Weak logistics systems deny Kenyan firms trade favours

Wind turbines are off-loaded from the MV Kota Bakti at the port of Mombasa. [Gideon Maundu, Standard]

Few Kenyan companies have qualified for a regional trade programme that gives firms preferential treatment on clearing cargo at border points due to their weak logistical systems.

The programme called Authorised Economic Operators (AEOs), identifies companies whose systems of importing or exporting goods are very robust — having sound logistics systems and sourcing their goods from trusted international markets.

These systems must also be well protected and cannot be infiltrated by corrupt cartels to allow counterfeits or tax evasion.

These companies, therefore, are put together under the wing of the East African Community (EAC) and are treated favourably by tax bodies of the partner states whenever they want their goods cleared.

According to EAC, an AEO is a customs-to-business partnership that involves giving preferential cargo clearance by accrediting trusted business entities. Customs performs limited inspections on goods imported or exported under the AEO scheme.

A study by the Federation of East African Freight Forwarders Associations (FEAFFA) reveals that only 99 cargo agents are registered in the programme.

This number is low considering Kenya has over 1,000 clearing agents registered with the Kenya International Freight and Warehousing Association.

There are only eight transporters enrolled in the programme. Kenya Transporters Association has more than 200 registered members. A measly 182 Kenyan companies involved in export-import of goods are registered.  

There is only one ship agent enrolled in the programme that came into effect in 2015.

This means most Kenyan firms cannot have their cargo cleared in the shortest time possible, nor are they considered first when claiming tax refunds from governments in the countries they trade in.

AEOs are compliant and trusted traders who are allowed trade favours with minimal customs controls.

The scheme significantly reduces the physical and document-based controls, offers priority treatment in customs, and guarantees easy access to customs by businesses.

According to Daniel Mugwe, the Customs, Tax and Compliance Manager at Farmers Choice Ltd, the company has significantly gained by attaining AEO status.

“Processing of our entries through customs at the port has dropped to an average of five hours from four days to six days since Farmers Choice became an AEO in 2012,” he said.

To be enrolled, companies go through a rigorous vetting process by customs officials.

The AEO scheme has also been available to small and medium-sized enterprises (SMEs), and a number have been enrolled, according to Noel Kayaywa, Assistant Manager, AEO programme at Kenya Revenue Authority.

In 2005, the World Customs Organisation Council adopted the SAFE Framework of Standards to secure and facilitate global trade.

The AEO programme was among the protocols that were borne out of this decision, and, as a result, the EAC revenue administrations, through their respective commissioners of customs, conceived the regional AEO programme in 2006. 

A meeting held last week by FEAFFA to sensitise clearing and forwarding agents on the AEO scheme recommended the need to bring on board all other partner government agencies involved in cargo clearing to break the existing bottlenecks and continued awareness creation in the private sector.

“FEAFFA’s intention is, therefore, to supplement the efforts of the EAC and the revenue authorities in strengthening the capacity of the private sector players, especially the SMEs,” said FEAFFA Vice President Edward Urio.

“Companies can meet the threshold for AEO accreditation so that the number of AEOs can increase and have much more cargo moving across borders with minimal customs intervention.”