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KAM: A Study to Analyze Kenya’s Trade Facilitation Systems

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Trade Facilitation Systems in Kenya

Table of Content


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Table of Content ..........................................................................1 Table of Figures and Tables ..............................................................6 List of Acronyms and Abbreviations.....................................................7 Executive Summary........................................................................9 Chapter 1 ................................................................................. 12 1.0 The Scope of the Study............................................................. 12 1.1 Objectives of the Study ........................................................13 1.1.1 Specific Terms of Reference for the Study ........................... 13 1.1.2 Expected output ........................................................ 14

1.2 Methodology......................................................................14 1.3 Organisation of the Report ....................................................15

Chapter 2 ................................................................................. 16 2.0 Introduction.......................................................................... 16 2.1 Trade Facilitation from a Global Perspective..............................16 2.2 World Trade Organisation and Trade Facilitation.........................17 2.3 WTO Future Direction in Trade Facilitation ...............................18 2.4 World Customs Organisation Initiatives.....................................18 2.5 Trade Facilitation at Regional Level.........................................21 2.6 Trade Facilitation in Kenyan Context .......................................21

Chapter 3 ................................................................................. 23 3.0 Situational Analysis of Kenya’s Trade Facilitation Systems ................... 23 3.1 Trade Facilitating Agencies in Kenya............................................. 23 3.2 Transportation System, - The Current Situation................................ 27 3.2.1 Overview .......................................................................27 3.2.2 Railways ..................................................................... 27 3.2.3 Pipeline ...................................................................... 28 3.2.4 Air Ports ..................................................................... 28 3.2.5 Roads ......................................................................... 28 3.2.6 The Port of Mombasa,..................................................... 28

3.3 Key Challenges with Air and Sea Ports......................................30 3.3.1 Other Challenges Experienced at the Air and Sea Ports ........... 32 3.3.2 Implication of the Challenges Experienced at the Ports ........... 33

3.4 Key Challenges in Roads and Rail ............................................34 3.5 Other challenges with overland transportation system; ................36 3.6 Implication of overland transport challenges to the business in Kenya............................................................................................37

3.7 Kenya Revenue Authority .......................................................... 38 3.7.1 The Customs Services Department........................................38 3.7.2 Current Situation in Clearing Goods with the Customs................40 3.7.3 Key Constraints in Customs Department .................................41 3.7.4 Other Problems in Dealing with Customs ................................42 3.7.5 Some Major Causes of the problems with Customs ....................43 3.7.6 Implication of the problems to the businesses .........................43

3.8 Kenya Bureau of Standards (KEBS)................................................ 45 3.8.1 The Role of KEBS .............................................................45 3.8.2 Key Constraints in Dealing with KEBS.....................................48


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3.8.3 Other Problems Experienced in Dealing with KEBS. ...................48 3.8.4 Implication of challenges at KEBS .........................................49

3.9 Kenya Plant Health Inspectorate Service (KEPHIS)............................. 50 3.9.1 The Role of KEPHIS ...........................................................50 3.9.2 Key Constraints in Dealing with KEPHIS ..................................51 3.9.3 Other Problems Experienced while Dealing with KEPHIS.............52

3.10 Department of Veterinary Services (DVS) ...................................... 52 3.10.1 The Role of Department of Veterinary Services ......................52 3.10.2 Challenges experienced in dealing with Department of Veterinary Services (DVS).........................................................................53

3.11 Clearing and Forwarding Agents............................................... 54 3.11.1 Key Constraints Experienced .............................................54 3.11.2 Other Challenges............................................................54

3.12 Security System in Trade ....................................................... 55 3.12.1Key Challenges with Security System....................................55

3.13 Certificate of Origin ............................................................. 56 3.13.1 Key Challenges ..............................................................56 3.13.2 Other Challenges............................................................56

3.14 Immigration........................................................................ 57 3.14.1 Key Challenges ..............................................................57

3.15 Summary of key challenges with various trades facilitating agencies, along the trade chain........................................................................... 58 3.15.1 Overall Implication of all Trade Facilitation Challenges.............60

