Question One

Rock Beverages Limited (RBL) is a mineral water bottling company packing

mineral water and has recently started packaging juice and other soft
drinks. For its juice packaging brand, RBL imported a filling machine from
Ostim Industrial City in Turkey. RBL paid $ 18,900 for the machine at the
factory, $ 600 to transport the unit to the port of export, insurance of $
945, and freight of $ 350 to the port of Mombasa.
RBL made additional payments to the manufacturer for a non-returnable
container of $ 120 and training fees of $ 1,200. As part of the purchase,
the manufacturer provided start-up bottling supplies for free valued at $
1,500.
The manufacturer sold the control unit of the machine separately at $
3,100. This was airlifted from Esenboga International Airport in Ankara to
Entebbe International Airport in Uganda. The air freight was $ 110 and
freight insurance of $ 50.
Additional information:

The Exchange rate at the time was $ = Shs 3,700

• The Import duty rate is 25%
• Value added tax rate is 18%
• Withholding tax is 6%
• Infrastructure levy is 1.5%
Required:
Compute the customs value and taxes payable by KBUL for the importation.

Question Two

Kenzi is a trader dealing in the importation of general merchandise and

specialised equipment. He recently ordered for the following items:
(i) A self-refrigerated vehicle from Yokahoma in Japan at United States dollars
(USD) 15,000 free on board (FOB) for which he paid freight to the port of
Mombasa of USD 1,300, and insurance of USD 1,500.
(ii) He also ordered for a consignment of electronics from Guangzhou in China
valued at USD 33,000. Included in the consignment are energy-saving
bulbs worth USD 9,000, television sets for USD 15,000, and hi-fi music
units for USD 9,000. On this consignment, he paid freight charges of USD
3,000 and an insurance cost of USD 3,300 to the port of Mombasa.
Notes:
1. Freight and insurance charges are proportionate to the value of each item
in the consignment.
2. The exchange rate posted by the central bank for the month was USD 1 =
Shs 3,700.
3. Import duty rates are 0% for self-refrigerated vehicles and energy-saving
bulbs and 25% for electronics. Electronics also attract an excise tax of
10%.
Required:
(a) Determine the customs value and total tax payable by Kenzi as provided
for in the East African Community Customs Management Act, 2004
b) Explain the different forms of smuggling in international trade.
Question three.

Mr. Kasuku borrowed US$ 120,000 from a commercial bank in Kampala on 1

June, 2020 at an interest rate of 4% per annum for the sole purpose of
importing a machine to manufacture electronic school calculators from Yawee
Company Limited (Yawee) in Wuhan, China. The arrangement fee for the loan
was 1% of the amount to be disbursed which he paid. Yawee specialises in
manufacturing of manufacturing machines used to make calculators branded
“Easy Add” which they have patented. For anyone to produce and sale “Easy
add” calculators, they must purchase the machinery from Yawee and pay a
royalty of US$ 30,000 to allow them use the machine to manufacture anywhere
outside China. Yawee is the sole manufacturer of machines that manufacture
“Easy Add” calculators in China.
The cost of the machine on the commercial invoice (ex-factory) issued on
15 December, 2020 was US$ 120,000. This is the invoice that was presented to
the customs officer at the Malaba border post on 1 March, 2021. The customs
officer however, had information that an identical machine was imported by Mr.
Musirifu from the same company on 1 January 2021 at US$ 130,000. Mr. Kasuku
argued that Yawee had given him a discount of US$ 10,000. On further scrutiny
of the invoice and accompanying documents, the officer confirmed that indeed a
trade discount of US$ 10,000 had been granted to Mr. Kasuku.
The other information relating to the import of the machine includes the
following:
1. Transport charges on land in China to the Guangzhou harbour US$ 300.
2. Storage charges at the Guangzhou harbour in China before loading
on the ship US$ 2,800. Shipping charges from Guangzhou to the port of
Mombasa in Kenya US$ 4,500.
4. Marine insurance on boarding the ship US$ 2,500.
5. Transport and insurance from Mombasa to Kampala US$ 3,000.
The following information was also available:
• Exchange rate of US$ 1= Shs. 3,700.
• Other rates:
Rate %
Import duty (finished products) 25
Import duty (intermediate products) 10
Import duty (raw materials) 0
Infrastructure development levy 1.5
Withholding tax 6
Required:
Advise Mr. Kasuku on the total taxes payable on the import of the calculator
making machine to Kampala.

Question Four
In the month of March 2023, Hill Processors Limited (HPL) imported an
all-in-one apple juice processing unit from Munich through Bremen a
seaport in Germany. For the equipment, HPL paid £ 28,000; damage
proof packaging of £ 110; transport to seaport of £ 55; insurance of £
420; and freight of £ 320.
As condition of sale, HPL is required to pay a trainer £ 560. HPL also
paid port handling charges in Bremen of £ 155, and $ 550 at the port of
Mombasa.
Additional Information:
(i) The exchange rate ruling at the time of import was as follows:
$1 1: Shs 3,500.
£2 1: Shs 4,000.
(ii) The applicable customs taxes were import duty at 25%, VAT at
18%, WHT at 6%, and infrastructure levy at 1.5%.
Required:
Determine the customs value of the equipment and advise HPL on
custom duty applicable to the importation.