Plans to reduce shipping costs sail into stormy waters

If last week’s meeting had ended conclusively, shipping stakeholders would have adopted a work plan that would have seen eight charges levied on importers by shipping lines and shipping agents scrapped. Four charges were also to be reduced.

Kenya Ships Agents Association (KSAA) Executive office Fredrick Wahutu said the plan to force shipping lines to reduce charges without a corresponding move by destination service providers would scare away some liners from the regional ports.

“In the last one year, two shipping lines have pulled out of the region because of high operating costs. There are two others that last year reported a loss of US$1b and US$500m respectively and are contemplating closing shop,” said Wahutu.

He cited the recently introduced Value Added Tax (VAT) on marine and stevedoring charges– which came into effect on 12th of this month – as some of the factors that would lead to an increase in freight costs.

The charges slated for elimination include a $60 to 65 delay order fee and terminal handling charges that stand at $90 for a 20ft container and $135 for a 40ft container.

Others are the Lift on or lift of charges, container handling charges (US$25), the 10 per cent administration fee (US$40 minimum), the US$ 50 equipment management fee, handing over fee which currently stands at US$ 25 per document and the Container Freight Service charges.

Those for reduction are; manifest correction charged at US$30, bill of lading amendment charge which ranges between US$ 30-50 and container demurrage charges.

The elimination of such costs is expected to bring down the cost of trade, a move that would also be reflected in the commodity prices that has continued to skyrocket to the detrimental of the region’s economy.

Mr. Msafari, however, said that all costs along the transport logistic supply chain should be looked into as a whole instead of concentrating on those charged by the shipping lines alone.

Experts say that though the international ocean freight is currently at fairly competitive prices elsewhere, the overall transportation costs in the region stills averages at 20-40 percent of Cost Freight and Insurance (CIF) as compared to 4 per cent in the other parts of the world.

“Land based transport service costs should also be looked at alongside ocean freight costs,” said Msafari.

Port tariff which are not harmonized with other charges are also to blame for the high cost of doing business along the Northern corridor, he added.

The work plan, which was dismissed – had proposed the reduction of the shipping cost in the next 90 days.

The plan was drawn by ISCOS in conjunction with KMA and Surface and Marine Transport Regulatory Authority (SUMATRA) of Tanzania.

KMA says hat the three regulatory agencies are developing consensus which once agreed upon will be incorporated as rules and regulations by the respective governments.