Chapter 4 ................................................................................. 61 4.0 Bench Marking Kenya’s Trade Facilitation with other Countries............. 61 4.1 Benchmarking Trade Facilitation in Kenya with other Countries ........ 61 4.2 What is Benchmarking? ........................................................... 61 4.3 Why Benchmark?................................................................... 61 4.4 Benefits of Benchmarking ........................................................ 61 4.5 Indicators for Benchmarking..................................................... 62 4.6 How is Trade Facilitation Achieved?.............................................. 64 4.7 Benchmarking Results............................................................. 71 4.8 The Trade Facilitation Situation in Some of the Above Countries ....... 71 4.8.1Mauritius: .......................................................................71 4.8.2 Egypt ............................................................................72 4.8.3 India.............................................................................72 4.8.4 Malaysia ........................................................................73 4.8.5 China Customs.................................................................73 4.8.6 Singapore Customs ...........................................................74

4.9 Trade Facilitation Gaps ........................................................... 75 4.10 Current Initiatives Being Undertaken to Improve Trade Facilitation for Kenya and the Region ................................................................... 76 4.10.1 Kenya Ports Authority......................................................76 4.10.2 Reform Programmes Being Undertaken by KRA –Customs ..........79

Chapter 5 ................................................................................. 80 5.0 Recommendation and Way Forward in Trade Facilitation in Kenya ......... 80


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5.1 Transportation system in Kenya .................................................. 81 5.1.1 The Ports .......................................................................81 5.1.2 The Roads ......................................................................82 5.1.3 The Railways...................................................................82 5.1.4 The Pipeline ...................................................................82

5.2 KRA - Customs ....................................................................... 83 5.3 Kenya Bureau of Standards ........................................................ 88 5.4 Kenya Plant Health Inspection Services (KEPHIS) ........................... 89 5.5 Department of Veterinary Services (DVS)..................................... 89 5.6 Clearing and Forward Agents .................................................... 89 5.7 Security Systems ................................................................... 89 5.8 Immigration Department ......................................................... 90 Chapter 6 ................................................................................. 90 6.0 Specific Advocacy proposals for KAM to advocate with Trade Facilitation Agencies................................................................................... 90 6.1 Overview..........................................................................90 6.2 A Review of International Standards in Trade Facilitation..............91 6.3. Overall Proposals...............................................................96 Proposal No. 1: Improve Trade Facilitation Policies ....................... 96 Proposal No. 2: Implementation of Trade Facilitation International Agreements Standards, Recommendations and Best Practices........... 97 Proposal No. 3: Implementation of Community Based System (CBS) ... 97 Proposal No. 4: Develop Trade Facilitation Centres at Border Points.. 98 Proposal No. 5: Public – Private Partnership in Trade and Transport Facilitation.......................................................................... 99 Proposal No. 6: – Capacity Building for Trade Facilitation Agencies. ... 99 Proposal No. 7: – Measuring and Evaluating Trade Facilitation Performance in Kenya ...........................................................100 Proposal No. 8: – Regional Excellent Service Awards for Trade Facilitating Agencies and Partners. ...........................................100

6.4 Specific Advocacy Proposals by KAM ...................................... 100 Proposal No. 9: Customs ........................................................100 Proposal No. 10 Transportation ...............................................101 Proposal No. 11 Kenya Bureau of Standards ................................103 Proposal No. 12 Advocacy to Kenya Plant Health and Inspection Services.......................................................................................103 Proposal No. 13 Advocacy to Clearing and Forwarding Agents ..........104 Proposal No. 14 Advocacy to Security Agencies............................104 Proposal No. 15 Advocacy to Immigration ...................................104

6.5 Consultant Views for Improving KAM Internal Capacity ............... 104 6.6 Implementation Matrix for Advocacy Proposal by KAM ................ 105 Specific Advocacy Proposal for Addressing the Challenge ...............105 Proposal No.1: Improve and Integrate Trade Facilitation Policies ........105 Proposal No. 2: Implementation of Trade Facilitation International Agreements Standards, Recommendations and Best Practices .............105 Proposal No. 3: Implementation of Community Based System (CBS) ....106


