Plans to reduce shipping costs sail into stormy waters

Plans to create rules to protect shippers using the East African ports from inflated charges levied by cargo interveners are on track despite fears that selfish interest could derail the process.

The fears emerged after the work plan that stipulated that unwarranted costs levied by the shipping lines be scrapped within the next  three months was rejected, forcing the region’s maritime regulators to go back to the drawing board to map out the next course of action.

Business Daily has however established that, whereas publicly shipping industry stakeholders appear to remain committed to the call to reduce freight costs through dialogue, secretly, many fear that selfish interest by the four principal players in the industry – ship owners, shippers, ship agents and transporters – may disrupt the process.

A regional meeting of maritime commercial service stakeholders in Mombasa called to adopt a work plan on the elimination of unwarranted levies ended prematurely after the ship owners and ships agents stuck to their guns saying they would not bow to pressure to reduce charges without a corresponding step from land-based transport logistics service providers.

Since the enactment of the new Merchant Shipping Act 2009 early this year, shipping lines have been in the spotlight for increasing the cost of transport.  

A provision in the new law bars them from investing in other parts of the transport logistics value chain since their anchor position could easily result in unfair competition that would hurt the industry.

Since then, shipping lines have enacted a well-orchestrated plan to block the move on the premise that the structured dialogue mechanism allows them room to interrogate charges levied by other players.

“The discussion has been narrowed down to ship owners against land based transport logistic supply chain service providers. The move could backfire because some of the charges have history, like government taxes,” said Mr John Msafari, administration director at the Alpha Group.

He added that if the current situation was not remedied, the local economy would suffer as liners were likely to withdraw from the region due to high overhead costs.  

Sandwiched by the two warring parties in the whole debate are the Intergovernmental Standing Committee on Shipping (ISCOS) and Kenya Maritime Authority (KMA) which are accused of not coming up with a proper mechanism to interrogate all charges levied by each transport logistic service providers before proposing the reduction of those charged by carriers.

High operating costs

ISCOS is a permanent secretariat mandated by east African governments to negotiations with shipping lines over maritime transport costs in the region.

KMA director general, however, expressed optimism that the plan would sail through despite the concerns.

“We shall call another meeting soon and all the charges levied by other cargo interveners in the transport logistic chain will also be interrogated,” said Ms Nancy Karigithu, KMA director general.

 “(Our intention is not) to control the industry but to establish key performance indicators that can apportion the cost where it falls,” said Karigithu.