Officers from the Directorate of Criminal Investigations (DCI) impounded over 7, 000 cartons of Lato milk at a go down along Sabuni road in Kisumu City.
The officers laid an ambush at the go down whose owners became cagey after operations to seize counterfeit milk smuggled into the country started in earnest.
Workers at the go down were caught unawares after the DCI officers from Nairobi swung into action and demanded to see what was stored in the godown.
It is believed that the Asian businessman was smuggling the milk into the country through the porous Kenya-Uganda border before repackaging into fresh carton boxes for distribution locally.
The DCI officers told KNA that the milk is believed to originate from Australia from where it is shipped to South Sudan before getting into Uganda where it is mixed with water and packaged.
Similar raids have been conducted in Nairobi, Meru and Nakuru.
On Tuesday, President Uhuru Kenyatta announced measures to tame smuggling of milk from neighboring countries.
The measures are expected to enhance fair trade and address the plight of local dairy farmers who have incurred losses worth millions.