as against the other sectors,” the judge said.

The court heard that before gazetting of the new regulations, there was a direct simple levy at 30 cents per kilogram of consignment calculated at the point of shipping.

According to the exporters, the formula was easily administered by Food and Agriculture Organization (FAO) and the Directorate and invoices were issued and payment done after exporting the goods.

The petitioners had also argued that there was no public participation before the new levy was imposed hence unconstitutional. They claimed that they were formally informed of the regulations and were given three weeks to submit their views, which they considered inadequate.

However, the court found that there was reasonable and meaningful involvement of stakeholders before the change was made.  It also rejected the horticulture producers’ argument that it was impossible for the Directorate and the Ministry of Agriculture to pre-determine consignment value.

“On whether there was adequate public participation, in consideration of the affidavit evidence on record and the parties’ submissions, it comes to the fore that there were stakeholder meetings, discussions and communications,” said the judge.

The exporters had estimated the new levy will increase their taxes from the current annual average of Ksh90 million to Ksh377 million, projecting that more than 40 percent of horticulture export firms will be pushed out of business.

The Directorate defended the levy, saying that part of it will be used to set up fumigation and hot water plants to clean mangoes as the country prepares to resume shipments to the US, Europe, and other key markets.

Kenya has not been exporting mangoes to these key destinations in the last seven years due to presence of fruit flies.