Agents fault criteria used to pick special category cargo handlers

Shipping & Logistics

Agents fault criteria used to pick special category cargo handlers

Tuesday, February 26, 2019 20:26

By SAMUEL BAYA |

Clearing agents are crying foul over the method used to accord freight companies preferential treatment under a system known as Authorized Economic Operators (AEO) category.

The Kenya International Freight and Warehousing Association (Kifwa) said the process leading to admission of new players into the category is tilted in favour of multinationals and against local firms most of which are Small Medium Enterprises (SMEs).

Companies approved by the Kenya Revenue Authority (KRA) to the AEO category have the advantage of automatic renewal of customs licences, containers released without going through 100 per cent verification, shipment given a green channel, among other benefits.

Kifwa national chairman William Ojonyo said the process should be revised to enable more local SMEs to qualify.

He said delays in clearance of goods are caused by the painstaking process through which cargo handled by many clearing agents have to go.The clearance delays, he added have led to high demurrages incurred by importers both in the Inland Container Depot Nairobi (ICDN) and the Port of Mombasa.

“This programme has been embraced by the East African Community (EAC) members and indeed Kenya, as a tool for trade facilitation,” he said.

“However, 99 per cent of the programme is enjoyed by multinational companies even though 90 per cent of clearing companies are local with 95 per cent falling under the SME category.”

He said there are about 80 AEO members against over 800 clearing agents in Kenya who are not under the special category.

Speaking to Shipping, Car Importers Association of Kenya CIAK) chairman Peter Otieno said KRA should remove the bottlenecks to enable more companies achieve the AEO status.

“The problem is that the requirements for company to qualify to be given the AEO status is tiresome and long. That means many SMEs are not able to cope with the demands by KRA,” Mr Otieno said.

“There should be another simple way of identifying those who can qualify for that category.”

Mr Ojonyo said said even with the rollout of several strategic plans, the cost of doing business at the port is still very high, adding that nothing has changed since the inception of the Standard Gauge Railway (SGR).

“We have had so many strategic plans being unveiled yet the cargo dwell time remains between 10 and 14 days, against four free days, that means 98 per cent of cargo continues to pay storage levies,” he said.

“We believe that creating an atmosphere where compliance and efficiency is rewarded by preferential treatment in terms of trading is the way to go.”

Mr Ojonyo said world over, AEO are used to facilitate trade and in Kenya, there are less than 40 AEOs most of which are multinationals.

“We would like to partner with the EAC, KRA and other private sector associations to onboard as many AEOs as possible. We believe that it is only then that the cost of doing business will reduce,” he said adding that this will ensure more SMEs are brought under the category.

“Multinationals have continued to be given preferential treatment at the expense of the SMEs that have continued to suffer, yet the economy relies on the SMEs to move forward. The SMEs form 85 per cent of clearing agents and trade in Kenya,” said Mr Ojonyo.

“The only thing we can do as private sector to address the situation is to try and benchmark on compliance and efficiency so that we can enjoy the preferential trade,” he said.

KRA in its website says AEO traders involved in international trade are approved by the Customs Administration.

“To qualify for the programme, companies have to satisfy the AEO Compliance Procedure which involves: Documentation of Standard Operational Procedures (SOPs), compliance culture, training of company staff, Internal audit programme/mechanisms, root cause investigations and corrective and preventive measure actions, communication and risk assessment,” says KRA in its website.

Some of the benefits of being in the AEO Programme, KRA says, are access to pre-arrival clearance; faster priority documentary clearance; access to priority service channel such as priority telephone line at contact centres and priority corner at release points; professional advice on customs compliance; and security and destination verification on need basis.