Agents and ship owners blamed for rise in freight costs

Exorbitant charges levied by ship owners and their agents are to blame for the upsurge in shipping costs at Mombasa port, it has emerged.

Maritime experts say that the agents have taken advantage of the fact that the contracts they sign with ship owners are confidential to introduce undue fees on imports into the country.

Because of such contractual confidentiality, experts said, it was difficult to determine who exactly between ship agents and owners should be held liable for over 20 unnecessary fees levied on importers using Mombasa port.

“It is necessary that the contract between ship agents and the owners is submitted to Kenya Maritime Authority (KMA) to be interrogated. We want to know what it says as far as commissions and payment is concerned,” said KMA director general Nancy Karigithu during a maritime stakeholders’ meeting held in Mombasa last week.

Investors at the meeting turned the heat on ship agents for shielding shipping lines, making it unclear who benefits from the many undue charges levied on shippers using the port.

The charges are blamed for the high cost of transporting goods through the Northern Corridor, leading to a spiral effect on prices of commodities in the region.

Ship agents serve as a critical part of the logistics chain as they act for foreign shipping companies that are unable to have direct representation in all the ports at which their vessels call.

According to Captain Fredrick Wahutu, the executive director of the Kenya Ship Agents Association (KSAA), there are 35 agents in the country.

Although a pact, developed by the Federation of National Associations of Ship Brokers and Agents, regulates the relationship between agents and shipping lines, the principals are hardly observed in Kenya, said Mrs Karigitu.

In countries like Singapore and Britain the agreement between shipping agents and shipping lines is subject to interrogation by respective maritime regulatory bodies, but in Kenya it is treated as confidential.

This makes it difficult for shippers and government agencies to know who levies what charges.

“We are informed that some ship agents have introduced their own charges to cover for their operational costs as their clients (shipping lines) sometimes fail to pay them,” said International Standing Committee on Shipping (ISCOS) secretary-general, ASC Mgondah.

But the agents said that the charges were common in other ports of the world.

“Shipping lines operate in an extremely competitive and volatile environment and as freight rates have tended to decline over the years, they had to institute charges to recover direct costs incurred locally that are not covered under freight revenues,” Mr Wahutu told an industry stakeholders’ meeting in Mombasa.

However, some charges are only unique to Mombasa, made possible by a weak regulatory framework that existed until early this year when the Merchant Shipping Act 2009 was passed.

Release of goods

For instance, the delivery order fee, which currently stands at between $60 and $65, is charged for issuance of a letter of release of shipped in goods in exchange for the bill of lading.

It is a cost unique to Mombasa, according to a recent report by KMA.

The delivery note has a life span of seven days and a further similar fee is payable if the shipper does not clear his good in the period.

“If one has paid for freight, why pay the ship’s agents for delivery of what they already own?” KMA poses in the report.

But Mr Wahutu said that the delivery fee is charged by shipping agents as a service charge.

“This charge is not exclusive to Mombasa. It is levied in the vast majority of the world’s ports including our regional ports,” Mr Wahutu said.

There is also a bill of lading fee of between $50 and $60. This fee is charged in addition to a delivery fee.

“The bill of lading is issued when one pays for freight. Why would someone then be charged to collect it?” asked the KMA report.

The shipping agents charge another fee of $25 for handing over original documents to cargo interveners such as clearing agents.

All empty containers that are returned to the shipping lines are charged a cleaning fee of between $10 and $20.

“Whereas cleaning of a container should only arise when the goods carried were potentially dirty, all shipping lines operating in Mombasa collect an advance cleaning fee,” KMA said.

But according to Mr Wahutu, returned containers are often used to transport goods between various inland destinations, hence they require a clean up.

The shipping lines also charge a terminal handling charge (THC) of between $70 and $90.

“It is a wonder what this charge relates to, especially when one considers that Kenya Ports Authority has a similar charge for the same containers, subjecting shippers to paying twice for the same service,” KMA said.

This charge is unique to Mombasa, Tanzania scrapped it.

Ironically, the THC levied by the liners is the same as the stevedoring levy charged by KPA.

The two terminologies mean off loading cargo or loading it on a vessel

Disputed charge

“This charge is levied to recover stevedoring and wharf costs. It is applied in many ports in the world. It came about with the advent of the containerisation of cargo in the mid-70s,” Mr Wahutu said. 

Another disputed charge is at the container deposit.

Agents charge $500 and $1,000 for 20 foot and 40 foot containers respectively for those destined to Kenya, while those on transit are charged $1,000 up to $5,000 for 20 foot and 40 foot containers respectively.

“Although this is part of a carrier attempt to ensure the return of containers, it has been used to provide shipping lines with a route for proliferation of charges whose reimbursement takes an inordinately long time,” the KMA report said.

Mr Wahutu gave a conservative estimate of lost or stolen containers in the region at about 500 units per year, which would amount to about $1,750,000.