2015 ACHIEVEMENTS

As the year 2015 draws to a close, we just wish to sincerely thank you for the support accorded to us at the Council. I particularly want to extend a warm welcome to the new members who joined during the year and to those members who have promptly paid their annual subscription and also participated in our events.


Through your subscription, membership and participation in our events, we can confidently state that together we are stronger and our collective voice louder, firmer and respected. We have noted the resounding confidence you the members have in our work and which has been well reflected in our member’s satisfactory survey and which over registered a 78% member satisfaction level. We shall be engaging the 22% to establish how best to address our shortcomings.

Year 2015 marked the end of our 2013 – 2015 Strategic Plan. In its place, we have the 2016 – 2020 Strategic Plan which has been developed through a consultative process and approved by the SCEA Board.  The strategy recognized the need to adapt a holistic approach to planning using the Balanced Scorecard and is themed around financial sustainability of the Council, delivering customer value, re organizing the internal systems of the Council and building up the requisite human capital to deliver the vision and mission of the council. We look forward to successful implement the strategy for the benefit of members in particular.


To empower members and dissmeninate information we  organized workshops to sensitize airfreight stakeholders about the enforcement of legal Notice 78 of 15th July 2015, Kentrade Implementation and COC/PVOC. We also are grateful to SGS, Intertek and KenTrade for sponsorshing some of the sensitization workshops. Shippers are encouraged to attend this forums to raise their concerns and make recommedations.

At the international arena, we draw your attention to the International Maritime Organization (IMO) adopted amendment to the Safety of Life at Sea (Solas) Convention which will make verification of gross weight of every packed export container a mandatory requirement.
The requirement will come into force on July 1, 2016. Under the requirement, no export container will be loaded onto a ship without verification of its actual gross weight. We note with appreciation the measures key stakeholders are putting in place to successfully have this requirement implemented and we shall keep you notified.

State of Logistics in the Region

Our 2015 Logistic Performance Survey that we launched in November 2015 and which  covered the maritime and airfreight sub sectors provides interesting performance based indicators. The Survey conclusively shows a general decline in transport costs on the Northern Corridor while the Central Corridor registers a steady but marginal increase. For instance, the average transport cost from Mombasa to Kampala came down from USD 3400 in 2011 to USD 2500 in 2015, while the rates from Dar-es-Salaam to Kampala have increased from USD 2,507 in 2011 to USD 4,500 in 2015. The findings also noted improved compliance at the weighbridges.

 
In respect to cargo dwell time there has been a 36.25 per cent increase from 76.3 hours in June 2014 to 119.7 hours in June 2015 as shown in figure 9. This essentially implies a drop from 3 days to 5 days of port dwell time. The target dwell time of 3 days, which is the global best-practice standard, can still be achieved, with more focus and cooperation amongst the Mombasa port charter community stakeholders.  The increase is partly attributed to the shippers’ self nomination of CFSs and which guarantees them longer and better terms. A better indictor needs to be formulated given that up to 75% cargo are self nominated.

 
The Council intends to engage the respective stakeholders and government agencies involved in trade facilitation with the findings to ensure that they take appropriate remedial measures aimed at enhancing the competitiveness of the shippers   and improving East Africa’s logistics performance.

Consultative Meetings

Lobbying and advocacy requires varied strategies including building alliances. Over the years we have been able to develop cordial working relations with Kenya Revenue Authority, Kenya Bureau of Standards, Kenya ports Authority and Kenya Maritime Authority meetings with this government agencies have proven helpful towards resolving otherwise difficult situations. We have however remained firm on issues of concern. 


In August we met and presented your concerns to the Kenya Ships Agents Association, Container Freight Stations, and Kenya Transporters Association. From the meeting we have developed TIPS to help shippers manage their imports better and professionally. We also held a meeting with the KIFWA Board room to discuss areas of collaboration.

 

INTERVENTIONS IN 2015

a) Exports of perishables through Port of Mombasa:We raised concern and invited clarification from the KPA management on “internal” changes (since there was no official communication) in handling of exports.  Members had raised concerns that (KPA) would treat reefer and dry export containers in a similar way.

