Compliance & Settlement Standard

Bulk commodity flow into Kenya operates under a well-defined legal, banking and regulatory architecture. Sarpah's role in this architecture is the introduction, the qualification and the documentation choreography. The regulated parties are the buyer's bank, the seller's bank, KEBS, KEPHIS, KRA and the Fertilizer & Animal Foodstuffs Board. Sarpah introduces buyers to upstream originators whose paperwork holds up against this architecture, and stays close so the buyer's bank can confirm and the buyer's clearing agent can clear without friction. (For originators considering a mandate enquiry, see the originators page.)

The architecture has four layers, all of which the buyer and seller must satisfy:

1. ICC rules govern the bank instruments. URDG 758 for demand guarantees. UCP 600 for documentary credits, with ISBP 821 (effective 1 July 2023) operationalising examination practice. ISP98 for SBLCs where the beneficiary or beneficiary's bank prefer it.
2. WTO multilateral floor. The Trade Facilitation Agreement (in force February 2017) defines the customs-modernisation baseline. The WTO Agreement on Preshipment Inspection underpins the PVoC layer.
3. Kenyan domestic regime. KEBS for product conformity. KEPHIS for plant health. The Fertilizer & Animal Foodstuffs Board (Cap 345) for fertilizer regulation. KRA for customs. CBK for trade-finance prudential supervision. FRC for AML/CFT reporting.
4. EAC regional layer. The Common External Tariff 2022 Edition for tariff treatment. The EAC Customs Management Act for procedure. The Single Customs Territory for inland transit.

Sarpah's working standard is that every cargo we introduce passes all four cleanly.

Pages in this section

• ICC URDG 758 — Demand Guarantees — bid bonds, advance-payment guarantees, performance bonds, the five-business-day examination discipline, the cross-border counter-guarantee structure under Articles 2 and 22.
• ICC UCP 600 — Documentary Credits — DLC lifecycle, the bulk-commodity document set, ISBP 821 application, charter-party B/Ls under Article 22 + ISBP 821 G6–G11, MT700 and discrepancy management.
• Standby Letters of Credit and ISP98 — when SBLC is the right structure, MT760, multi-shipment frame contracts, Rule 1.11(c) and Rule 2.01(b).
• WTO Trade Facilitation Agreement and Kenya's implementation — Articles 7, 10 and 12; KenTrade Single Window; iCMS risk management; AEO programme.
• KEBS Pre-Export Verification of Conformity — Routes A, B and C; the 2026–2029 nine-firm appointed list; the CoC discipline; KS 1900 series fertilizer standards; the 15% non-compliance penalty.
• KEPHIS phytosanitary regime — Plant Protection Act Cap 324; Plant Protection (Import and Export) Regulations 2021; KEPHIS Online Permit System; phytosanitary certificate, fumigation, ISPM-12.
• Kenya fertilizer regulatory framework — Fertilizers and Animal Foodstuffs Act, Cap 345; the 2015 Amendment and the Fertilizer & Animal Foodstuffs Board (FAFB); KEBS KS 158 and KS 1900-series; National Fertilizer Subsidy Programme registry.
• KRA Customs and EAC Common External Tariff — IDF at 2.5%, RDL at 2.0%, MRN, iCMS, the EAC CET 2022 four-band structure, HS codes for Sarpah's lines, stays of application.
• Kenya tax regime — VAT, RDL, IDF, withholding tax — Tax Laws Amendment Act 2024; Finance Act 2025; the move from fertilizer VAT zero-rating to VAT exempt; the AFA Cess scope (cereals and other AFA-scheduled crops only — not fertilizer).
• Sanctions, AML and KYC — OFAC General Licence 6D (June 2024); OFSI agricultural licences; EU 833/2014 recital and Article 12b derogations on food security; the fertilizer and grain carve-out; FRC POCAMLA reporting; CBK guidelines.

