STEEL MANUFACTURER IN CUSTOMS CROSS HAIRS

BACKGROUND 

This case was filed at the Tax Appeals Tribunal involving a steel manufacturer in Kilifi, Kenya and the tax dispute was over the correct tariff classification for imported punched steel heads (caps) used in roofing nails.

The steel manufacturer classified the imported goods under EAC Tariff HS Code 7326.19.00, which pertains to “other articles of iron or steel – forged or stamped, but not further worked,” attracting a duty rate of 10%. However, the Kenya Revenue Authority (KRA) insisted that the goods should be classified under HS Code 7326.90.90, which pertains to “other articles of iron or steel – other,” and carries a higher duty rate of 25%.

The steel manufacturer contested this classification, arguing that the punched steel heads are intermediary products that require further processing before they can be used. It asserted that these items, in their imported form, are not usable and need to be further worked on by pressing them onto nail pins through a hammering process to create finished roofing nails. The steel manufacturer argued that the respondent’s classification under HS Code 7326.90.90 was incorrect and unjust, as it would unfairly impose a higher duty rate on unfinished products, contrary to the intended tariff classification system.

The steel manufacturer ‘s case was supported by previous rulings and laboratory analysis, which confirmed that the imported items were indeed intermediary products not ready for use without further processing.

They pointed out that KRA had previously acknowledged the nature of the goods in a letter and that similar goods imported by a sister company had been classified under HS Code 7326.19.00 by the Tax Appeals Tribunal in a related case.

RULING

The Tribunal found that the KRA’s reclassification was not merited and allowed the appeal.

CPA Beatrice Njeri – Co-founder/Partner

Head of Tax & Accounting

beatrice@tarraagility.com
partners@tarragility.com