In 2019, The Federation of East Africa Freight Forwarders Associations (FEAFFA) in partnership with the Kenya International Freight and Warehousing Association (KIFWA) engaged industry stakeholders in drafting a Customs Agents and Freight Forwarders Management Bill for Kenya.
The Bill, which aims to govern the operations of Kenya’s freight logistic sector players spanning customs agents and freight forwarders was officially unveiled on January 21st, 2020 and is supported by industry stakeholders including the Kenya National Trade Network Agency (KENTRADE), Shippers Council of East Africa (SCEA), Nairobi Importers and Small Traders Association of Kenya, Kenya Ship Agent Association (KSAA) and Kenya Private Sector Alliance (KEPSA), Kenya Association of Manufacturers (KAM) among others.
KIFWA’s National Chairman, Roy Mwanthi gives a breakdown of why the proposed legislation is important and the solutions it will bring to the freight logistics industry.
The Customs Agents and Freight Forwarders legislation will ensure the capacity building of professionals
The legislation introduces the mandatory training of all customs agents and freight forwarders as a precondition for gaining registration and professional licensing to operate. This will ensure that all agents are equipped with the necessary knowledge of the regulations to apply when clearing goods, including understanding existing and changed trade and tax regulations, other countries’ regulatory regimes, customs valuation, classification, rules of origin and management, and the use of clearing systems, digital gadgets and portals.
The legislation also introduces a mandatory Continuing Professional Development (CPD) programme to ensure professionals stay abreast of regulatory changes and new technological developments.
It will weed out middlemen/brokers and ensures professionalism across logistics and freight forwarding.
The sector currently has middlemen and brokers whose actions such as negotiating higher rates from shippers/importers but end up contracting clearing agents to do the same work at lower rates has undermined the credibility of customs agents and freight forwarders. This legislation aims to phase them out as it requires every customs agent and freight forwarder to first register with the Customs Agent and Freight Forwarders Society of Kenya before operating and the names all qualified and registered professional agents will be published annually or periodically for the general public to access. The society will also create a database of these professional practitioners which will be updated from time to time.
Companies and individual agents that will provide exemplary clearing and forwarding services will be highly recommended by the society to those needing their services. The society will be empowered to determine the standard charges they will be strictly adhered to by the agents. Competition will therefore depend on the quality of services that will be rendered by the professional agents. Together these measures should rid of us of unethical agents.
It will ensure accountability and transparency within the clearance process.
The Bill defines the terms and conditions of service for each customs agent and freight forwarder. Presently, business contracts are barely used, allowing some importers to run away with customs agents’ wages, while agents have run away with shippers’ goods or evaded liability when goods get lost or are damaged.
However, the proposed legislation introduces a mandatory legal contract between the agent and importer/exporter where liability clauses are defined and the society will publish the minimum chargeable rate payable to the agent for clearance of various types of goods. Further, the legislation gives customs agents and freight forwarders lien to good if the clearance fee/wages are not paid.
As a result, if delays are caused by the agent, cost liabilities will be incurred by the agent and if delays are caused by the importer/exporter, then the cost liability falls to the importer/exporter. The importer or exporter will also be able to hold government agents accountable for delays that they cause.
It will ensure efficient and effective service delivery to importers and exporters
Kenya’s logistics sector is growing, with the cargo handled at the port of Mombasa having increased from around 22m tonnes in 2013 to an estimated 30m by 2017. With the completion of the LAPSSET project, it is estimated cargo landing in Kenya will increase to over 50m tonnes a year by 2030. Yet, already, about 5,600 cargo containers arrive at the Embakasi Inland Container Depot, with only about 50 per cent able to clear within the four days’ clearance timeline estimated by KPA and thus not incur demurrage costs.
By enhancing professionalism in service delivery and compliance with the existing regulations and training agents, KIFWA aims to improve the cargo flow and reduce the cargo delays at the ports to achieve an increase in demurrage-free clearance from 50 per cent to 70 or 80 per cent. This will, in turn, lower the cost of doing business, translating to lower cost of goods for Kenyan consumers. It will also improve revenue collection by the revenue authority.
Supplement government regulations by filling up regulatory gaps.
By promoting gender balance rule in governance and promotion of professional code of ethics. The bill recommends gender balance in the society’s management team including the council and the registration board. This will address women’s current under-representation.
Have a well monitored and effective approach of all activities as will be coordinated by the society.
The new Bill proposes the formation of a self-regulatory structure for the industry, overseen by an industry society, the Customs Agent and Freight Forwarders Society of Kenya. The industry’s self-governance will then be implemented by a Customs Agents and Freight Forwarders’ Management Council, and the Kenya Customs Agents and Freight Forwarders Registration Board, which will effect certification and registration, a professional code of ethics, and disciplinary proceedings.
In addition, it recommends that the representatives on the board span both the public and private sectors and include the PS National Treasury, PS Ministry of Transport, the commissioner general of customs and border control, and a representative from the Kenya National Chambers of Commerce with at least one third of the council’s and registration board’s members be women. This has not been the case previously, leaving both the private sector and the government in a battle for supremacy when it comes to imposing laws and regulations.
The new structure is designed to uphold industry standards and professionalism and achieve one voice in industry policy changes.
Conserve government resource spent on dispute resolution by setting up an internal dispute resolution mechanism under the law.
Currently, customs and freight forwarding related disputes between customs agents and their third-party service providers and shippers are dealt with as normal commercial disputes. Some end up at the commissioner of customs, yet this is not part of his mandate. However, this legislation proposes a mechanism for handling agent-to-agent and agent-to-shipper disputes which will be investigated and settled by the Customs Agents and Freight Forwarders’ Management Council. This we, believe will significantly reduce the bulk of disputes within the industry. KRA will however continue handling tax related disputes.
Enhance revenue collection by the revenue authority through effective and efficient clearing of goods.
The proposed Bill seeks to make the East Africa Customs and Freight Forwarders Professional Certification (EACFFPC) mandatory for Kenyan customs agents and freight forwards, as a precondition for registration and licensing.
The certification will ensure the industry’s professionals understand existing and changed trade and tax regulations, other countries’ regulatory regimes, customs valuation, classification, rules of origin and management, and the use of clearing systems, digital gadgets and portals. It also introduces a mandatory continuing professional development programme to ensure professionals stay abreast with changes in the sector.
This will enable a fast and efficient clearance process as the errors and cargo clearance delays caused by customs agents will significantly reduce, increase the volume of cargo being cleared each week at the port and in turn increase volume of revenues to government each month.
In addition, the bill proposed mandatory registration of all customs agents and the establishment of a standard chargeable fee for the customs agent. This will also enable the Kenya Revenue Authority effectively monitor the income tax remittances for all customs agents and freight forwarders.
Enhance ties with other regional National Customs authorities for increased trade
Kenya’s Port of Mombasa handles over 22m tonnes of cargo meant for all the East African countries; Uganda, Rwanda, Burundi, Tanzania and Kenya itself and the volume keeps growing. The adoption of this legislation will deliver an efficient cargo clearance system, less time take to clear good, lower the cost of trade and in turn facilitate increased cross broader trade.
The proposed legislation provides an opportunity for customs agents to network and share information
The move to a registered and operational network for the industry will facilitate share information, including on any legislative changes affecting the industry, which will be circulated to all the customs agents and freight forwarders in a coordinated manner.
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