THE CUSTOMS AND EXCISE (DUTY REMISSION) REGULATIONS, 2002

Citation.

1. These Regulations may be cited as the Customs and Excise (Duty Remission) Regulations, 2002.

Interpretation.

2. In these Regulations unless the context otherwise requires-

"gazetted approved supplier" means a manufacturer or producer who imports goods for use in the production of goods for supply to an indirect exporter;

"gazetted exporter" means a manufacturer or producer who imports goods for use in the production of goods for subsequent exportation;

"gazetted indirect exporter" means a manufacturer or producer who imports goods for supply to another manufacturer or producer for use in the production of goods for export;

"gazetted indirect manufacturer" means a manufacturer who imports materials for use in the manufacture of goods which are in turn supplied to another manufacturer or producer for use in the manufacture of goods under these Regulations;

"manufacture" includes any process by which a commodity is finally produced including assembling, packing, bottling, repacking, mixing, blending, grinding, cutting, bending, twisting, joining, or other similar activity;

"indirect export" means the goods supplied by an indirect exporter to a manufacturer or a producer for use in the production of exports under these regulations;

"Tax Remission for Exports Office" means the office, in the Ministry for the time being responsible for matters relating to finance, charged with the responsibility of the administration of these Regulations.

Remission of duty on imports for use in the production of exports.

s.2, L.N.46/2003.

3. (1) The Minister may grant remission of duty in respect of-

(a) goods imported for use in, or to be attached to goods manufactured or produced in Kenya for subsequent exportation; and

(b) imported goods other than fuels, lubricants, plant machinery or equipment, for direct consumption or to be expended in the manufacture or production in Kenya of goods for subsequent exportation.

(2) For the purposes of this regulation, fuels include motor spirits (gasoline) and automotive diesel but excludes coal, coke, furnace oil, petroleum gases and kerosene.

Duty free or specified goods.

4. The Minister may grant remission of duty in respect of-

(a) goods imported for use in, or to be attached to goods manufactured or produced in Kenya; and

(b) imported goods other than fuel, lubricants, plant machinery or equipment for direct consumption, or to be expended in the manufacture or production in Kenya of goods

Provided that the goods produced or manufactured are-

(i) duty free under the First Schedule to the Act or are specified, but excluding fuels;

(ii) goods, including capital equipment and vehicles, supplied to an official aid funded project where the goods, if imported, would have qualified for full remission of duty under section 138 of the Act; or

(iii) goods for official use by the Kenya Armed Forces; or

(iv) goods manufactured for use in production of goods under this regulation.

Limitations on application of remission.

L.N. 138/2003

5. The remission of duty referred to in regulations 3 and 4 shall be restricted to

(a) the manufacturer or producer of goods for export referred to in regulation 3;

(b) an indirect exporter approved under regulation 7 (c);

(c) the manufacturer or producer of goods referred to in regulation 4;

(d) seventy-five per centum of duty payable on industrial sugar used under regulation 4 (tariff number 1701.99.90); or

(e) eighty-five per centum of duty payable in the case of a manufacturer who uses paper and paperboard in making packaging materials for liquids for sale in the domestic market.

(f) the manufacturer or producer who uses crude palm olein or stearin in producing edible oils and raw materials for the manufacture of laundry toilet soaps and detergents for sale in the domestic market.

Application for remission.

6. An application for remission of duty under these Regulations shall be submitted for consideration and approval by the Tax Remission for Exports Office.

Approval of application for remission on imports for use in the production of exports.

7. Subject to regulation 5, an application for remission of duty under regulation 3 may be allowed by the Tax Remission for Export Office in the following cases-

(a) on receipt of an application on Form C.56 supported by-

(i) a bona fide export order or export contract for specified export goods or a letter of credit;

(ii) a detailed production plans including production processes or formula, and specifying the types and quantities of goods to be imported; and

(iii) a list of the goods to be imported including description, tariff classification, quantity, value and the estimated amount of duty to be remitted ; or

(b) where an exporter has an established record of exports of specified goods over a period of at least one year, on receipt of application on Form C.56 for the imports required to produce exports of value up to the value exported on average over a six month period where the application is supported by-

(i) export entries documenting the value of exports of specified goods over the immediately preceding year, or such longer immediately preceding period not exceeding three years;

(ii) detailed production plans including production processes or formulae, and specifying the types and quantities of goods to be imported; and

(iii) a list of the goods or materials to be imported including description, tariff classification, quantity, value and estimated amount of duty to be remitted; or

(c) on receipt of an application of Form C.56 from an indirect exporter jointly with an application or applications from an exporter or exporters under paragraph (a) or (b), where the application of the indirect exporters is supported by-

(i) bona fide order or orders from an exporter or exporters applying under paragraph (a) or (b);

(ii) detailed production plans including production processes or formulae, and specifying the types and quantities of goods to be imported; and

(iii) a list of the goods or materials to be imported as indirect imports including description, tariff classification, quantity, value and estimated amount of duty to be remitted;

and a copy of the approved application shall be returned to the applicant duly certified by the Tax Remission for Exports Office.