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Proposal No. 4: Integrate transportation systems from seaports, airports, rail, roads and waterways........................................................106 Proposal No. 5: Develop Trade Facilitation Centres at Border Points ...106 Proposal No. 6: Public – Private Partnership in Trade and Transport Facilitation .........................................................................107 Specific Advocacy Proposal for Addressing the Challenge ...............109 Proposal No. 10: Customs.......................................................109 Proposal No. 12 Kenya Bureau of Standards ................................118 Proposal No. 13 ...................................................................119 Advocacy to Kenya Plant Health and Inspection Services ................119 Proposal No. 14 ...................................................................119 Advocacy to Clearing and Forwarding Agents...............................119 Proposal No. 15 ...................................................................120 Advocacy to Security Agencies ................................................120 Proposal No. 16 ...................................................................120 Advocacy to Immigration........................................................120

6.7 Conclusion ...................................................................... 122 7.0 ANNEX...............................................................................123 7.1 Kenya’s Trade Facilitation Questionnaire - a Kenya Association of Manufacturers Project ............................................................ 123 7.2 Respondents to the Study by KAM Members ............................. 135 7.3 Respondents to the Study by Trade Facilitating Agencies ............ 136 7.4 Bibiliography: .................................................................. 137


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Table of Figures and Tables TABLE 1: TRADE FACITATING AGENCIES AND THEIR MANDATES ......................................... 23 TABLE 2........................................................................................................... 29 TABLE 3: OVERSTAYED CONTAINER................................................................................ 32 TABLE 4 MAJOR CHALLENGES WITH ROAD AND RAIL ............................................................... 34 TABLE 5........................................................................................................... 58 TABLE 6 : TRADE FACILITATION BENCHMARK FOR SELECTED COUNTRIES IN AFRICA AND ASIA ...................... 70 TABLE 7 BENCHMARKING RESULTS................................................................................. 71 TABLE 8.......................................................................................................... 135

FIGURE 1 KEY CHALLENGES WITH AIR AND SEA PORTS ........................................ 30 FIGURE 2: OTHER MAJOR CHALLENGES EXPERIENCED WITH PORTS ............................ 31 FIGURE 3 IMPLICATION OF CHALLENGES AT THE PORTS ....................................... 33 FIGURE 4: OTHER MAIN CHALLENGES WITH ROAD TRANSPORT ................................ 34 FIGURE 5 IMPLICATION OF TRANSPORT CHALLENGES .......................................... 37 FIGURE 6 MAIN CHALLENGES IN CLEARING CARGO WITH CUSTOMS............................. 41 FIGURE 7 CHALLENGES IN CLEARING WITH CUSTOMS ......................................... 42 FIGURE 8 EFFECTS OF KRA CHALLENGES ..................................................... 44 FIGURE 9 ISSUES WITH KEBS ................................................................. 48 FIGURE 10 IMPLICATION KEBS CHALLENGES .................................................. 49 FIGURE 11 ISSUES WITH KEPHIS............................................................. 51 FIGURE 12 ISSUES WITH DVS................................................................. 53 FIGURE 13 ISSUES WITH CLEARING AND FORWARDING AGENTS................................. 54 FIGURE 14 ISSUES WITH SECURITY SYSTEMS................................................... 55 FIGURE 15: KEY ISSUES WITH CERTIFICATE OF ORIGIN ........................................ 56 FIGURE 16 IMMIGRATION KEY CHALLENGES ................................................... 57


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List of Acronyms and Abbreviations Abbreviation Description

ACIS Automated Cargo Information System AEO Authorized Economic Operator AGOA Africa Growth & Opportunity Act ASYCUDA Automated System for Customs Data C & F Clearing & Forwarding Agent CBC Customs Business Centre CBS CCK

Community based System Communication Commission of Kenya

CFS Container Freight Station COC Certificate of Conformity EDI Electronic Data Interchange EDIFACT ETA

Electronic Data Interchange For Administration of Commerce and Trade Expected Time of Arrival

KAA Kenya Airports Authority KAM KSC

Kenya Association Manufacturers Kenya Shipper’s Council

KEBS Kenya Bureau of Standards KPA KPC

Kenya Ports Authority Kenya Pipeline Company

KRA Kenya Revenue Authority KRC KRB MTI MOT MRPW NEMA

Kenya Railways Corporation Kenya Road Board Ministry of Trade and Industry Ministry of Transport Ministry of Roads and Public Works National Environment Management Authority

PVoC Pre-export verification of Conformity RADDEX Revenue Authorities Digital Data Exchange RCN Rail age Consignment Note RMG Rail Mounted Gantry RO Release Order