KPA responded that there are no changes in the handling of perishable containers.

b) Management of Steel at the PORT:Our attention was drawn to the delivery of steel coils from the port especially when they are not able to take delivery from the vessels as a result of delays arising from congestion at the port and its environs and also from system failures. As a result, the steel sector is charged an extra USD 8 per metric ton as shore handling, as coils are taken to shed. A few months ago shippers were advised that such issues would be dealt with on a case to case basis. As a result of SCEA’s petition, a meeting between KPA and the steel manufacturers was held on 23rd June 2015 and KPA undertook to form a working group to further the meeting recommendations and actions.

c) CFSs Fees and Charges:While we noted less grievances about CFS issues, some CFSs continue to mis-interpret last sling and charge shippers demurrages even when it is very apparent that the shippers were ready to collect their cargo within the free period. Worsening the situation is the unnecessary delays to refund the arbitrary fee “charged” by the shipping lines. The Council petitioned KPA to fast track the completion of the CFSs policy and to institute measures to reign in errant CFSs.

d) Movement of Ethanol From Mombasa to Kampala:Ethanol destined to Uganda was stuck at the Mombasa Port since the transporter/clearing agent was unable to get appropriate guidance on how it can be transported following changes affecting movement of ethanol.  Attempts to secure the requirement to move the product from the Port had not been successful with the transporter being moved from one office to another in Mombasa and Nairobi. Customs have not given clear guidelines on handling ethanol containers destined for transit and the transporter have been advised to have all documents cleared in Nairobi (KRA) and this still had not been possible. Through consultation with KRA proper guidance was provided to the transporter and the matter rested successfully.

e) Ban by County Government of Mombasa on the use of tractors to shunt empty containers to the Port.We petitioned the County Government of Mombasa to retract their notice to ban tractors from carrying empty containers with effect from October 1, 2015. If the decision is not rescinded, Shippers will suffer demurrages penalties for failure to deliver their empty containers. A stay was granted unfortunately the matter is yet to be finalized.

f) KEBS / KRA notice on requirements for all imports to have COC certificateSCEA was involved in the technical committee established to work out the implementation mechanisms. The COC certificate is required for all imports as from December 1, 2015. The technical team came up with recommendations which led to the publishing of a second notice. The Concerns of SCEA and KAM are;

- Legal notice no. 78 does not provide for PSI, valuation and tariff classification. 

- There is no exemption from PVOC for all goods imported into Kenya. Our proposal was that raw materials, industrial inputs, petroleum products be exempted.

- As a technical team we did provide a list of products that should be exempted. This was not adequately covered in the notice. Discussions are ongoing to ensure that this does not inhibit trade and a manual has been developed by KeBS.

g) Mombasa County Council Finance Bill: SCEA and KAM jointly put-up a petition to C.S. Treasury contesting the proposed fees and charges proposed in the 2015/2016 Mombasa County Finance Bill. Our modest analysis indicates that through this proposed levies the industry will suffer an additional costs of USD 523,450,000/- for import clearance, export permit, vessel inspection county levies on 20ft and 40ft containers. This could go higher when further analysis on the resultant costs for gantry development fees, gantry application fees, and gantry for every square meter, bulk merchant levies and ship chandler supplies, supervision and destruction of condemned goods are incorporated.

h) Draft Regulations 2015 for Container Freight Stations/CFS Self NominationKenya Revenue Authority has proposed new regulations to replace current regulations contained in Gazette Notice No. 11215 dated 20th September 2010. This is despite that KPA has also initiated the review of the KPA/CFSs policy whch has been on going. 


Our concern is that cargo shall be designated to a specific CFS based on a criteria and through a mechansim determined by KRA and KPA. Currently shippers nominate CFSs of their choices and this has reduced the previous cry of shippers. It is worth noting that upto 76% of cargo are self nominated by shippers and only about 24% done by KPA. 


Before the stakeholders could dicuss the draft regulations, KPA issued a notice stipulating that they will nominate containers to the CFSs. SCEA intervened by presenting a position paper and held a subsequent meeting between SCEA Board and KPA Managing Director. This resulted in the directive being stayed. Shippers and industry players must engage the Government to address the concerns of revenue loss and leakages.

i) New Export Procedures: Citing Provisions of the Value Added Tax Act. CAP 476 and the Customs and Excise Act CAP 472 Kenya Revenue Authority did institute new Exports Procedures. As a result, evidence is now required to support exports for goods under the Part A of the fifth Schedule of the VAT Act and for rebates. Under the new rules it is now mandatory that all exports must have a Simba system online release report endorsed at the points of loading and exit. In addition all exports must be supported by a “Certificate of Export”
Following our interventions this decision was rescinded.

j) Change of Payment Mode by Kephis:SCEA successfully opposed the proposal by KEPHIS to levy 20 cents per kilogram on all food items. This would have resulted in an increase in the cost of a bill of lading.

