The Kenya Revenue Authority’s Customs Department has come under pressure after it emerged that some of the consignments it allowed into the country contained undervalued tyres from China, prompting loss of billions of shillings.
A document comparing custom entries seen by the Business Daily shows that imports of some tyres were grossly undervalued, a leakage that insiders estimate could cost the country up Sh9 billion a year in revenue losses, or between Sh250 million and Sh500 million every month.
Analysis conducted by the investigation and enforcement agency on a select consignment showed their landing price was undervalued by more than half, with some segment of traders raising concerns that this amounts to unfair competition.
The Investigation Department, in a memo to the Customs Department seen by the Business Daily, found that there was “deliberate undervaluation by importers”.
“The deliberate undervaluation has resulted in significant revenue losses running into billions of shillings over time,” says the Investigation Department in a memo to the Customs Department.
The disclosure shines the spotlight on the close to Sh20 billion shipment of vehicle tyres from China. China, which is known as the factory of the world due to its industrial prowess, is the leading manufacturer of tyres, accounting for nearly a third of world output.
The Asian nation has 161 tyre factories, the highest number in the world, including domestic companies like Zhongce Rubber and international players such as Michelin and Bridgeston.
Imports of tyres have picked up in line with increased shipments of second-hand vehicles, which often require their tyres to be replaced shortly after entry into the country.
This has led to an increase in demand for imported tyres, especially from China, India and Southeast Asia.
Imported tyres are significantly cheaper than locally produced or premium international brands.
Kenya imports most of its tyres from China, with shipments sweeping over the local manufacturing players like Sameer Group, which was also forced to close its plant and ship most of its supplies from outside, mostly the Asian nations.
The investigation team at the KRA said the analysis was prompted by complaints of unfair competition from some traders, who decried how the valuation of imports by the Customs Department has enabled a few businesspeople to pay lower levies, giving them an undue advantage in the market.
The team noted that it targeted some undervalued consignments in Nairobi and Mombasa, with a view to uplifting the values to the recommended landing prices and ensuring correct taxes are collected.
“Most of the targeted consignments declared less than half of the recommended Free on Board values for the sizes declared,” added the memo.
Last year, the number of imported tyres more than doubled to 9,606,400, from 4,278,600 in the previous year, official data shows.
The imported tyres were valued at Sh19.2 billion, an increase of 14 per cent from Sh16.85 billion – a rise in local demand that has been informed by the increase in the number of motor vehicles on the Kenyan roads in recent years.
A data visualidation platform by the Massachusetts Institute of Technology showed that imported vehicle tyres from China in 2023 – when the latest figures are available – were valued $147 million (Sh19 billion using the current exchange rate), an increase of 44.1 per cent from Sh13.22 billion.
Imports from China have faced scrutiny for mis-invoicing, where businesses under-declare the price of an imported item, mostly through concealment.
