Price rise looms over steel tax tiff

Kenya Association of Manufacturers acting chief executive Tobias Alando. The lobby has called for a quick end to the stalemate. PHOTO | DIANA NGILA  

By JAMES KARIUKI

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Summary

• A stalemate between Kenya Revenue Authority (KRA) and manufacturers has seen 13 consignments of imported raw materials classified as a finished alloy steel, which attracts a 35 percent import duty instead of iron and non-alloy raw material for reprocessing that attracts a zero duty.
• Kenya Association of Manufacturers (KAM) Acting chief executive Tobias Alando called for a review of the classification saying a 0.0008 percent boron (mineral) content was too negligible to warrant re-classification for the 13 consignments held by Customs at the Mombasa Port.

Consumers of iron products in the construction, auto-fabrication, water and infrastructure sectors could soon pay more for steel products after key manufacturers halted production for lack of raw material.

A stalemate between Kenya Revenue Authority (KRA) and manufacturers has seen 13 consignments of imported raw materials classified as a finished alloy steel, which attracts a 35 percent import duty instead of iron and non-alloy raw material for reprocessing that attracts a zero duty.

Kenya Association of Manufacturers (KAM) Acting chief executive Tobias Alando called for a review of the classification saying a 0.0008 percent boron (mineral) content was too negligible to warrant re-classification for the 13 consignments held by Customs at the Mombasa Port.

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“The element Boron of 0.0008 percent is very negligible in the whole mass of steel. Variation in chemical composition does not, in any way, warrant re-classification of hot rolled steel coils as 7225.99.00 instead of 7208.39.00.I and H sections have been classified as 7225.99.00 instead of 7208.10.00 while chequered coils/plates have been classified as 7225.99.00 instead of 7208.10.00."

“Addition of any element in this raw material does not benefit or change its use for producing black and galvanised steel pipes, tubes, and sections,” he said.

KAM wants swift resolution of the standoff saying 5,000 jobs as well as multibillion-shilling investments in the steel subsector were in jeopardy.

It said all storage and demurrage charges should be waived to enable manufacturers restart operations using the imported raw material with an understanding that future imports will not have boron. Devki Group chairman Narendra Raval termed the new requirement as unfair saying firms have been importing the raw material for the past 30 years at zero tariff. He added that some international finished iron product suppliers could be behind the stalemate to facilitate entry of their products.

The new fees, he said, adversely affected Kenyan-made steel products’ competitiveness in East African.

Devki Group and Nail and Steels companies are among six companies that have halted production owing to lack of raw material with the other 18 companies fast depleting the stocks.

This could see Kenya lose its regional market as a leading steel products supplier and seller besides making housing more expensive.