Cargo Uptake after Customs Release: Cargo continued to stay in port after customs release beyond the 24 hours period by an average of 20 hours.  This  was  attributed  to  among  other  factors,   late  arrival  by  transporters  to  pick  up  cargo,  poor  exit infrastructure, congestion at the gate, traffic jam at the Changamwe roundabout, poor port planning and low supply of loading equipment. Under the Mombasa Corridor Port Charter, shippers are expected to collect their cargo within 24 hours after customs release.
During the year under review we also note the following as emerging issues;

a) Equipment Interchange Receipt. Shippers failure to secure the Equipment Interchange Receipt, from KPA, Shipping lines and the CFSs led to paying for repairs of containers which were otherwise in bad condition. A container interchange report is a document that gives a detailed description of the outward condition of a container when the container transfers from one responsible holder to another. By preparing an interchange report for each transfer, it can be established when damage to a container has occurred and the party who during that period had the container in his possession can be held responsible.

b) IDF approvalShippers contnue to face delays in IDF approval. We have contacted the Commissioner of Customs Office who has assisted our members secure the approval. We have sought for long term solutions.

Logistics Audit:

In Kenya, we are witnessing various infrastructural developments namely, the construction of the Standard Railway Gauge, the operationalization of the Kentrade System, the implementation of the Single Customs Territory, and the expansion of both Kenya Ports and Kenya Airports. They are some of the government’s undertakings to address infrastructural deficiencies in the logistics chain. 
Unfortunately the full benefits of the infrastructural improvements may not be realized by industry players due lack  of  adequate  knowledge  on  the use of international  trade terms, and the inability to incorporate modern  freight management practices resulting in high logistics costs and delays.
Our fears have been confirmed through the pilot logistics audit findings launched in May. From the findings, it is clear that shippers need to critically review their internal processes and systems. We urge members to take advantage of this service availed to you by the Shippers Council.

Advocacy Strategy 

Lobbying and advocacy is at the centre of SCEAs existence and activities. For SCEA to efficiently and effectively deliver on its mandate, it has become critical that a strategy be developed to aid, guide and monitor its work. Consequently an Advocacy and Lobbying Strategy has been developed to support and cement the process.


We look forward to your support as we monitor the government policies, directives and county government bills and by-laws. Our annual Logistics Performance Survey (LPS)  findings will continue to inform our evidence-based advocacy together with various sector briefs.
As I have mentioned in various forums, we are not where we ought to be, a number of challenges still hang around the logistics supply chain.

We are however determined and the know how to reach our destination. The infrastural development, port expansion, the port Charters and the WTO Trade Facilitation present perfect opprtuntities. We undertake to supplement faster cargo dwell time and customs procedures and towards this end we shall be engaging key stakeholders towards the adoptation of an Advanced Shipping Information System called ECTN. Our feasibility study has established enormous benefits to shippers and the government should this system be adopted in Kenya.

Plans for 2016

 

In the coming year, we shall endevour to work even harder to address shippers concerns. We have scheduled a number of activities and programmes including but not limited to developing a position for the establishment of a green channel, improvement of the services by both state and private sector agencies and establish more value add services. 


We have measures aimed at reducing freight costs and monitoring policies and interventions by both national and county governments which could be detrimental to our aspirations. To foster an even better cordination of members interests, the Board has approved the formation of a sub committee of the Board that will over see members recruitment, development and retention.


This year we noted an upsurge of Government directives which have the potential of eroding some of the gains. We shall keep a close tab on the implementation of the ISM Mark, PVOC/COC, implementation of the single window and the various undertaking by KRA, KPA amongst others. Our commitment to the Port Charter is still on course and we shall also continue to monitor its implementation. In addition, we undertake to participate and present your concerens and issues at the Friday port community meetings.


Special appreciation goes to Kenya Ports Authority, Kenya Maritime Authority and SGS K Ltd  for sponsoring our 2015 Shippers Open Day. We wish you a successful year 2016 and assure you of our commitment in enhancing your competitiveness. On your part, we urge you to engage us more.


Thank you for your  continued support.

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