Efforts by freight forwarders to have cash deposits for containers scrapped have been thrown into disarray after shipping lines remained defiant in signing agreements with UAP Insurance Company that had offered to guarantee the risks.
The 13th Northern Corridor Integration Projects Heads of State Summit in April 2016 directed ministers responsible for finance and trade to ensure that shipping lines and insurance companies finalised and signed an agreement on elimination of cash deposits for containers, but nine months later, little progress has been made.
Rwanda freight forwarders engaged the UAP Insurance Company to guarantee transit containers. But UAP Rwanda managing director Pauline Wanjoki said CMA CGM, a global shipping group, has not signed on.
The idea, according to Ms Wanjoki, was to first engage one or two shipping companies at Mombasa and Dar ports.
While the container deposits are refundable upon the return of empty containers to the shipping lines, freight forwarders complain about delays in processing the refunds. At times, according to clearing agents, it takes six months for the refund to be processed.
While Rwanda has chosen to engage an insurance firm to cover container deposits, Kassim Omar, chairman Uganda Clearing Agents and Freight Forwarders Association is against the insurance guarantee pool saying it would be sustaining an illegal non-tariff barrier in a Single Customs Territory.
“The container deposit is extortion, as not all money deposited is refunded,” said Mr Omar.
Industrial players believe that by maintaining the container cash deposit, shipping lines are using unfair competition against the local clearing, freight forwarding operators through horizontal and vertical integration.
“We need collective effort as the East African Community to fight this barrier,” Mr Kassim said.
For the Uganda freight forwarders, the cost is higher as the country’s imports more compared with Rwanda. On average it is estimated that 700 containers enter Uganda daily, translating into Rwf10 billion ($13.3 million) weekly.