RVR SPS

Rift Valley Railways Sanitary and Phytosanitary

SA Shipping Agents TEU TFA

Twenty foot Equivalent Unit Trade Facilitating Agencies

VSAT Very Small Aperture Terminal GSP RILO

Generalised Systems of Preferences Regional Intelligence Liaison office


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Abbreviation Description

TRIPS CEN COSIS ICEGATE ICES IMO ISO KTA RVR CAC QMS ACP/EU COMESA DRC DVS EAC EMS GATT ICD IMO ISO IGAD JKIA KAM KEBS KEPHIS KIFWA KRA KTA OAU OECD RVR SA UNCTAD UN/CEFACT WCO WTO

Trade Related Aspects on Intellectual Property Customs Enforcement Network Custom Stock Information System Indian Customs and Central Excise Gateway Indian Customs Electronic Data Interchange Systems International Maritime Organisation International Organisation for Standardisation Kenya Transport Association Rift Valley Railways Customs Advisory Committee Quality Management Systems Africa, Caribbean, and Pacific Countries /European Union Common Market for Eastern and Southern Africa Democratic Republic of Congo Department of Veterinary Services East Africa Community Environment Management Systems General Agreement on Tariff and Trade Internal Container Depot The Inter-governmental Authority on Development Jomo Kenyatta International Airport Kenya Association of Manufacturers Kenya Bureau of Statistics Kenya Freight and Warehousing Association Kenya Revenue Authority Kenya Transport Association Organisation for African Union Organisation for Economic Co-operation and Development Rift Valley Railway Ship Agent United Nations Conference on Trade and Development United Nations Centre for Trade Facilitation and Electronic Business World Customs Organisation World Trade Organisation


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Executive Summary This study was commissioned by Kenya Association of Manufacturers to look into the trade facilitation situation in Kenya. Trade facilitation has a major effect on both domestic and international trade, and affects the competitiveness of Kenya’s products. Trade facilitation is “the simplification and harmonisation of international trade procedures” covering the “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade”. The major findings of this study is that, there are delays in processing documents, the trade facilitating agencies have poor communication with business community, there is lack of transparency on charges and penalties. The poor road and rail infrastructure amplify the problem of the port congestion. Inadequate staff training at various levels of trade facilitating agencies, corruption and lack of facilities such as verification sheds at the border points, loading and off-loading equipment contribute to poor trade facilitation in the country. Companies have to absorb the induced costs associated with hedging for the lack of predictability and reliability of the supply chain. Maintaining three months of inventories to avoid run out is common. The implication of all these challenges is high cost of goods which eventually lead to loss of business since the competitiveness of Kenyan products is highly compromised. In benchmarking Kenya with some countries in Africa and Asia, the study shows that, countries which implement the best trading practices, standards and recommendations by trade development organisation such as the WTO, WCO, UNCTAD, UN/CEFACT, IMO, ISO and others, are more efficient in trade facilitation and clear cargo at their ports and borders within shorter time. According to Singapore Customs it takes 10 minutes to process documents and 2 hours to provide a delivery certificate while in Kenya it takes a minimum of 4 days. In Mauritius customs clearance of goods take one hour according to Mauritius Revenue Authority. Both Mauritius and Singapore have adopted the best practices procedures and standards; they have an integrated Electronic Data Interchange (EDI) network which links all commercial operators, trade facilitating agencies with the Customs Departments. The ICT systems enable the approval and release of cargo to be carried out simultaneously and hence the shorter release time. In Kenya the Simba System is not integrated with other trade facilitating agencies such as KEBS, KEPHIS and others. Kenya is undertaking custom reforms programmes which are aimed at improving trade facilitation systems. These reforms include; the implementation of Community Based System, an ICT system which will integrate all trade facilitating agencies, the business community with the KRA


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Simba system. The KRA support the WCO SAFE Framework of Standards and has started certifying businesses to become the Authorized Economic Operators (AEO). Kenya is yet to ratify the Revised Kyoto Convention which came into force in February 2006. Kenya should take an integrated and comprehensive approach aimed at improving its trade facilitation systems. This is an approach which will not only focus on road infrastructure and information technology in customs, KPA, KEBS, KEPHIS, exporters and importers but also on improving the institutional and human capacity of all the public and private agencies along the trade facilitation chain. The integrated and comprehensive approach is likely to have a more lasting effect that will benefit the government, manufacturers, traders and consumers. The role of KAM is to continuously advocate for the implementation of trade facilitating recommendations, standards, best practices and procedures in order to improve the competitiveness of Kenyan products both locally and across the borders.


