INTERNATIONAL PURCHASING

Unit Code: BCP 400

GOVERNMENTS REGULATION OF IMPORTS

Dr. Evans Oteki, Ph.D.

07/25/2021 1
Introduction
In spite of the strong theoretical case that can be made for free international
trade, every country in the world has erected at least some barriers to
international trade.
A country restricts the importation of goods and services produced in foreign
countries.
They shift the supply curve for each of the goods or services protected to the
left.
 Protectionist policies imposed for a particular good always reduce its supply,
raise its price, and reduce the equilibrium quantity.
The supply curve shifts to S2, the equilibrium
price rises to P2, and the equilibrium quantity
falls to Q2
Instruments of protection
Protection often takes the form of an import tax or a limit on the amount that
can be imported, but it can also come in the form of voluntary export
restrictions and other barriers.
 Tariffs: A tariff is a tax imposed on imported goods and services. A tariff
raises the cost of selling imported goods. It thus shifts the supply curve
for goods to the left.
 Quotas: A quota is a direct restriction on the total quantity of a good or
service that may be imported during a specified period.
 An important distinction between quotas and tariffs is that quotas do not

increase costs to foreign producers; tariffs do.

 Voluntary Export Restraints (VERs): They are agreements between an exporting and an
importing country that limits the quantity businesses can export during a period.
 Even though the term says the agreement is voluntary, it is usually not.
 By reducing the quantity exported, the importing country can increase prices and total
revenue.
 Anti-Dumping Duties:
 Dumping happens when the exporting producer sells goods below cost of production
or below the selling price in the exporting country.
 A firm in the importing country complains to its Government that a certain firm is
exporting goods at an unfair price.
 The government then can impose a duty on the good till the WTOdecides the issue.

 However, firms often claim that the good is produced below the cost to buy more time
for themselves. It is often difficult to determine the actual costs of the firm.
Subsidies: Governments offer export subsidies to help make firms
more competitive by lowering their costs.
Regulatory Barriers: Any “legal” barriers that try to restrict imports.
 safety standards,

 pollution standards,

 product standards that specify that the product should meet or exceed
standards set by the local government.
 For example, car manufacturers often have to pass certain safety
ratings to sell the car in the importing country.
Other Barriers
The following may have the effect of restricting imports
Import license
Local content requirements
Currency devaluation - Exchange rate management
Embargo - Prohibition that prevents entry of illegal or harmful items
Justifications for import regulation
The Infant Industry Argument
The Anti-Dumping Argument
The Environmental Protection Argument
The Unsafe Consumer Products Argument
The National Interest Argument
Domestic Employment
Aggressive Trade Practices
To raise revenue
The Infant Industry Argument
Tariffs are commonly used to protect early-stage domestic companies and
industries from international competition.
The tariff acts as an incubator that theoretically affords the domestic company in
question the ample time it may need to properly nurture, develop, and grow its
business into a competitive entity, on the international landscape.
The infant industry argument is theoretically possible, even sensible: give an
industry a short-term indirect subsidy through protection,
Implementation, however, is tricky. In many countries, infant industries have gone
from babyhood to senility and obsolescence without ever having reached the
profitable maturity stage.
Protectionism is supposed to be short-term but often took a very long time to be
repealed.
The Anti-Dumping Argument
Dumping refers to selling goods below their cost of production. 
Anti-dumping laws block imports that are sold below the cost of production by imposing tariffs
that increase the price of these imports to reflect their cost of production.
Since dumping is not allowed under the rules of the WTO, nations that believe they are on the
receiving end of dumped goods can file a complaint with the WTO.
Why would foreign firms export a product at less than its cost of production—which presumably
means taking a loss? - innocent & sinister.
The innocent explanation -market prices are set by demand and supply, not by the cost of
production. Demand shifts to the right or left
The sinister explanation is that dumping is part of a long-term strategy.
 Foreign firms sell goods at prices below the cost of production for a short period of time, and when
they have driven out the domestic (e.g. Kenya) competition, they then raise prices.
Environmental Protection Argument
Governments may use tariffs to diminish consumption of international goods
that do not adhere to certain environmental standards.
In general, high-income countries such as the United States, Canada, Japan,
and the nations of the European Union have relatively strict environmental
standards.
 In contrast, middle- and low-income countries like Brazil, Nigeria, India,
Kenya and China have lower environmental standards. 
The diffence b/w developed and developing countries leads: the “race to the
bottom” scenario and the question of how quickly environmental standards will
improve in low-income countries.
WTO is Pressuring Low-Income Countries for Higher Environmental Standards
The Unsafe Consumer Products Argument
 Another argument for shutting out certain imported products

is that they are unsafe for consumers.

