How govt lost Sh62b in edible oils scandal

Members of Parliament are now looking into how the government could have lost Sh62 billion in revenue in the last three years through the importation of edible palm oil disguised as crude palm oil.

According to documents tabled before a House team, the product was imported from countries such as Malaysia and Indonesia through the port of Mombasa and was destined for the East Africa Community market.

They further indicate that Louis Dreyfus Company (LDC), which is the importer of the product, misdeclared the consignments in a bid to avoid paying the requisite taxes. Notably, a 35 percent duty is charged on imported refined palm oil whereas semi-refined palm oil attracts a 10 percent duty.

Other charges include an Import Declaration Fee (IDF) at 2.5 per cent, Railway Development Levy at 1.5 per cent and Value Added Tax (VAT) at 16 per cent.

The documents tabled before the National Assembly Committee on Trade, however, explain that one form of misdeclaration occurs by mixing the product as 60 per cent crude palm oil and 40 per cent crude palm oil. It is then declared as crude palm oil.

In other instances, it emerged, the product was imported as a refined product but declared as crude palm oil to circumvent the payment of the 35 percent duty, which is equivalent to $500 per ton.

Consequently, in 2022, the government lost Sh16.5 billion in revenue from the 233,000 metric tonnes that were misdeclared as crude palm oil and Sh32.54 billion in 2023 from the 387,868 metric tonnes misdeclared.

In 2024, the government has already lost Sh13.83 billion in revenue from the 163,567 metric tonnes imported so far.

“They (importers) load both cargoes into the same ship tanks using a 40 per cent refined oil blend and 60 per cent crude oil blend. This is against the World Customs Organization guidelines as any adulterated cargo cannot be deemed as crude oil palm oil.

"The product at the destination country requires less processing or none at all thus their customers save on processing costs,” reads the document in part.

It further explains that the palm oil cargo imported from Malaysia and Indonesia is in six types- RBD Palm Olein, RBD palm stearin, crude palm kernel oil, crude palm olein, crude palm oil and palm fatty acid distillate.

To promote local value addition, Indonesia and Malaysia have imposed a $70 per ton export duty exemption on crude palm oil.  

“This means that the importers of the product save the $70 per ton duty when exporting refined palm oil from Indonesia or Malaysia and 35 per cent import duty when declaring the cargo as crude palm oil in Kenya,” it adds.

LDC officials are slated to appear before the House team for questioning. Efforts to reach the company were futile given that it had no contact on its website.