The High Court has rejected a petition to nullify the government's decision to provide incentives in the local construction industry through temporary suspension of import duty exemption on steel billets and wire rods.
The two-year suspension commenced in January 2025 after President William Ruto signed into law, the Tax Procedures Amendment Act, 2024 to boost the government's plan to reduce costs for construction and manufacturing industries and protect the domestic players.
The intervention was aimed to address unfair competition for local steel manufacturers, after stakeholders told the National Assembly that steel products imported from the South African region were cheaper than the locally manufactured ones.
The low price was because of Kenya being party to the African Continental Free Trade Area (ACFTA) Agreement, which permits duty-free importation of steel products from the South African region.
The stakeholders said the agreement grossly disadvantaged the local industry from cheap imports coming in from other regions. They called for measures to allow growth of local industries and protect them from collapse.
The National Assembly responded by introducing a clause in Section 6A of the Tax Procedures Act to suspend import duty exemption of steel and imported wire billets for two years to allow growth of the local industry.
However, in a petition filed by the Law Society of Kenya (LSK), the court was asked to declare that the suspension was unconstitutional and inconsistent with Kenya's regional international obligations.
LSK argued that the legal clause was not part of the original Tax Procedures Amendment Bill No.2 of 2025 and that it was introduced by Parliament after the public participation exercise.
According to LSK, the legal provision lacked the public input as required by the Constitution.
But Justice Lawrence Mugambi rejected the petition after evidence from MPs showed that the suspension resulted from the views submitted by Kenyans during the public participation stage.
MPs told court that views were received by the Departmental Committee on Finance and National Planning from local steel manufacturers, through Kiarie Mungai & Associates Advocates, during the public participation exercise, which upon due consideration informed the introduction of the new clause for suspension of import duty.
"The argument by the LSK that the amendment ought to have undergone through public participation collapses. This is because the decision to introduce this amendment has been demonstrated by the National Assembly to have been arrived at upon due consideration of views and memoranda received during the public participation exercise," ruled the judge.
The court noted that local industry steel players highlighted the negative impacts faced by manufacturers as a result of implementation of African Continental Free Trade Area (AfCFTA) agreement.
The court also declined LSK's argument that the tax suspension contradicted the regional and multilateral agreements on imposition of import duty on steel billets and imported wire billets.
Justice Mugambi said the national law prevails over the regional and multilateral treaties.
They had said permits issued to importers of steel and wire billets from South Africa without being charged import duty made those imports cheaper than the locally manufactured steel.
This was the reasoning that informed the amendment of the Act to suspend import duty exemption for two years to allow growth of the local industry.
The House as a policy intervention adopted Kiarie Mungai & Associates Advocates’ proposal with the keen interest of protecting the local manufacturers while preserving the multitudes of jobs that were threatened as a result of the unfair competition.
"Even without delving further to determining whether indeed there exists any specific inconsistencies between the Tax Procedures Act and the regional and multilateral treaties, the legal consequence, is that if inconsistencies exist, the provisions of the Tax Procedures Act would prevail over the provision in the regional or multilateral treaties," said the judge.
He explained that the only time the court would strike out a provision in a statute is if it is in conflict with the Constitution and not the provisions of a treaty law.
LSK argued that the law amendment offended the provisions of the East African Community Customs Management Act and the Protocol on the Establishment of the East African Customs Union by excluding Kenya from its obligations under the existing agreements and treaties.
It further stated that the legal provision had exposed Kenya to the possibility of being in dispute with the regional partners.
This was because the amendment exempted Kenya from its obligations under the multilateral agreements and treaties for two years with respect to imposition of import duties.
