1. Kenya Maritime Authority
Port Transit (ship and cargo ) Costs – Kenyan efforts to influence the quality of port service and reduce cargo clearance costs
John Omingo
Kenya Maritime Authority

2. Contextual Background
PORT TRANSIT COSTS
Contextual Background
Kenyan Port Service Structure – Introduction;
Costs from Private Service Providers;
Delay Costs arising from Government Agencies;
Cost arising from the nature of international sales contracts;
Intervention measures – Kenyan Experience;
Way Forward;

3. Kenyan Port Service Status
Service Port - Mombasa
Second Container Terminal – Concession
Lamu Port (LAPSSET) – 32 Berths
Kenya Maritime Authority – Oversight on Quality, Availability and Cost of maritime transport services in the country

4. Container Trafic (TEU): 2004 - 2013
Rate of increase for the period: 13.2 %: (2014 – 1,012,200 TEUs)

5. MSA Port Throughput (DWT): 2003 – 2013
Rate of increase for the period: 11.2% (2014 – 24,875)

6. Private Service Providers - Costs
MARITIME TRANSPORTATION COSTS ON CONTAINER TRAFFIC (2014)
EXCHANGE RATE 1USD=KSH.85
Charge item
Units
Rate
US Dollars
Kenya Shillings 1
Freight (TEU)
1,000,000
1,269
1,269,000,000
107,865,000,000 2
DO fees (BLs)
91,240 60
5,474,400
465,324,000 3
THC 99
99,000,000
8,415,000,000 4
LO/LO
32.5
32,500,000
2,762,500,000 5
ISPS 6
6,000,000
510,000,000
Container Cleaning Charges 20
20,000,000
1,700,000,000 7
10% Administration Fee 40
40,000,000
3,400,000,000 8
Equip Management Fee/ITS 50
50,000,000
4,250,000,000 9
Out of Service Charge
36,146
150
5,421,900
460,861,500 10
Piracy Risk Surcharge
300
300,000,000
25,500,000,000 11
Empty Drop off charges 12
Peak Season Surcharge
100
100,000,000
8,500,000,000 13
Bunker Adjustment Factor
450
450,000,000
38,250,000,000 14
Emergency Bunker Surcharge 15
Seal Surcharge
5,000,000
425,000,000 16
Operation Surcharge Fee
250
250,000,000
21,250,000,000 17
Import Service Charge 18
Stripping 75
75,000,000
6,375,000,000 19
Bill of Lading Fee
Handing Over Fee 25
2,281,000
193,885,000
2,885,151,700
245,237,894,500

7. Government Agency Services – Delay Costs
Delays as a proportion of the total import costs Logistics =18%, while the FOB accounts for about 55%: Delays 27% of the total import cost (2013)
Element
Prop (%)
Tot cost of importing
100.0
FOB
55.2
Logistic + taxes
17.6
Sea Freight & Insurance
3.1
Port-charges + VAT
0.7
Shipping line charges at Mombasa
0.3
Certificate of conformity
0.4
IDF and goods VAT
10.6
Clearing and forwarding
Transport costs to Nairobi
2.4
Hidden costs (delays & document processing operations)
27.2
Source: KSC

8. Government Agency Services – Delay Costs
Delays as a proportion of total logistics costs -account for about 60% (2013)
Logistic & taxes
Prop (%)
Total Logistic costs + taxes+ delays
100
Sea Freight & Insurance
6.8
Total Taxes
24.6
Shipping line charges at Mombasa
1.1
Clearing and forwarding
0.6
Tot port charges
1.4
Certificate of conformity
0.8
Transport costs to Nairobi
4.4
Total indirect payments
0.2
Hidden costs (delays & document processing operations)
59.8
Delays and unofficial facilitation (corruption) 60
Source: KSC

9. By exporting on FOB and importing on CIF terms
Costs associated with the nature of International sales contracts (Incoterms)
By exporting on FOB and importing on CIF terms
You loose the right to nominate or negotiate terms of carriage or insurance for shipment of goods;
You reduce income from sale of goods;
You incur expenses that could be managed by direct involvement in arranging shipments;
Consequently the price of products traded become less competitive;
Negative impact on local transportation and insurance industries;

10. Key Challenges (2013) Low service quality
Inefficiency and high costs - procedures that attract penalties
Proliferation of charges
Lack of competition
Lack of clear standards on performance
Insignificant involvement in sea transportation
Weak structures for oversight on quality and cost of services
Disjointed approach to cargo clearance (Silo mentality).

11. KENYAS TRANSPORTSECTOR
WHAT DID WE DO IN 2013?
KENYAS TRANSPORTSECTOR

12. INTERVENTION 1 Regulatory Framework KMA Act and Merchant Shipping Act
Oversight on service delivery in regard to availability, quality, standards of service, cost and efficiency of production and distribution – public and private agencies
Merchant Shipping (Maritime Service Providers) Regulations;
Annex IV: Service Level Agreements – KPIs
The constitution (Article 232) Public agencies - high standards of
Professional ethics;
Efficient, effective and economic use of resources;
Responsive, prompt, effective, impartial and equitable provision; Involvement of the people in the process of policy making;
Accountability for administrative acts;
Transparency and provision of timely and accurate information;

13. INTERVENTION 2 Development of Service Delivery Standards The process
Pre-define the business process;
State the requirements for the process;
Establish a quantitative/qualitative measurement of the results – KPIs in order to compare actual performance with set goals;
Address shortfalls in service delivery in the key services – associated cost implication to the responsible parties (Accountability Structure);
Develop framework for monitoring performance – investigation of variances and weaknesses in the processes (Port Community Charter);

14. INTERVENTION 3
Mombasa Port Community Charter

15. Port Community Charter
Inter-Agency Collaboration
Port Community Charter
Reform Programme Goals
High performing landlord port by 2016
120,000Kms per Truck per Annum
30% cargo off take by rail by June 2016
All port community systems in KNESWS
70% cargo throughput through the green channel
12/3/2018
The Port Community

16. Development of the National Single Window Platform
Inefficient processes
Development of the National Single Window Platform
Port Health
KTB
KPA
Other related
government agencies
KRA
KEBS
Many government regulatory agencies
Inspection Agents
Numerous lodgments
Importer/Buyer
Freight Forwarder /Shipping
Many Duplicated data elements
Carriers
Exporter/Seller
Bank
Terminal
Insurance
Company
Warehouse 16

17. Expected Business Solution
KPA KWATOS
KRA SIMBA
Clearing Agent
Ship Agent
Bank
KTB
Importer
KNSWS
Port Health
Exporter
KEBS 17

18. Single Window Operations
Monday, December 03, 2018
Monday, December 03, 2018 18

19. INTERVENTION 4
Enhance Regulatory Framework to ensure fair play and efficiency:
Intervene in cases where the cost of delays not caused by the Importer/Exporter are nonetheless charged to them (Use on the national Single Window).
Have the ability to exact penalties on those service providers who are culpable of inefficiency.
Ability to intervene in finding the balance between tariff and the value for money e.g in the case of the CAK being able to arbitrate between operator and customer in the case of termination charges.

20. WAY FORWARD
12/3/2018
The Port Community Charter

21. Enhancement of oversight capacity
WAY FORWARD
3 Cooking Stones
Competition
Shipper Empowerment
Enhancement of oversight capacity

22. THANK YOU