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Forward It is a well acknowledged fact that trade plays an important role in accelerating economic growth and poverty reduction. An analysis of African trade literature indicates that the relatively low level of trade in the Africa region is largely due to poor institutional, communication and transport related infrastructure. These weaknesses negatively impact on the export led initiatives of many countries which aspire to reduce poverty. The combination of high regulatory costs, inadequate and high cost infrastructure and corruption only add to the cost of doing business in Africa - 20-40 above that of other developing countries. Kenyan businesses are affected by many trade barriers with regard to facilitation of trade both internally and at the borders in terms of time taken to carry out trade transactions and the many procedures that must be followed. The need to track trade facilitation systems in Kenya arose from the frequent complains by KAM members on issues such as: bureaucratic customs clearance procedures, poor road and port infrastructure, a high number of levies, many police blocks which increase the cost of trade transactions - all of which undermine Kenya’s export competitiveness. The study has documented a situational analysis of Kenya’s trade facilitation systems, short falls, needs and the extent to which they affect our competitiveness. It has proposed specific areas for KAM advocacy on trade facilitation systems where Kenya requires improvements. I wish to thank and express my appreciation to Danish International Development Agency (DANIDA) for funding the study and its publication through Business Advocacy Fund (BAF). I wish to thank Mrs. Rosemary Mwangi Mburu of Institute of Trade Development who worked hard and produced the final study report according to the work plan and last but not least, I wish to acknowledge the participation of my colleagues, Mr. Walter N. Kamau who developed the key content for the terms of reference for the trade facilitation study, Mr. Moses Kiambuthi who formatted the initial draft and other staff who participated in facilitating the preparation of the final report. Betty Maina Chief Executive Kenya Association of Manufacturers


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Chapter 1

1.0 The Scope of the Study This study was commissioned by the Kenyan Association of Manufacturers (KAM) - the leading and most influential industrial organisation in Kenya – especially with regard to advocating for the manufacturers’ interests. The association’s mission is to promote competitive local manufacturing in a liberalised domestic market. However, one of the biggest challenge facing the Kenyan manufacturers and exporters is lack of an efficient trade facilitation system in terms of transport logistics, administrative procedures, processes, operations and transit procedures. Kenyan businesses are affected by many trade barriers with regard to facilitation of trade both internally and at the borders in terms of time taken to do trade transaction process and many procedures that must be followed. Trade facilitation issues of concern are mainly related to the border processes - at the border issues and those behind the border. Trade facilitation at the border mainly targets the use of information technology to improve the efficiency of the port operations while “behind the border” trade facilitation involves the development of physical and market infrastructure. These processes affect the efficiency of international trade and raise transaction costs. Some of the major concerns by manufacturers include:

• Clearance procedures at the port • Customs procedures and documentation • Movement of goods in transit, i.e. rail, road, pipeline and lake transport • Poor road infrastructure and facilities along the Northern Corridor • Clearance formalities at the border posts • Non-acceptance of COMESA Certificate of origin and documentation • Visa requirements • Changes in road toll and border toll levies • Restrictions of transport mode • Incorrect tariff classification • Poor collection and dissemination of trade data

KAM has played a leading role in influencing EAC and COMESA trade regimes to come up with monitoring and quick resolution mechanisms for tracking both tariff and non tariff barriers to trade with a view of facilitating business. The priority programme of trade facilitation in Kenya still lies in addressing transport logistics, improvement of regional transit procedures which include implementing a cargo tracking system, harmonising axle-load regulations, implementing one weight policy, benchmarked improved services of KRA, RVR, KIFWA, KPA, KEBS, Department of Veterinary Services (DVS), KEPHIS and


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introduction of a data interchange information system linking all parties involved in trade facilitation.

1.1 Objectives of the Study

The aim of this study is to document a situational analysis of Kenya’s trade facilitation systems, short falls, needs and the extent to which they affect access to domestic, regional and overseas markets with specific advocacy recommendations for KAM to raise with the Government and trade facilitation agencies.