Approval of application for remission on imports for use in the production of exports, duty free, or specified goods.

8. Subject to regulation 5, an application for remission of duty under regulation 3 or 4 may be allowed by the Tax Remission for Exports Office in the following cases-

(a) on receipt of an application on Form C.56 supported by-

(i) a bona fide export order or contract for the purchase of the goods;

(ii) a detailed production plans including production processes or formula, and specifying the types and quantities of goods to be imported; and

(iii) a list of the goods to be imported including description, tariff classification, quantity, value and the estimated amount of duty to be remitted ; or

(b) where an exporter has an established record of production and sales of the goods specified under regulation 4(a) or 4(b) over a period of at least one year, on receipt of application on Form C.60 for the imports required to produce the goods of value up to the value of sales on average over a six month period where the application is supported by-

(i) sales invoices documenting the value of sales of specified goods over the immediately preceding year, or such longer immediately preceding period not exceeding three years;

(ii) detailed production plans including production processes or formulae, and specifying the types and quantities of goods to be imported; and

(iii) a list of the goods or materials to be imported including description, tariff classification, quantity, value and estimated amount of duty to be remitted;

and a copy of the approved application shall be returned to the applicant duly certified by the Tax Remission for Exports Office.

Frequency of making application.

9. Applications under regulation 7(b) or 8(b) can only be made once every six moths except where evidence can be provided that exports or sales have or will reasonably be expected to exceed the average exports or sale value for a six month period.

Register of applicants.

10. The Tax Remission for Exports Office shall maintain a register of applicants for duty remission under these Regulations which shall contain the name, postal address and location of the business premises, and any other information that the Tax Remission for Exports Office may require.

Undertaking by applicant.

11. Remission of duty on goods shall be conditional upon the applicant undertaking in Form C.56 or C.60 to-

(a) pay duty on any imported goods that have not been-

(i) used in the production of approved exports or indirect exports where remission is granted under regulation 3;

(ii) used in the production of approved goods where remission is granted under regulation 4;

(iii) re-exported;

(iv) transferred to an approved bonded factory as provided for under regulation 25; or

(v) transferred to the next production period as provided for in regulation 26;

(b) complete and submit to the Tax Remission for Exports Office a reconciliation declaration as required under regulation 23;

(c) keep and maintain books and records in accordance with regulation 19; and

(d) provide security in the form and manner referred to in regulation 15.

Exclusion of other exemptions.

12. Goods manufactured from goods imported under these Regulations shall not be eligible for duty remission under any other written law.

By-products.

13. Where a by-product results from a process of manufacture or production utilizing goods subject to duty remission under these Regulations, duty shall be payable on such imported goods in the same proportion that the value of the by-product bears to the total value of all goods manufactured or produced from such imported goods unless the by-products are exported.

Scrap or waste.

14. Where any scrap or waste of commercial value results from a process of manufacture or production utilizing goods subject to duty remission under these Regulations, duty shall be payable on the prevailing value of the scrap or waste in accordance with section 127 or 127B, as the case may be, and the First Schedule, unless the scrap or waste is exported, or destroyed under supervision of the proper officer.

Entry and bond forms for imports.

15. Goods imported under these Regulations shall-

(a) be entered on Form C.63 with a declaration of "REMISSION UNDER APPROVED MANUFACTURE, Legal Notice Number............... of ..............." endorsed on each copy in block letters, and

(b) have a security bond posted in an amount determined by the Commissioner, but not exceeding the duty that would otherwise be payable, and executed on the Form CB. 13.

Transfer and bond forms for goods from an indirect exporter.

16. (1) Goods purchased from an indirect exporter under these Regulations shall-

(a) be transferred from an indirect exporter to the approved manufacturer or producer for use in the production of exports using Form C.58; and

(b) have a security bond posted by the recipient of the transferred goods in an amount determined by the Commissioner but not exceeding the duty that would otherwise be payable on the indirect imports, and executed on the Form CB. 13.

(2) Goods transferred from a gazetted approved supplier to an indirect exporter shall-

(a) be entered in Form C.58; and

(b) have a bond security executed on Form CB.13.

