Industries blame State agencies for cargo delays

PUBLISHED ON October 17th, 2018

Industries blame State agencies for cargo delays

Manufacturers have blamed the introduction of 20 per cent levy on demurrage for the delays at the Port of Mombasa and the Nairobi Inland Container terminal.

The Kenya Association of Manufacturers (KAM) said the tax was ill-advised as government agencies deliberately delay clearance processes to facilitate accumulation of demurrage costs paid to incoming ships, hence raising tax collection.

Demurrage is a monetary penalty charged on an importer after exceeding the given time for collection of goods or returning equipment used in the transportation of goods.

“The government agencies have mooted long procedures to clear cargo at the Mombasa port that make consignments await clearance for up to four weeks. This means cargo inspected at country of origin will be re-inspected with owners paying the cost,” said a speaker at a meeting convened by KAM last week.

The forum heard that quality re-inspection and physical examination of cargo by the Kenya Bureau of Standards (Kebs) attracts a Sh5,000 fee while Kenya Plant Health Inspectorate Service (Kephis) charges Sh27,000.

The Finance Bill 2018 introduced withholding tax on demurrage paid to non-resident shipping lines at the rate of 20 per cent on the gross demurrage amount settled by local companies.

The levy was meant to encourage faster evacuation of cargo. However, the move seems to have had unintended consequences, with long delays in clearance of cargo being now a common occurrence.

In an interview, the Association of Kenya Feed Manufacturer(Akefema) Publicity and Marketing Committee Chairman John Gathogo said the import re-inspection of raw materials by Kebs and Kephis amounted to increase on production costs that is later passed on to Kenyan consumers.

“A 27-tonne lorry importing soya from Malawi or Zambia parts with Sh32,000 at the border which translates to Sh1.50 per kilo of processed feed. This means our farmers can hardly afford the required daily rations for their livestock leading to poor production,” he said.

The Nairobi meeting heard that Kenya is its own worst enemy since efforts by importers to clear cargo on time are hampered by new changes that have seen importers delay payment of delivered cargo.

“No one is paying for goods upon delivery until it is cleared as fit for use within Kenya. If it is rejected, then it means the exporter suffers a loss and will in future avoid selling products to Kenya,” said Mr Gathogo. The forum was told that absence of a systematic process on clearance of cargo causes conflict where some importers bribe customs officials to fast-track clearance of their cargo.

“We are creating loopholes for graft to thrive since costs will rise over time with money paid to government, incoming ships as well as to private warehouses around the port as importers plan to ferry goods out of town,” he said.

While Kenya Railways has been fast-tracking transportation of imported cargo to Nairobi, delays caused by clearance complications perpetrated by state agencies led to a new problem where the Nairobi ICD is heavily congested and has since rented space outside the protected area.

Delay to download cargo causes shippers to incur losses running into millions of shillings in demurrage every year and this as seen them charge demurrage levy that start from Sh1,000 per 20-foot container daily after expiry of the free period, while 40-foot containers attract demurrage charges at Sh2,000 a day.

The charges can rise to more than Sh10,000 per container depending on the number of days the importer stays with the container. To recoup their investments, manufacturers pass on their costs to consumers who are left with no choice but to seek alternative products some of which could be smuggled goods selling cheaply on Kenya streets.

SourceBusiness Daily

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