The study should suggest areas of inmprovement with regard to trade facilitation systems in terms of customs processes, transport logistics, transit procedures, seaport and cross-border procedures cargo tracking, axle-load regulations, weight policy and benchmark the services of KRA, RVR, KIFWA, KPA, KEBS, Department of Veterinary Services (DVS) and KEPHIS among others, against the services of similar institutions in competing countries such as South Africa, Egypt, Mauritius, India, China and Malaysia which have registered high growth in their export trade due to efficient and competitive trade facilitation programmes

For each of the above areas of trade facilitation, the study should propose specific advocacy position which KAM should sell to the Government and other trade facilitation agencies.

The need for a study to track trade facilitation systems in Kenya is justified for KAM because every year when KAM undertakes survey on tariff and non-tariff barriers in the African region, many members normally complain about many factors including; that customs clearance procedures are bureaucratic or are taking too long; roads infrastructure to deliver goods to the domestic markets are in a very poor state; numerours number of police blocks and levies at weighing bridges and at the port which all increase the cost of trade transactions and undermine the competitiveness of exports. Lack of an efficient trade facilitation system undermines the gains made in terms of trade liberalisation in COMESA, EAC, AGOA and EU and leads to lost export opportunities to these markets

1.1.1 Specific Terms of Reference for the Study

a. Document and undertake a situational analysis of Kenya’s trade facilitation systems, short falls, needs and the extent to which they affect access to domestic, regional and overseas markets with specific advocacy recommendations for KAM to raise with the Government and trade facilitation agencies.


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b. Recommend in detail the improvement areas on trade facilitation

systems in terms of customs processes, transport logistics, transit procedures, seaport and cross-border procedures cargo tracking, axle-load regulations, administrative procedures and processes and their operations and transit procedures and weight policy.

c. Benchmark the services of KRA, RVR, KIFWA, KPA, KEBS, KAA,

Department of Veterinary Services (DVS) and KEPHIS among others against the services of similar institutions in competing countries such as South Africa, Egypt, Mauritius, India and China and Malaysia and identify specific areas which Kenya needs to improve with suggestions on how each area can be improved.

d. Indicate gaps of what Kenya is missing based on a benchmark

report which should address and cover all areas mentioned in paragraph (b) and (c) above.

e. Arrange a trade facilitation systems report according to their

importance to businesses in Kenya.

f. Develop a stand-alone chapter of specific areas where Kenya needs to make improvements in the trade facilitation systems in each cluster including transport logistics, administrative procedures and processes, border processes and their operations and transit procedures including those of services offered by trade facilitation agencies in Kenya.

1.1.2 Expected output

The expected output of the study is:

i. Proposals of specific areas where Kenya requires improvements in trade facilitation systems in each trade facilitation cluster such as transport logistics, administrative procedures and processes, border processes and their operations and transit procedures including that of services offered by trade facilitation agencies in Kenya.

ii. Advocacy proposals for KAM on various trade facilitation systems.

1.2 Methodology 1.2.1 Study Area: This study was carried out in Nairobi, Mombasa, Busia, Malaba and Namanga.


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1.2.2 Desk Research The study methodology involved carrying out desk research and field study. The desk study involved reviewing various documents in the area of study as well as carrying out extensive internet research particularly for benchmarking analysis. 1.2.3 Field Research The consultant also carried out structured research using a questionnaire which was administered to about 40 KAM members (see annex B). With regard to the facilitating agencies, the consultant carried out face to face interviews with the appropriate officers. The consultant also participated at the stakeholder meeting at the Kenya Ports Authority where it was possible to interview various actors in trade facilitation. In Nairobi the consultant also participated in a meeting between KRA and KAM, Shippers Council and KIFWA. The meetings enhanced data collection. The consultant further carried out over 60 face to face consultations and interviews with officers from different trade facilitating agencies and stakeholders. The purpose was to gather critical information to establish the key concerns and challenges in trade facilitation. The institutions interviewed include:

� Kenya Revenue Authority - Nairobi, Mombasa, Namanga, Busia, Malaba � Kenya Airport Authority - Nairobi, Mombasa � Kenya Ports Authority - Nairobi, Mombasa � KIFWA - Mombasa, Nairobi � RVR - Mombasa, Nairobi � KEBS - Mombasa, Nairobi, Namanga, Busia � KEPHIS - Mombasa, Nairobi, Namanga, Busia � Departments of veterinary services - Namanga, Nairobi � Ministry of Public Works-Axle Load Limit Unit - Nairobi (HQS), Mlolongo � Ministry of Transport - Nairobi � Trade facilitation agencies, Ministry of Trade and Industry, Municipal

Council, Busia � Transporters, private companies and KAM members among others

1.2.4 Data Analysis The formal analysis of the 40 structured questionnaires was carried out using an Epidata computer package for statistical analysis. The results of the data analysis are shown in chapter 3.

