Hurdles knocking wind off importers’ sail

Mercy Nkirote, a resident of Nanyuki, imported an assortment of goods from Dubai in January this year and expected the items would be cleared within a couple of days after arrival at the Mombasa port.

But four months later, her electronic goods and clothes for her baby are yet to be cleared. “I don’t know what the problem is because when I ask the clearing agent he tells me the container has been held and there are some issues that must first be sorted out. I paid over Sh300,000 to buy the goods and I can’t understand why they are being held,” said a frustrated Nkirote (not her real name).

Her woes are a reflection of some of the challenges that importers face as they bring goods into the country.

The import and export business is technical and can sometimes get complicated. Small importers are usually the hardest hit, often being caught up between clearing and forwarding agents and government agencies. In some instances, these import hurdles result to loss of goods.

Although Ms Nkirote has not been told precisely what the problem is, it has to do with the new rules on consolidation of cargo. Small importers who cannot fill a container on their own get their goods pooled into one container. The goods may either come into the country though one bill of lading or individual ones.

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But this brings about complications when one of the importers does not comply with the set rules, causing the entire consignment to be held by authorities. This seems to be the case for Ms Nkirote’s goods. The cargo might also be held if the consolidator is discovered to have engaged in shady deals.

Some unscrupulous traders in the business of consolidation have also been on the spot for pooling goods belonging to up to 50 importers into one container and paying taxes as one importer, yet when it comes to tax refunds each of the importer lodges a claim. “This is tax evasion and fraud because they not only fail to pay taxes but they also claim them,” said a source at the Kenya Revenue Authority (KRA).

In an attempt to tame the tax cheats and curb import of contraband goods, the Kenya Bureau of Standards (Kebs) and KRA have tightened procedures for cargo consolidators with a rule requiring them to register with the agencies.

“Kebs and KRA wishes to notify all importers and the general public that a new procedure (“Route D”) has been developed for inspection and certification of Consolidated Cargo under the Pre- Export of Conformity (PVOC) programme,” the agencies said in a joint notice on April 4.

“This procedure applies to cargo containing a wide range of products or merchandise generally in small quantities or parcels belonging to several consignees who have pooled or assembled together their parcels to form one consignment which may be declared as belonging to one importer at the port of destination or de-consolidated back into the original individual consignments for delivery to the respective cargo owners upon arrival at destination port,” the notice added.

In the notice, Kebs said all consolidators for both air and sea cargo were required to register with the agency by April 20.

As is the practice with other types of cargo, consolidated goods must be inspected in the country of origin by the Kebs appointed inspection agents and issued with a Certificate of Inspection (CoI) before shipment into the country.

With the registration window closed, Kebs is now compiling data on consolidators who, in the past, have operated within the shadows in the import and export business.

Speaking to Shipping & Logistics in a telephone interview on Monday, Kebs managing director Charles Ongwae admitted that they did not have data on consolidators and they did not know who, or how many, they are.

He said they had not yet compiled a list and were collaborating with KRA in the process, adding that currently they were doing 100 per cent verification of goods at the Mombasa port.

“We would like to know who it is that does consolidation so that we profile them,” he said.

Mr Ongwae did not disclose the reason for seeking cargo consolidators to register. However multiple sources revealed that besides the clearing and forwarding industry being susceptible to tax evasion cartels, unscrupulous importers have been using containers in consolidated goods to ship in contraband, counterfeits and illicit goods including drugs.

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However, according to Shippers Council of Eastern Africa (SCEA) executive officer Gilbert Lang’at, there is need for the agencies to sensitise importers on the new rules as most of them are not aware.

“Cargo consolidation has in the past been done externally and we need our own capacity to deal with it since we have mostly been using clearing agents. Each of the importers in consolidated cargo should have their own bill of lading so that in case there is a problem with part of the goods they are not all held,” he said.

Kebs is expected to hold a consultative forum with all consolidated cargo importers and handlers Wednesday May 23. During the forum Kebs will also announce new proposed regulation framework on how goods will be inspected under the Pre-Export Verification of Conformity (PVoC) programme.

The Kenya International Freight and Warehousing Association (Kifwa) Nairobi chairman William Ojonyo said Kebs and KRA should engage stakeholders on how they would be affected by the new rules.

“As much as they want to safeguard revenue and stem entry of substandard and contraband goods, the new rules will introduce non-tariff barriers with the clearing process taking longer with higher costs to importer, which will be passed on the end consumer,” said Mr Ojonyo.

Another challenge facing small importers is that of the Marine Cargo Insurance certificate. Since January last year, importers are required to insure their cargo locally.

Initially, insurance used to be paid to a foreign agent in Cost Insurance and Freight (CIF) basis but currently, most cargo is imported Free on Board (FoB).

However, most importers have not embraced the FoB model, which means insurance is still being paid to foreign firms.