The Settlement Architecture in One Page

Documentary Credit (UCP 600)

The buyer's Kenyan bank (KCB, Equity, Stanbic Kenya, NCBA, ABSA Kenya, Standard Chartered Kenya, Co-operative Bank, Diamond Trust Bank) issues the credit on the buyer's instructions. The credit is transmitted MT700 via SWIFT to the advising bank in the seller's country. Confirmation by the advising bank is added under UCP 600 Article 8 where the SPA requires it. The European-prime confirming-bank universe for Russia-touching trade finance has narrowed materially through 2022–2026; routing is selected per cargo subject to the buyer's bank's group sanctions office. Indicative cost of confirmation on East African sovereign-risk credits: 1.5–4% per annum.

The DLC lifecycle:

Document set under Article 14 typically includes: signed commercial invoice (Art. 18), 3/3 originals clean-on-board ocean B/L (charter-party for bulk under Art. 22 and ISBP 821 G6–G11; non-charter under Art. 19/20), Certificate of Origin, KEBS CoC, phytosanitary certificate (for plant cargoes), fumigation certificate, COA, weight certificate, insurance certificate covering 110% CIF (Art. 28), packing list. Sarpah supports the seller's document preparation so that the presentation matches field 46A on first presentation; the document set is the seller's responsibility, presented through the seller's bank.

Demand Guarantee (URDG 758)

The dominant rulebook for advance-payment, performance and bid-bond security. Incorporated by the wording: "This guarantee is subject to the Uniform Rules for Demand Guarantees, ICC Publication No. 758."

URDG 758 has no confirmation mechanism. Where a beneficiary requires local-bank recourse — a Kenyan bidder needing a guarantee enforceable through its local bank, or an East African buyer needing local enforcement of an APG issued in Russia — the structure is the counter-guarantee under URDG 758 Articles 2 and 22. The applicant's bank issues a counter-guarantee to a guarantor bank in the beneficiary's jurisdiction, which in turn issues the local guarantee to the beneficiary on its own credit. Two instruments, two issuing banks, one chain.

The 758 articles operative on a typical guarantee chain:

• Article 5 — Independence. The guarantee is separate from the underlying SPA. The guarantor cannot raise SPA-dispute defences.
• Article 7 — Non-documentary conditions. Conditions not specifying a document of compliance are disregarded.
• Article 15 — Mandatory supporting statement. The beneficiary's demand must include a written statement identifying the breach.
• Article 20 — Five business days. The guarantor's examination period.
• Article 22 — Counter-guarantee mechanism for cross-border structures.
• Article 23 — Where the beneficiary makes a complying demand for payment but indicates willingness to accept extension, the guarantor may suspend payment for up to 30 calendar days while seeking the applicant's extension instructions; if extension is not arranged, the original demand for payment must be honoured.
• Article 26 — Force majeure. Suspension and the 30-calendar-day post-FM payment window.
• Article 33 — Transfer requires both that the guarantee expressly states "transferable" and that the guarantor consents at the time of transfer.

Use cases: NCPB and KTDA bid bonds (2–5% of tender value); APG covering MT103 prepayment to the producer (typically 100% of prepaid amount); performance bond on annual SPAs (5–10% of contract value); retention or warranty guarantee.

Standby Letter of Credit (ISP98 or UCP 600 / URDG 758)

ISP98 is the international rulebook designed specifically for SBLCs; UCP 600 and URDG 758 are also available where the beneficiary or beneficiary's bank prefer them. The functional choice is between standby (paid only on default) and demand (paid on first compliant demand) — not a US-versus-rest-of-world choice. SBLCs are typically deployed across multi-shipment frame contracts as evergreen credit support. Vehicle: MT760, with field 40C tagged to the applicable rule set.

Confirmation under ISP98 is grounded in Rule 1.11(c) and Rule 2.01(b). URDG 758 has no confirmation mechanism — cross-border URDG works through counter-guarantee.