1.3 Organisation of the Report

The study comprises of six chapters; Chapter one gives a brief outline on the scope and objectives of the study. The chapter also highlights the terms of reference and methodology used in conducting the study. Chapter two is the introduction to the study and it gives an overview of trade facilitation systems


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from a global perspective. Chapter three provides a detailed analysis of the data collected on the trade facilitation systems in Kenya. Chapter four deals with benchmarking trade facilitation in Kenya with that of other countries in Africa, Asia and also identify gaps which Kenya needs to address. Chapter five focuses on recommendations to address the challenges identified. Chapter six highlights advocacy proposals and implementation matrix which KAM should undertake to promote a more effective and efficient trade facilitation to concerned agencies. The chapter ends with the conclusions to the study.

Chapter 2

2.0 Introduction

2.1 Trade Facilitation from a Global Perspective

Today, as the role of traditional (customs tariff) trade barriers gradually vanishes, the focus of trade policy has shifted to the non-tariff barriers to trade, including trade facilitation.

Trade facilitation refers to a comprehensive and integrated approach towards reducing the complexity and cost of trade transaction processes and ensuring that trade facilitation activities take place in an efficient, transparent and predictable manner, based on international accepted norms, standards or best practices.

Trade facilitation refers to the avoidance of unnecessary trade restrictiveness. This can be achieved by applying modern techniques, standards and technologies, while at the same improving the quality of controls in an internationally harmonised manner. Trade facilitation is one of the key factors for economic development of nations and is closely tied into national agendas on social well being, poverty reduction and economic development of countries and their citizens.

Trade facilitation also involves a wide range of activities that are centred on lowering trade transaction costs for firms in global commerce. These costs include the price of moving freight from the factory to final destinations. Firms must manage border clearance procedures and pay trade services fees, among many other steps after goods and services are produced. As such, trade facilitation involves much more than moving goods across national borders or shipping a package by sea or air transport.


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Trade facilitation is one of those areas on which countries must focus on in order to realise fully the benefits accruing from the removal/reduction on customs duties under the various trade regimes Trade facilitation is becoming increasingly important in enhancing competitiveness countries in the current context of abolition of formal trade barriers at both the regional and the international levels. This is because:

• Exports will be efficient and cost-effective

• Imports of raw materials for the manufacturing sector will be less costly

• Small and medium-sized enterprises will be able to participate in international trade as the country’s trade regulations and procedures become easier

• Increased trade flows will result in more foreign exchange earnings.

Technological advances and economic liberalisation have created new opportunities for countries to harness global markets for economic growth and development. But expanded supply chains and global production networks put a new premium on moving goods in a predictable, timely, and cost-effective way. In this highly competitive world, the quality of logistics can have a major bearing on a firm’s decisions about which country to locate to, which suppliers to buy from, and which consumer markets to enter. High trade facilitation costs and, more particularly low level logistics services are a barrier to trade and foreign direct investment and therefore to economic growth. Countries with high overall trade facilitation costs are more likely to miss the opportunities of globalisation. This is why trade facilitation has become one of the key issues of trade negotiations within the WTO.

2.2 World Trade Organisation and Trade Facilitation Trade facilitation is one of the ‘four Singapore Issues’ that was added to the WTO agenda in December 1996. The Singapore Ministerial Declaration directed the Council for Trade in Goods, “to undertake exploratory and analytical work, - drawing on the work of other relevant organisations, on the simplification of trade procedures in order to assess the scope for WTO rules in this area.” In the WTO text on Trade Facilitation, there are already three specific articles dealing with the simplification and harmonisation of trade procedures namely:

1. Freedom of Transit (Article V), whereby each Member State is requested to grant freedom of transit for goods, vessels and other means of transport crossing its territory via the routes most convenient for international transit.

