Pakistan

The Tea Board of Kenya is continuing to press Pakistan to review import duty charged on tea as a means of tackling rampant smuggling of tea across the highly porous border between Pakistan and Afghanistan.

"There is very little we can do in terms of regulating what volume goes into Afghanistan because its an open market system and everyone has a right to buy from anyone, but we have resolved to continue lobbying Pakistan to lower the import duty on tea that enters its market," according to Sicily Kariuki, managing director, Tea Board of Kenya (TBK) quoted in Business Daily. "This will deny smugglers the incentive to engage in the malpractice."

Currently, Pakistan charges a total of 37% on imported tea, in the form of a 10% import duty, sales tax of 15% and 10% value-added tax, plus a further 2% income tax. Tea smugglers, who are widely believed to be connected with terrorist groups, are able to sell their product for significantly less, placing legitimate tea importers at a disadvantage.

Trade figures appear to support claims that Afghanistan is major source of smuggled tea in the region. In the first three quarters of 2009, Kenya’s tea exports to Afghanistan, which creates blends that include imported premium Kenyan tea to pass on to Pakistan as Kenyan tea, surged by around 30%, while other traditional markets saw as sales drop proportionately – Egypt by 18% and Pakistan by 13%.

Afghanistan bought 22 million kg of Kenyan tea during this period, more than double its estimated annual domestic consumption.

"Such improved sales are good for us but we are concerned about the possible side effects in the long term," Kariuki said. "Such smuggling comes alongside adulteration of the original product that could see us lose customers after a while because nobody would want compromised quality."