MT103 plus APG

A common Russia-origin structure. The buyer wires MT103 directly to the producer's account. Concurrent with payment, the producer's bank issues an APG under URDG 758 in the buyer's favour, callable on first compliant demand under Article 15. This preserves direct-to-factory pricing while neutralising producer credit risk during the production-and-shipment window.

SWIFT Message Stack

The SWIFT messages a buyer's bank and seller's bank will route on a typical Sarpah cargo:

• MT103 — payment to a named beneficiary. Final, not contingent.
• MT799 — bank-to-bank free-format narrative. Pre-advice, RWA-style confirmations and bank-to-bank dialogue travel on MT799.
• MT199 — customer-to-bank or bank-to-customer free-format narrative; not a bank-to-bank instrument.
• MT202 / MT202 COV — interbank cover for an MT103. The locus of AML monitoring.
• MT700 — issuance of a DLC.
• MT701 — DLC continuation (when MT700 exceeds character limits).
• MT705 — DLC pre-advice.
• MT707 — DLC amendment.
• MT740 / MT742 — reimbursement authorisation and claim.
• MT760 — issuance of a guarantee or SBLC.
• MT767 — guarantee or SBLC amendment.
• MT768 — guarantee or SBLC acknowledgement.

The Kenyan Regulatory Layer

KEBS PVoC. Mandatory pre-export Certificate of Conformity for regulated imports including fertilizer, vehicles, electronics and FMCG. Routes A (per-consignment), B (registered product), C (licensed product) — choice of Route is the buyer's, made with the buyer's PVoC partner. The 2026–2029 cycle effective 19 February 2026 lists nine appointed firms: SGS, Bureau Veritas, Intertek, Cotecna, CCIC, China Hansom, ASTC, TÜV Rheinland Middle East FZE and QSI Japan. Cotecna and CCIC are the contracted bodies for China-origin (Mainland China, Taiwan, Hong Kong, Mongolia). Inspection fee: 0.45–0.75% of FOB. Penalty for non-compliance at destination: 15% of CIF plus 1.5–2.5% destination inspection cost plus 30+ day delay.

Fertilizer KEBS standards: KS 158:2018 (sampling), KS 1900-1 (urea), KS 1900-2 (CAN), KS 1900-3 (DAP), KS 1900-4 (ammonium sulphate), KS 1900-5 (SSP), KS 1900-6 (TSP), KS 1900-7 (compound NPK), KS 1900-8 (MOP), KS 2492 (liquid fertilizers), KS EAS 750 (East African harmonised standard).

KEPHIS. National Plant Protection Organisation under the IPPC. Statutory architecture: KEPHIS Act 2012, Plant Protection Act Cap 324, Plant Protection (Import and Export) Regulations 2021. Phytosanitary certificate (issued before sailing per IPPC ISPM 12; current practice within ~14 days of vessel departure to satisfy KEPHIS recency expectations on arrival), KEPHIS import permit (90-day validity), plant import declaration, on-arrival inspection, fumigation. Required for grain, oilseed, sawn timber and biological products. Not required for mineral fertilizer.

Fertilizer regulation (Cap 345). The Fertilizers and Animal Foodstuffs Act, Cap 345, administered through the Ministry of Agriculture / State Department for Agriculture, with the Fertilizer and Animal Foodstuffs Board (FAFB) created by the 2015 Amendment as the operational regulator. Importer registration, product registration (KS 1900-series compliance) and the National Fertilizer Subsidy Programme registry where applicable. The buyer is the importer of record and holds any required FAFB registration; Sarpah does not hold and does not require a fertilizer importer licence.

KRA Customs. Import Declaration Form (IDF) at 2.5% of CIF (minimum KES 5,000), Master Reference Number, iCMS Bill of Entry, manifest matching, risk-channel routing (Green / Yellow / Red / Blue), duty payment via KEPSS or M-PESA, release order. Authorised Economic Operator (AEO) programme has operated regionally since 2016 and is open to repeat importers.

