Kenya currently produces only 34% of its annual edible oil demand of 900,000 metric tonnes.
Government data shows a 4% decline in oilseed acreage this season.
The Vegetable Oil Price Index soared to 166.8 points, a 7.1% month-on-month jump.
The regulation targets retail-packaged edible oils, excluding those used as ingredients in manufacturing.
This loophole has prompted accusations of trade distortion, with Indian processors and farmers facing unfair competition.