There are more than 20 des­ti­na­tion charges that are added to the nor­mal rates

The East African - - BUSINESS - By GITONGA MARETE Spe­cial Correspondent Pic: File

Ship­pers could save up to $6m an­nu­ally in freight fees

Kenyan im­porters could save up to Ksh600 mil­lion ($6 mil­lion) they pay to for­eign firms an­nu­ally in des­ti­na­tion charges for cargo land­ing at the Mom­basa port by pay­ing the freight rates lo­cally.

The levies in­clude de­liv­ery or­der fee of Ksh7,000 ($70) per con­tainer, con­tainer clean­ing charges amount­ing to Ksh2,000 ($20), con­tainer de­posits of Ksh5,000 ($50) and an ad­min­is­tra­tion fee of Ksh4,000 ($40) per con­tainer.

These fees, which a lo­cal freight com­pany would ordinarily not charge, con­trib­ute to the high cost of goods. There are more than 20 des­ti­na­tion charges that are added to the nor­mal rates.

“There are charges for­eign freighters quote that im­porters pass on to the consumer, elim­i­nat­ing which will mean the prices of goods would be lower,” said Peter Otieno, the chair­man of Car Im­porters As­so­ci­a­tion of Kenya.

For ex­am­ple, the cost of a sec- ond­hand Toy­ota Vitz, which av­er­ages Ksh850,000 ($8,500) would go down by at least Ksh100,000 ($1,000), Mr Otieno said.

Mar­itime ex­perts say by pay­ing freight rates in the coun­try, im­porters would help lo­cal freight firms se­cure part of the Ksh300 bil­lion ($3 bil­lion) paid to for­eign freighters to im­port Ksh1.4 tril­lion ($14 bil­lion) worth of goods an­nu­ally.

Pay­ing rates lo­cally would also help boost the strug­gling Kenya Na­tional Ship­ping Line since im­ports would be chan­nelled through the car­rier.

Now, the Kenya Mar­itime Authority (KMA) is rais­ing aware­ness among im­porters on the ben­e­fits of pay­ing freight charges to ship­ping lines and their agents reg­is­tered lo­cally.

Rais­ing aware­ness

KMA head of com­mer­cial ship­ping John Omingo said they are ed­u­cat­ing ship­pers on the use of ap­pro­pri­ate in­ter­na­tional com­mer­cial terms such as cost in­surance and freight (CIF), cost and freight and free on board (FOB). Im­ports are shipped into the re­gion on CIF terms, mean­ing all charges are paid in the source coun­try, while ex­ports go by FOB in which case the rates are also paid abroad, de­priv­ing lo­cal firms of a chance to ben­e­fit from mar­itime trade.

“We have started with big im­porters and hope to make an im­pact just like we did with the in­surance com­po­nent,” Mr Omingo said.

If quotes are done lo­cally and pay­ments made in the coun­try, there are charges that the im­porter can be ex­empted from, or they can ne­go­ti­ate bet­ter rates, thus sav­ing on the cost of im­ports. This would also re­duce the dol­lar im­port bill, thus strength­en­ing the lo­cal cur­rency, ac­cord­ing to Mr Omingo.

Some in­dus­try play­ers say the in­tro­duc­tion of a law forc­ing im­porters to pay freight lo­cally would be in line with in­ter­na­tional prac­tice.

Since Jan­uary, when Trea­sury started en­forc­ing the Marine Cargo In­surance law that re­quires im­porters to pur­chase cover lo­cally, premi­ums col­lected from the sec­tor have grown by 64 per cent, from Ksh694.9 mil­lion ($6.9 mil­lion) col­lected in the first six months of last year to Ksh1.4 bil­lion ($140 mil­lion) over the same pe­riod this year.

Ac­cord­ing to Kenya Na­tional Ship­ping Line act­ing man­ag­ing di­rec­tor Joseph Juma, im­porters should be forced to pay freight charges in the coun­try by amend­ing pro­cure­ment laws to that ef­fect.

“In other coun­tries, pro­cure­ment does not end in sourc­ing of goods. They go to the ex­tent of de­mand­ing that the goods should be shipped by lo­cal play­ers,” he said, ad­ding that in­ter­na­tion­ally, coun­tries come up with a cab­o­tage regime that en­cour­ages im­porters to use ships reg­is­tered in those re­gions.

In a cab­o­tage regime, large ves­sels de­posit cargo at des­ig­nated ports, leav­ing lo­cal ships to re­dis­tribute the goods within the re­gion.

A study by the United Na­tions Con­fer­ence on Trade and De­vel­op­ment (Unc­tad) ob­served that the bulk of seaborne cargo is from de­vel­op­ing coun­tries yet the bulk of ship own­ers/ op­er­a­tors are from de­vel­oped coun­tries.

Con­se­quently, the Unc­tad Code of Con­duct for Liner Con­fer­ences was adopted to en­able de­vel­op­ing coun­tries take part in the car­riage of their goods.

Im­ple­men­ta­tion of a law in Kenya re­quir­ing im­porters to pur­chase in­surance cover for goods lo­cally has been hailed as a step in the right di­rec­tion, with mar­itime ex­perts now fo­cus­ing on freight rates.

There are charges for­eign freighters quote that im­porters pass on to the consumer.” Peter Otieno, chair­man Car Im­porters As­so­ci­a­tion of Kenya


Cargo con­tain­ers at the Port of Mom­basa. Fees paid to for­eign freight com­pa­nies con­trib­ute to the high cost of goods.

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