Regional insurer gives local importers lifeline

The long-running row between local clearing agents and importers against shipping lines at Mombasa over container deposit fees could soon end after a regional insurer agreed to provide them guarantees. Importers are currently required to pay between $2,500 (about Rwf1.8 million) and $5,000 (about Rwf3.6 million) to shipping lines as a container deposit, an issue that has been at the centre of disagreement between the three parties for a year. This, according to local importers and clearing agents, is compounded by the fact that shippers always delay reimbursing the money when the containers are returned to them (shipping lines). However, if a new deal between AUP, a Kenyan-based regional insurer, and clearing agents works out the relationship between shippers and the businesses could normalise and boost trade. This, according to business experts, could change the dynamics of regional trade and make Rwanda’s logistic industry more competitive. Fred Seka, the chairman, Association of Clearing and Freight Forwarders Rwanda, said importers have in the past been required to have ‘strong’ business relationships with a shipping line or deposit large sums of money as container deposit fees at Dar es Salaam in Tanzania or Kenya’s Mombasa. This, according to clearing agents, is unfair and affects Rwanda’s competiveness, especially given the fact that Rwandans joined the EAC bloc later, he added. Seka lauded the deal between importers, clearing agents and UAP, saying it will help reduce the cost of doing business and, ultimately, grow Rwanda’s logistics industry. Seka said the two parties have already drafted the agreement, outlining how container deposit fees will be handled. According to the draft agreement seen by Business Times, UAP acts as the guarantor for clearing agents, thus making it possible for containers destined for Rwanda exempted from container deposit fees. It will also pay a sum of money yet to be confirmed to the shipping lines to cover instances where importers default. On their part, clearing agents and importers will be required to refund any amount which UAP, as the guarantor, may have paid shipping lines in case of any malicious damages or any other costs resulting from negligence. Patrick Rugamba, the assistant manager in charge of under writing and re-insurance at UAP Rwanda, said the deal is a win-win for both UAP and clearing agents, adding that it will help reduce the cost of doing business. “It is good business with good risk… we are yet to agree on the amount of premium the agents will pay when all parties have agreed,” Rugamba told Business Times in an interview last week. The deal also requires that the association of clearing agents provide a list of its members and details before the contract can commence. Under this agreement, the guarantor (UAP) will cover damages or any loss of container arising from accident or theft, Rugamba noted. Clearing agents and importers said the deal is fairer than paying $2,500 container deposit fees.Previously, there have been prolonged negotiations with Kenya Ports Authority, Ministry for East African Community Affairs and shipping lines that never yielded much. Earlier initiatives to resolve the matter Rwanda’s EAC Affairs ministry had raised the issue with Rwanda Revenue Authority (RRA). Though several stakeholder meetings were held, especially around the time the EAC Single Customs Territory was launched, no solution was forthcoming. With no solution from concerned governments and shippers, Rwandan traders turned to insurance as the only viable option. “During the meetings we held with stakeholders, it was discovered that Rwandan clearing agents did not have an established relationship with the shipping lines to ensure trust (to give containers without a guarantee),” Valentine Rugwabiza, the Minister for East African Community Affairs, said in an earlier report. She advised the agents and importers at the time to set up a revolving account with the shipping lines to resolve the matter. She noted that Kenyan clearing agents were using a similar model. Commenting on the latest development, Gerald Mukubu, the acting Private Sector Federation chief executive officer, said the partnership with an insurer will help increase agents’ cashflow.“We are talking of using insurance guarantees instead of deposit fees, which in turn, will increase the cash flows for importers and clearing agents,” Mukubu said. There are about 159 clearing agents in Rwanda who are expected to benefit from the arrangement. With regional trade expected to increase, there is need to resolve such matters, including all the remaining non-tariff barriers to reduce cost of doing business in the region, Mary Gasana, the managing director of JEM Freight Forwarding and Clearing, said. Relocating to sea ports To tap into the growing trade, some local agents have relocated to Mombasa , which is also a requirement under the single customs territory, where goods are cleared at the first port of entry. The agents recently signed an agreement with RRA setting up a framework of co-operation to facilitate trade in accordance with the existing laws. It’s expected that the agreement will assist in investigating customs offenses, including sources of smuggled goods. business@newtimes.co.rw

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Regional insurer gives local importers lifeline