A new regulation to end cargo delays at Ports, improve cargo flow, improve revenue collection and lower the cost of doing business has just been unveiled.
The regulation, which is now a bill, was unveiled in collaboration with Kenya International Freight Forwarders Association (KIFWA) and the Federation of East African Freight Forwarders Associations (FEAFFA) in partnership with other relevant industry associations.
Speaking to the media during the unveiling of the bill, FEAFFA President, Seka Fred said that with the launch of the proposed bill, Kenya is among the first three countries in the region to have taken tremendous steps in drafting the bill drawing from the principles of our initial model bill 2017.
“A 2018 report by Global Financial Integrity found 8 per cent of Kenya’s revenue was being lost due to miss-invoicing of KSh90.7bn ($899.32 million) a year. Imports account for the largest part of this, at KSh76.7bn ($759.69 million).
The move to unveil the bill was also to enhance professionalism in service delivery and compliance with existing regulations with the aim of ending cargo delays at Ports, improve cargo flow, improve revenue collections and lower the cost of doing business.
“Kenya trades over 30m tonnes of cargo withinthe East African community and the volumes keep growing,putting ever more pressure on a system that is inherently inefficient due to the lack of obligatory qualifications,” said Mr.Seka.
The consequent delays are costing shippers as much as KSh25.6bn ($253.5 million) a year in extra demurrage charges.
The proposed bill will require all customs agents to demonstrate their understanding of the clearance processes, valuations, classification, rules of origin and management of the changing regional regulatory regime, and of the country’s clearing systems, digital gadgets and portals.
This will make for a step change in cargo efficiency, with 62.5 per cent of Kenya’s customs agents and freight forwarders currently lacking the skills to ably clear goods, according to the International Journal of Supply Chain and Logistics.
The skill gaps have resulted in frequent clearance errors, across the wrong tariff classification and valuation, the wrong duty and tax payments, cargo entry errors in the system, and acquisition of the wrong certificates, all of which add to the delays.
“The result has been spiraling shipping costs, which are nowthree times higher than in other countries and making nearly all of our goods more expensive to consumers,” said National Chairman KIFWA, Roy Mwanthi.
Embakasi Inland Container Depot, for instance, receives about 5,600 containers every week, for clearance from Mombasa and the clearance process is supposed to take four days, according to the KPA Tariff Charter. Agents however are only managing to clear 48 per cent of the freight within the four-day timeframe.
To address this, the bill seeks to formalise the East Africa Customs and Freight Forwarders Professional Certification (EACFFPC) exam and make it mandatory in order for customs agents and freight forwarders to get licenses from the revenue authority.
“Of the over 8,000 customs agents operating in the country, only 3,000 have taken the exam over the last decade on a voluntary basis. Mandatory certification and continuing professional development will ensure professionals stay abreast ofthe necessary skills required in the sector,” said Mr. Mwanthi.
The Kenya National Bureau of Statistics reports that Kenya handles KSh578bn ($5.724 billion) worth of exports and KSh1.4tn ($13.86 billion) of imports a year, with its annual cargo forecast to increase to over 50m tonnes a year by 2030.However, according to World Bank, it takes Kenya an average of 39 days to export and clear goods while elsewhere in the world it takes 15 to 26 days. Moving towards a skills-driven industry will reduce this time significantly.
The bill also requires every certified customs and freight forwarder’s agent to be registered to operate and the publishing of the list of all active, registered customs agents.
“We want to eradicate rogue agents and protect industry players from liability. Presently, the general public is not able to distinguish a genuine customs agent from a rogue one,” said Mr. Mwanthi. “Fines and penalties of up to two million shillings and imprisonment of two years or both are also being introduced.”
The bill has been supported by various stakeholders in the industry including the Kenya National Trade Network Agency (KENTRADE), Shippers Council of East Africa (SCEA), Importers and Small Traders Association of Kenya, Kenya Ship Agent Association (KSAA) and Kenya Private Sector Alliance (KEPSA) among others.
“To increase logistics investment in the East African region and boost cross border trade we need an industry that is guided by stringent regulatory guidelines that enhance business efficiency, competitiveness and ensure professionalism which is the reason we are supporting adoption of the bill,”said Daniel Kiange, Manager Trade Facilitation, KENTRADE.
Cargo is cleared by over 7,000 customs agents from across the region. These agents do a complex job and must therefore understand the classification of goods and how to value goods correctly. They are expected be abreast of all the tax regulations, not just general customs duties and any indirect taxes, but they must be able to apply the correct taxes and levies to the correct products.
They must also understand all the compliance and certification requirements, the regulations of the source country, and more still.
Across East Africa, Rwanda, Kenya, Burundi and Tanzania have since begun drafting texts for development as Bills. Rwanda Freight Forwarders Association (RWAFFA) led in the drafting procedure and is now in the process of getting the draft adopted as a Bill and presented to parliament.
The bill now awaits vetting by parliament after which, if accented, it will become law and the industry will have a set of regulations to abide by to become players in the logistics industry.