EAC Common External Tariff 2022. Four-band structure (0%, 10%, 25%, 35%) with sensitive-items list above the band. Mineral fertilizer at 0%. Wheat at 35% with Kenya's 10% stay routinely renewed in deficit years. Refined sunflower oil at 25%. Maize HS 1005.90.00 at 50% (sensitive list), with Kenya's 0% stay during gazetted deficit windows. Sawn timber (HS 4407) at 0%. Plywood at 25%. HS code reference is provided on each product page.

The Sanctions Position

Russia-origin fertilizer and grain trade with non-designated counterparties is fully lawful for Kenyan import:

• OFAC General Licence 6D (June 2024) — the explicit US carve-out for agricultural commodities including fertilizer, grain, oilseeds, edible oils, dairy, meat and sugar. GL 6D succeeded GL 6C and is the operative authority for 2026.
• OFSI agricultural licences (UK) — humanitarian and agricultural transactions exemptions; specific-licence pathways narrow and case-specific.
• EU Council Regulation 833/2014 — agricultural and food-security carve-outs preserved through all sanctions packages, anchored in Article 5aa for transactions necessary for the supply of agricultural and food products including wheat and fertilizers, and Article 12b's wind-down/divestment derogation framework which includes a competent-authority pathway for food-security transactions; Annex XXI exclusions. Refer to the consolidated 833/2014 as amended through the 19th and 20th sanctions packages 2025–2026.

The operating constraint is counterparty-specific. Designated banks (Sberbank, VTB, Gazprombank from 21 November 2024, Otkritie, Sovcombank, Tinkoff/T-Bank from 20 July 2023, Credit Bank of Moscow from 24 February 2023) cannot receive USD/EUR/GBP correspondent banking. Rosselkhozbank sits separately on OFAC EO 14024 Directive 3 (NS-MBS sectoral) — restricting new debt and equity over 14 days maturity, not full asset-freeze; agricultural payment chains routing through Rosselkhozbank are subject to per-cargo sanctions-desk approval. Designated individuals — including UBOs of certain Russian fertilizer producers (Mazepin/Uralchem-Uralkali OFAC SDN April 2022; Melnichenko/EuroChem UK OFSI March 2022 with the August 2025 EuroChem v Société Générale ownership-and-control ruling; Guryev/PhosAgro UK OFSI March 2022; Kantor/Acron UK OFSI in force, EU CFSP designation removed March 2025) — require per-cargo beneficial-ownership disclosure under the OFAC 50% rule and the UK / EU ownership-and-control tests at SPA stage.

Belaruskali and JSC Belarusian Potash Company were removed from the OFAC SDN List on 26 March 2026 (OFAC GL 14 issued; Directive 1 rescinded; GL 13 archived). UK OFSI asset-freeze and EU Reg 765/2006 designations remain in force. Sarpah does not introduce buyers to Belaruskali or BPC pending UK and EU resolution; East African MOP demand routes through non-designated Russian producers (Uralkali, EuroChem) with per-cargo BO disclosure. The exclusion is producer-entity-specific to potash; Belarusian DAP, sawn timber, plywood and dairy are introduced on standard counterparty-screening terms.

Kenya does not impose autonomous sanctions on Russia. CBK has issued no directive prohibiting Russia-origin trade finance. The Kenya Financial Reporting Centre POCAMLA reporting regime applies as standard.

Why This Matters

A correctly-papered cargo arrives at Mombasa, clears KRA in 5–10 days, sits at minimum demurrage, and is released to the buyer's warehouse on contract terms. An incorrectly-papered cargo accrues 15% CIF KEBS penalty, 1.5–2.5% destination inspection, KES 1.5–3.0/MT/day storage after free period, and 30–90 day delays — and may be returned to origin at the buyer's cost.

The institutional procurement units that buy at scale in Kenya — NCPB, KNTC, KTDA, FAFB-registered blenders, NSE-listed millers, cement majors — operate inside this architecture as a matter of course. Sarpah's introductions are built to it.