UAP insurance and shipping lines are about to sign a deal which will see cash deposits guarantee for containers scrapped, a development that promises Rwanda freight forwarders a competitive edge in the region.
The shipping lines include Gulf Evergreen, Emirates, Oceanic Freight MSC and PIL.
“The shipping lines requested some data which we have shared with them. We are meeting again this week,” said James Mbithi, UAP Insurance Rwanda chief executive.
Each freight forwarding firm in Rwanda will be expected to contribute a premium of $1,000 annually as opposed to the $2,000 and $4,000 they have been depositing before a container is released to a Rwanda freight forwarder.
While the container deposits are refundable upon the return of empty containers to the shipping lines, freight forwarders complain about delays. At times, according to clearing agents, it takes six months to receive the refund.
The clearing agents further complain that the capital requirement is huge, which locks out many small clearing firms from big deals.
Rwanda has been pushing for the containers cash deposit to be scrapped since 2014 when a delegation of the private sector federation travelled to Kenya to negotiate with the shipping lines.
Maintaining the cash deposits, according to freight forwarders, creates unfair competition against the local clearing, freight forwarding operators. Rwanda has 150 registered freight forwarders.
Kigali is optimistic the reduction in container cash deposits will result in reduced transport costs for Kigali-bound cargo from the port of Mombasa. Transporting a container from Mombasa costs $3,625, partly because of the existing non-tariff barriers (NTBs).
“The existing NTBs are hindering the regional trade competitiveness. New mechanisms are needed to address this,” said Stephen Rugwabiza Rwanda Private Sector Federation chief executive at a Rwanda Logistics Forum.
The June 2017 status status report shows 17 new NTBs have come up, hindering free movement of goods and services in East African Community.