Cancellation of security bond.

17. The security bond shall be cancelled only-

(a) after the reconciliation declaration has been verified and approved by the Commissioner;

(b) any unused imported goods have been re-exported or transferred to an approved bonded factory; or

(c) the duty has been paid.

Period for processing application.

18. The Tax Remission for Exports Officer shall within seven working days of the receipt of a satisfactorily completed and supported application as required under regulation 7 or 8 give approval or advise the applicant of a rejection stating the reasons for such rejection.

Maintenance of books and records.

19. Every person who has been granted a remission from duty shall keep and maintain at his place of business detailed books and records relating to the purchase, importation, stocks of goods, packing, sales, shipping and exportation of all goods.

Examination of books and records.

20. The books and records referred to in regulation 19 shall be kept for five years from the time of application for remission and shall be made available, upon request, to the proper officer, including an officer of the Tax Remission for Exports Office, for examination and verification at all reasonable times.

Other records.

21. Separate books and records from those maintained for domestic goods shall be maintained for stocks or imported goods, indirect imports and indirect exports.

Powers of inspection.

22. A proper officer including an officer from the Tax Remission for Exports Office shall have powers to inspect and verify the books and records, inspect the production facilities of any remission applicant and examine any goods or materials within the production facility or any storage place related thereto.

Submission of reconciliation declaration.

23. A reconciliation declaration in Form C.57 in respect of the duty remission granted shall be submitted to the Commissioner in three copies within a nine month period from the time of approval of the remission application, or, for applications approved under regulation 7(a) or 8(a) on completion of the order or contract, whichever is the earlier.

Supporting documents for reconciliation declaration.

24. The declaration referred to in regulation 23 shall be submitted together with-

(a) certified copies of all import entries and indirect export transfers to which the reconciliation declaration relates;

(b) a document showing-

(i) in the case of exporters approved under regulation 3, the linkage between the imported goods and indirect exports and the exported goods produced or manufactured from these imported goods, or any waste or scrap of commercial value, or any waste or scrap destroyed, or any by-products either exported or sold domestically resulting from the manufacturing or production of the exported goods; and

(ii) in the case of indirect exporters approved under regulation 3, the linkage between the indirect imports and the indirect exports produced or manufactured from the imported goods, or any waste or scrap of commercial value, or any waste or scrap destroyed, or any by-products either exported or sold domestically resulting form the manufacturing or production of the indirect exports; and

(iii) in the case of manufacturers or producers approved under regulation 4, the linkage between the imported goods and the sales of approved goods produced or manufactured from the imported goods, or any waste or scrap of commercial value, or any waste or scrap destroyed or any by-products exported or sold domestically resulting from the manufacturing or production of the approved goods; and

(iv) the disposal of any remaining unused imported goods or indirect exports by re-export, transfer to an approved bonded factory, retention for future use in production as provided for under this regulation, or domestic sale subject to duty.

(c) certified copies of all export entry documents or a list of the export entry numbers to which the declaration relates and certified copies of all indirect export transfer documents; and

(d) the invoices for the exported goods, indirect exports and domestically sold goods, as the case may be.

Transfer of goods to approved bonded factory.

25. Subject to section 58A of the Act, imported goods for which a remission has been authorized may be sold or transferred to an approved bonded factory.

Renewal of remission.

26. The remission of duty granted under these Regulations may be renewed on the basis of the conditions of the initial authorization after the nine month period referred to in regulation 23, by submission of a new application under regulation 7 or 8 where-

(a) fulfillment of an export or domestic sales contract has been delayed, or only partially achieved; or

(b) production and delivery for export or domestic sale, as the case may be can be established to e regular and ongoing.

Gazettement of manufacturers and producers.

27. On the advice from a committee appointed by the Treasury, the Commissioner shall gazette the manufacturers and producers under these Regulations but the approved quantities of the raw materials to be imported shall be maintained by the Tax Remission for Export Office.

Penalty.

28. Any person who fails to comply with or contravenes any provision of these Regulations commits an offence and shall be liable to a fine not exceeding one million shillings or three times the duty of the goods involved, whichever is higher, or to imprisonment for a term not exceeding three years, or to both such fine and imprisonment.

Revocation of approval.

29. Without prejudice to the provisions of regulation 28, where any person-

(a) fraudulently contravenes the provisions of these Regulations;

(b) is grossly negligent in complying with the provisions of these Regulations; or

(c) repeatedly acts in a manner inconsistent with the intent of these Regulations;

the Tax Remission for Exports Office may reject or revoke approval of an application under these Regulations.