 For imported products, WTO says:
Countries can set their own safety standards.
Regulations must be based on science.
They should not arbitrarily or unjustifiably discriminate
between countries where identical or similar conditions
prevail.
The National Interest Argument
A nation should not depend too heavily on other countries for supplies of certain

key products, such as oil, or for special materials or technologies that might have
national security applications.
If a particular segment of the economy provides products that are critical to

national defense, a government may impose tariffs on international competition to

support and secure domestic production.
 This can happen both during times of peace and during times of conflict.
Domestic Employment
Governments policies to focus on fostering environments that provide its

constituents with robust employment opportunities.

 If a domestic segment or industry is struggling to compete against

international competitors, the government may use tariffs to discourage

consumption of imports and encourage consumption of domestic goods, in
hopes of supporting associated job growth, especially in the manufacturing
sector.
Aggressive Trade Practices
International competitors may employ aggressive trade tactics such as flooding
the market, in an attempt to gain market share and put domestic producers out
of business.
Governments may use tariffs to mitigate the effects of foreign entities
employing unfair tactics.
Revenue source to Governments
Taxes fund Government budgets and import trade is one of such sources of
revenue.
The common taxes are VAT, IDF fee.
For all purchases from other countries to Kenya, an import declaration fee
(IDF) of 2.25% of the CIF Value subject to a minimum of 5,000.00 Kenyan
Shillings is payable.
Customs will assess duty payable depending on the value of the item(s) and
the duty rate applicable.
Negative effects of tariffs
Importers pay tariffs to their home government.

Most economists find that the bulk of tariff costs are passed on to consumers.

This is particularly true for industries, such as retail or grocery stores, with

small profit margins.

For most of the past century, however, tariffs have fallen out of favor because

they often lead to reduced trade, higher prices for consumers in tariff-wielding
countries, and retaliation from abroad. 
SUMMARY
Some experts believe that governments should support free trade and refrain

from imposing regulations that restrict the free flow of goods and services
between nations.
 Others argue that governments should impose some level of trade regulations

on imported goods and services.

KENYA - IMPORT REGULATIONS- What exporters should know
Includes the barriers (tariff and non-tariff) that foreign companies face when exporting to
Kenya and other regulations that MUST be fulfilled.(Last Published: 8/13/2019)
1. Non-tariff barriers
 Certificate of Conformity from a Kenya Bureau of Standards appointed pre-export
verification of conformity (PVoC) partner and
 Obligation to obtain an Import Standards Mark (ISM) for a list of sensitive products
imported into Kenya.
 packaging and labeling requirements
 intellectual property rights protection
Some U.S. firms may find packaging and labeling requirements difficult to meet.
 The lack of enforcement of intellectual property rights protection on videos, music, and
computer software makes some U.S. firms reluctant to export these goods and services to
Kenya.
2. Conformity Assessment
All consignments of regulated products must now obtain a Certificate of

Conformity issued by authorized PVoC country offices (programs managed by

partners such as Intertek Services) and an import standards mark (ISM) prior to
shipment.
The ISM is consignment specific.
3. Consignment without PVoC
For consignments shipped without inspection, importers may apply for a

destination inspection subject to KEBS acceptance and pay a penalty of 15

percent and a 15 percent bond of the CIF value, plus the costs of the test.
In November 2007, KEBS removed a significant non-tariff trade barrier by

agreeing to waive the Certificate of Conformity (CoC) requirement om

 bulk agricultural commodities inspected and certified by U.S. government inspection

agencies, i.e., the U.S. Department of Agriculture Federal Grain Inspection Service
(FGIS) and Animal and Plant Health Inspection Service (APHIS).
4. Product Certification
National organizations such as the Radiation Protection Board, NEMA, the 

