Hefty storage levies lift KPA profits as importers cry foul

New policies on demurrages implemented by the government since May last year have negatively impacted importers business with billions of shillings collected by the Kenya Ports Authority (KPA) as penalties, raising the agency’s margin to Sh15.5 billion after tax in the 2018/2019 fiscal year.

Importers say the storage charges are crippling their businesses and have even sought interventions of President Uhuru Kenyatta to address the bottlenecks at the Port of Mombasa to ease movements of goods and reduce penalties that are now shoring up KPA’s earnings .

Last week, the President directed acting Finance Secretary Ukur Yattani and Kenya Revenue Authority Director General James Githii to call a crisis meeting to discuss issues raised by importers and local leaders.

Among the issues outlined in the meeting include the implementation of the Integrated Customs Management System (iCMS), nomination of cargo and the implementation of the government directive on reducing the number of agencies handling the cargo.

Shipping and Logistics can confirm that some traders have suspended importing their cargo as the Kenya Bureau of Standards (Kebs) abroad is yet to be integrated in the iCMS system, hence business people cannot risk to import any consignment which has not been certified at the country of origin as required by law.

One of the identified hurdles to faster clearance of goods is failure by some of the agencies to move out of the Port of Mombasa despite government order to reduce number of players handling cargo to fasten cargo clearance.

In a memo sent from State House on June 4 this year, more than 20 agencies were removed from the port with major agencies with restricted access to cargo clearance. These key agencies include the National Intelligence Service, the Directorate of Criminal Investigation, Kenya Plant Health Inspectorate Services and the Anti-Counterfeit Agency.

The memo grouped the agencies into five categories with only Immigration, Port Health and Port Security Office, Kenya Revenue Authority (KRA), Kenya Ports Authority (KPA) and Kenya Bureau of Standards (Kebs) allowed to fully access cargo.

However, despite the directive, importers are still being forced to clear with some of them in the system, causing delay in releasing of cargo at the Port of Mombasa and Nairobi Inland Container Depot.

“We have agreed that government to ensure agencies handling cargo are reduced to three as per the order released three months ago, and that nomination of all Mombasa cargo to be cleared in Mombasa instead of being taken to Nairobi as they sort out the issue of the implementation of iCMS which has been difficult to use,” said Kenya International Freight and Warehousing Association (Kifwa) Roy Mwanthi.

CS Yattani promised to work with all stakeholders to improve efficiency at the Port of Mombasa.

Due to the reported inefficiencies, KPA financial performance indicated it collected Sh48.4 billion from operations revenue while it spent Sh34.8 billion on the same period when the finance income was Sh1.9 billion, leaving a net profit of Sh15.5 billion.

The increase earnings was also attributed to the new demurage tariffs which took effect last year where free period for cargo to stay at the port facilities was reduced.

The tariffs charged owners of cargo that stay at ICDN for six days is Sh4,000 for a 20-foot container and Sh8,000 for a 40-foot container. This compared to previous charges of Sh4,000 for a 20-foot container at ICDN for between 16 and 24 days.

Importers were also given a day to collect their cargo after being cleared by the Kenya Revenue Authority (KRA), failure to which they are to pay a punitive charge of Sh10,000 for a 20-foot container daily and Sh20,000 for a 40-foot container.

KPA also cut the free storage period for containers at the depot from 11 days to four days but these charges have been a thorn in the flesh of importers as they are forced to pay for the inefficiencies deliberately said to be caused by KPA and KRA to increase revenues.

According to the records, only 26 percent of imported cargo in the past one year was cleared within stipulated time with over 41 per cent being cleared after 21 days with 15 per cent of cargo collected in less than 21 days hence resulting to loses to importers due to costly demurrage. This has raised concerns to Mombasa Port stakeholders who blame the government of not implementing their recommendations.

“More than 41 percent of the import containers stayed at the ICD for more than 21 days. This was occasioned but not limited to inadequate access roads to the facility used by trucks to collect cargo,” read part of a report by Mombasa Port Community Charter, which comprises port stakeholders.

“We have given KPA our recommendations on how best to resolved congestion to ensure cargo are cleared on time but they have ignored them. KPA does not lose anything if they allow CFSs to operate within ICD,” said CFS association CEO Daniel Nzeki.

The stakeholders also complained over the delay at the Document Processing Centre and tests done by Kenya Bureau of Standards which takes a number of days.

Due to the delays, KPA increased it revenues significantly by also charging the importers handling and marshaling charges to all cargo which stayed beyond free stay period.

Marshaling is done to move the cargo from the ICD to holding Container Freight Stations to give room for more containers being hauled by the Standard Gauge Railway (SGR) from the Port of Mombasa.

The terminal at the port of Mombasa is linked to the ICD by a rail service of both the SGR and the meter gauge railway that is run by the Kenya Railway Corporation. The ICDs receive imports directly from the port and collect export cargo and empty containers to be ferried to Mombasa.