Cash deposits charged by shipping lines as a guarantee for the return of cargo containers by importers could soon be scrapped.
The Intergovernmental Standing Committee on Shipping (Iscos) has stepped up the push for the elimination of cash deposits. Iscos Secretary General Daniel Kiange said it is a trade barrier at both the Mombasa and Dar es Salaam ports.
“We have had a number of meetings. The Tuesday virtual meeting with industry players was fruitful. We have suggested doing away with cash deposits as a container guarantee, and moving to either the use of insurance or signing a guarantee form between the traders and shipping agents,” he said.
In 2016, presidents Uhuru Kenyatta (Kenya), Paul Kagame (Rwanda) and Yoweri Museveni of Uganda way asked stakeholders to find a solution between shipping lines and insurers to end the costly and inconvenient bonds.
Due to a shortage and high cost of containers, shipping lines routinely demand cash deposits before the cargo leaves the port as a guarantee for the return of the empty container. The shipping agents charge $500 and $1,000 for a 20-foot and 40-foot container respectively, for cargo destined for Kenya: Those in transit are charged between $1,000 and $5,000 for a 20-foot and 40-foot container respectively.
The cost is determined by geographical location, market demand and the size of the container. An estimate of a new standard 20-foot container can be above $3,000, while a standard 40-foot may cost more than $4,000.
Shippers Council of Eastern Africa executive officer Gilbert Lagat said the cost of container bonds affect final consumer prices.
“We can no longer afford to import large quantities since each container is subjected to about $500 in charges, and the amount doubles for a 40-foot container, hence making it very expensive to traders who import millions of units. The cost is directly passed on to the consumers,” said Mr Lagat in the recent interview.
“Mombasa Port container cash charges have negative effects on regional trade and business since the port could increase its transshipment as it will encourage bulk importation. Most consider $500 per unit small money, but this has a ripple effect whenever we import millions of units,” said Haji Mwinyi, one of the traders.
The container cash charge is added to the containerised imported cargo to cater for its cost in case of its loss among other risks which include damage, abandonment or detention for prolonged periods.
The importer is refunded the deposit in full only when the container is returned to the freight station in Kenya, less any accrued demurrages and damages.
Kenya Ships Agents Association chief executive Juma Tellah said lack of ethics among individual traders has remained a major barrier in the implementation of written or insurance agreements.
“We piloted the use of insurance, but traders failed to honour promises forcing insurance companies to suspend the process. It is easier to implement the new arrangement if clearing and forwarding associations in the EAC member states give assurance to shippers,” he said.
Mr Tellah added that the association is open for any workable propositions without hurting shipping lines.
Importing companies say it currently takes three to five months for refunds to be processed. This affects business cash flow and adds financial burdens, particularly to small freight forwarders.