Dairy Board of Kenya, and the Communications Authority of Kenya (CAK)

 have specific product and system requirements that must be met prior to
issuance of licenses or permits.
5. Importation of plants material
The importation of any form of plant material (seeds, cuttings, bud wood plantlets, fresh

fruit, flowers, and timber) into Kenya is subject to strict conditions as outlined in the
import permit issued by the Kenya Plant Health Inspectorate Service (KEPHIS) prior to
shipment of such plants from the origin regardless of whether they are duty free, gifts or
for commercial or experimental purposes.
Seed certification is mandatory before seeds can be sold locally; the process can take up to

three years
6. Kenya- Business Travel
Includes information on business customs, travel advisory, visa requirements,

currency, language, health, local time, business hours and holidays, acceptable
business etiquette, dress, business cards, gifts, temporary entry of materials and
personal belongings,etc.
All these regulates import of services
7. Business culture
The principles of customary business courtesy, especially replying promptly to

requests for price quotations and orders, are a prerequisite for exporting success.
Kenyan buyers appreciate quality and service, and, if justified, are willing to pay

a premium if they are convinced of a product's overall superiority.

Local assembly of complete knock down kits, especially for electrical and

electronic goods has an import duty advantage.

8.Travel Advisory
Travel Warning on Kenya due to the threat of terrorism and violent crime that
might happen.
This affects importation of consultancy services to Kenya.
Consultants concern will have to postpone contracts until the travel advisory is
lifted thus affecting purchasing achieving its goals.
Rescheduling will be the option
9. Visa Requirements
As of 2011, the fee is $50 for single-entry visas, and $100 for multiple-entry
visas, $20 for transit visas and an administrative fee for referred visa of $10.
This applies to each applicant regardless of age, and whether obtained in
advance or at the airport
10. Currency
Our currency rankings show that the most popular Kenya Shilling exchange
rate is the USD to KES rate. The currency code for Shillings is KES, and the
currency symbol is KSh.
 Purchasing department should convey this information to consultants coming
to Kenya.
11. Telecommunications
Kenya has a well-developed telecommunications infrastructure that is reliable

and affordable. The three primary mobile networks in Kenya are Safaricom,
Airtel, and Telkom Kenya.
Roaming and international calling charges in East Africa are generally higher

than those in Asia and Europe. Wi-Fi service in the country is readily available
with Wi-Fi hotspots available in major shopping malls, restaurants, salons, and
even in some public transport vehicles.
12. Transportation
Taxis and rental automobiles are available in large towns and cities. Traffic moves on

the left-hand side of the road. For safety reasons, visiting American business executives
should not use the informal “matatu” bus system or trains. If possible, taxis should be
hired via concierge services at hotels or through reputable travel agents.
Kenya has two major international airports: Jomo Kenyatta International Airport

(JKIA) in Nairobi and Moi in Mombasa. Taxis are available at the airport, and we
would recommend getting a taxi from the various Taxi companies with an office
outside the arrivals.
13. Language
The official languages of Kenya are English and Kiswahili.

 However, many different languages and dialects are spoken throughout the country.

The commercial language is English.

Language barriers pose few problems, but in legal documents it is important to have

lawyers who can interpret distinctions between American English and Kenyan
English.
14. Health
Useful information on medical emergencies abroad, including overseas

insurance programs, is provided in the Department of State’s Bureau of

Consular Affairs brochure, Medical Information for consultants Traveling
Abroad, available via the Bureau of Consular Affairs
15. Local Time, Business Hours and Holidays
Most of the year, Kenya isGMT +3, or three hours ahead of London and eight hours ahead

of Eastern Standard Time.

A 40-hour workweek is the norm for offices and factories. Typical office working hours are

8:00 a.m. to 5:00 p.m. with lunch from 1:00 p.m. to 2:00 p.m.
Banking hours are from 9:00 a.m. to 3:00 p.m. Most retail stores are open from 9:00 a.m. to

6:00 p.m. There are several supermarkets that are open 24hrs, and most shopping malls will
have some shops open till 8pm.
16. Temporary Entry of Materials or Personal Belongings
Kenyan law limits the period of temporary importation to be consistent with
the purposes for which goods have been imported.
For instance, the temporary importation period for goods imported for
exhibition purposes shall be limited to the period of the exhibition.
However, the Minister for Finance may extend the period of temporary
importation beyond twelve months upon application depending on the merit of
each case.
Such extensions are best requested before the expiry date to avoid
inconvenience
 INTERNATIONAL PURCHASING
Unit Code: BCP 400
GOVERNMENTS REGULATION OF IMPORTS

Dr. Evans Oteki, Ph.D.

07/25/2021 34