EAC heads push for scrapping of container cash deposits

Cargo at the port of Mombasa. Container cash deposits are paid as surety. PHOTO | FILE 

By ALLAN ODHIAMBO

In Summary

• Presidents Uhuru Kenyatta (Kenya), Paul Kagame (Rwanda) and Yoweri Museveni of Uganda ordered the conclusion of a deal between shipping lines and insurers to end the costly and inconvenient bonds.

Heads of State from the East African Community have stepped up the push for the elimination of cash deposits for cargo containers, signalling relief for traders already burdened with levies.

Presidents Uhuru Kenyatta (Kenya), Paul Kagame (Rwanda) and Yoweri Museveni of Uganda ordered the conclusion of a deal between shipping lines and insurers to end the costly and inconvenient bonds.

“The Summit directed ministers responsible for Finance and Trade to ensure that shipping lines and insurance companies finalise and sign an agreement on elimination of cash deposits for containers,” the leaders said in a joint communique at the close of a regional infrastructure meeting in Kampala at the weekend.

Since containers are expensive, shipping lines servicing developing markets such as east Africa routinely demand cash deposits before releasing containers to consignors or freight forwarders.

Shipping line agents charge $500(Ksh50,000) and $1,000(Ksh100,000) for 20 foot and 40 foot containers respectively for cargo destined for Kenya, while those on transit are charged $1,000(Ksh100,000) up to $5,000(Ksh500,000) for 20 foot and 40 foot containers respectively.

Typically a new standard 20-foot container can cost above $3,000 while a standard 40 foot may cost more than $4000, estimates by the United Nations Economic and Social Council showed.

Container deposit is often not required in developed economies due to high level of professionalism and industrial competency among all players in the supply chain such as consignors, freight forwarders, haulers, warehousing operators and shipping liners.

This is further supported by the fact that most developed markets have proper legal environments.

“However, in some developing economies, there are higher risks of containers being stolen, damaged, abandoned or detained for prolonged periods. Ship liners impose container deposit as a risk diminutive measure,” the UN agency said.

The container deposits are refundable upon the return of empty containers to the shipping lines upon presentation of a payment receipt, a copy of the container guarantee form, a refund request note and a copy of the container interchange report.

East African countries have lately stepped up trade among them through efficient port and customs clearance procedures.

The Heads of State said the recently adopted Single Customs Territory (SCT) system had yielded immense benefits for regional trade and directed the adoption of a joint enforcement strategy along the bloc’s northern transport corridor.

“The summit welcomed the harmonisation of the warehousing regime and expansion of the commodities under the SCT” the Presidents said.

Under the SCT deal that began in 2014, clearing agents within EAC have been granted rights to relocate and carry out their duties in any of the partner states as part of a strategy to improve flow of goods and curb dumping.

Kenya, Rwanda and Uganda were the first to take up the SCT arrangement starting April 1, 2014, with Tanzania joining the scheme two months later.