Oil firms fight inspection fee

Marketers have appealed to the Customs Department to defer petroleum inspection fee until an amicable solution is reached, setting the stage for a battle as an increase in fuel prices looms.

Kenya Revenue Authority started collecting the fee from March 1 on behalf of the Kenya Bureau of Standards, about five days after oil companies were given notice by Customs Commissioner Wambui Namu.

Kebs in July last year defied the Public Procurement Administrative Review Board nullification and contracted Geo Chem Middle East of India to carry out quality and quantity inspection of crude oil and imported refined fuel.

Oilibya, the oil industry supply coordinator, said the fees ought to be suspended pending consultations with KRA as the notice was too short.

“It is our fear that the real beneficiary of these money is not Kebs but a private entity known as Geo Chem Middle East,” said Oilibya Managing Director Karmel Jarnaz said in a letter dated March 1, 2010, sent to the customs commissioner.

It was copied to KRA’s Commissioner General Michael Waweru and Energy Permanent Secretary Patrick Nyoike. KRA last week insisted fees must be paid before firms move fuel from Mombasa.

Oil firms estimate that over Sh2.5 billion would be paid annually under the three-year contract signed by Kebs and Geo Chem for services that firms paid Sh8 million to SGS and Intertek among other private testing companies.

Marketers warned that Geo Chem’s services would not add value but instead lead to a price increase of over Sh2 as the fee amounts to 0.675 per cent of cost, insurance and freight (CIF) of crude oil and imported refined fuel.

“The fees will borne by consumers. Geo Chem is using a testing laboratory of a State corporation in Mombasa as the Indian company does not have its own facilities locally,” said an official who asked not be named.

Legal notice No. 142 signed in September 2009 by Industrialisation minister Henry Kosgey fixed inspection charges at 0.675 per cent of CIF. Before Kebs awarded the tender, the fee was pegged at 0.2 per cent of cost and value for final product and 0.1 per cent for raw materials and intermediate goods.

Mr Jarnaz said Geo Chem had previously forwarded to marketers invoices under cover letter of Kebs asking for payment when the legality of Standard (Quality Inspection of Imports) Regulations of 2009 was being contested.

He said the industry was open to meet with customs officials as the law does not provide for KRA to act as a collecting agent.