A garment manufacturing firm in Mombasa has been shut down this week by the Kenya Revenue Authority (KRA) following allegations of transhipment of finished products.

According to a statement by KRA commissioner-general Kennedy Onyonyi, the Lihua Garments Export Processing Zone Company Ltd was closed for allegedly importing finished garments from Asia, changing the labels to give the impression they were manufactured in Kenya, and then re-exporting them under the African Growth and Opportunity Act (AGOA) initiative.

Onyonyi said an audit team would now be formed to deliberate on the issue and take conclusive action.

"To stop such practices, all (Export Processing Zone) operators will from January next year be compelled to submit monthly audit reports to the Customs and Excise Department," he said in the statement.

Under the AGOA initiative, selected third world countries are allowed to sell products to the United States market duty-free.

However, the initiative stipulates that 70 per cent of the products' raw material must have come from an AGOA-benefitting country.

"KRA as trade facilitator and the enforcement agency of the Customs and Excise Act will not allow traders to contravene these regulations," Onyonyi said.