2. Fees and formalities (Article VIII), which states that all fees and charges imposed with respect to importation and exportation must be limited in amount to approximate the cost of services rendered and must not


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represent an indirect protection to domestic industry or a source of revenue for fiscal purposes.

3. Publication and administration of trade regulations (article X) - This requires that all trade regulations be published promptly in such a manner as to enable governments and traders to become acquainted with them.

It has to be emphasised that the GATT Articles V, VIII and X only cover trade facilitation to some extent. In fact, there are other WTO agreements, which also deal with this issue namely the Customs Valuation Agreement and Agreements on Pre-shipment Inspection, Rules of Origin, Import Licensing Procedures, Technical Barriers to Trade and Sanitary and Phytosanitary measures. In addition, there are other international organisations that deal with issues related to trade facilitation namely UNCTAD, UN/CEFACT World Customs Organisation and the World Bank among others.

2.3 WTO Future Direction in Trade Facilitation

Talks are underway on revisions to the WTO rules regarding trade facilitation in the Doha Development Agenda negotiations. The outlines of a possible agreement include, among others:

a. New obligations to promote electronic distribution and transmission of government trade regulations on imports and exports;

b. Standardisation of certain basic fees for imports; c. Stronger rules to help ensure freedom of transit for goods crossing

national borders.

In the WTO Secretariat tabulation of proposals from August 11, 2006, there is consideration of more "ambitious" changes to current obligations, such as the establishment of a single window for exporters and importers at customs or accepting copies of documents for import and export in lieu of originals. Since 2002 there have also been talks about explicit ties between a package of technical assistance and development aid as part of any final agreement. Developing countries participated very actively in these negotiations and considerable progress had been achieved before the suspension of the Doha Round in late 2006 (World Bank, 2006).

2.4 World Customs Organisation Initiatives The World Customs Organisation (WCO) provides standards and technical support aimed at enabling customs administrations operate effectively. The


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Revised Kyoto Convention (RKC) outlines principles and practices for applying modern simplified, harmonised and standardised procedures. It is crucial in the development of trade policy and description of goods for the purposes of customs that goods be described and defined in standard codes. This code is spelt out in the Harmonised Commodity Description and Coding System (HS).

The WCO recognises that trade facilitation initiatives benefit both the business community and governments. The business community benefits by obtaining enhanced competitiveness in national and international markets due to reduction in delays and costs which are achieved with predictable and efficient movement of goods across borders. WCO has also appreciated the need for security of supply chains as a collective challenge, hence the need to operate an effective risk management policy worldwide. This means securing each stage of the journey made by goods, from the point where they are packed to their final destination. This is known as end-to-end security. Consequently it is vital to the success of this enterprise that alongside customs, every link in the supply chain, whether public or private, be committed to tackling this challenge effectively. Strengthening co-operation and exchange of information between the various players is therefore a crucial success factor.

Resulting from substantive consultations between the international Customs, trade and business communities, the WCO has developed a regime that will enhance the security and facilitation of global trade which is known as the WCO SAFE Framework of Standards to Secure and Facilitate Global Trade. This regime is considered a response to the potential threat of terrorist activity on the movement of goods around the world.

The Framework - a consolidation of various agreed upon security and facilitation measures - contains 17 agreed upon standards that should be adopted and implemented by Customs’ administrations and their business partners. It is aimed at providing uniformity and predictability to the global trade environment by safeguarding the end-to-end security of the international trade supply chain even as facilitating the passage of legitimate goods through Customs control.

The Framework was developed with four principles or core elements in mind, namely;

1. Customs administrations commit to harmonising advance electronic manifest information requirements to allow risk assessment of cargo;

2. Apply a common risk management approach; 3. Use non-intrusive detection equipment to effect examinations; 4. Provide benefits to businesses that meet minimal supply chain security

standards and best practices. The SAFE Framework rests on the twin pillars of Customs-to-Customs network arrangements and Customs-to-Business partnerships. The two-pillar strategy has


20

many advantages. The pillars involve a set of standards that are consolidated to guarantee ease of understanding and rapid international implementation. Moreover, this instrument draws directly from existing WCO security and facilitation measures and programmes developed by Member administrations. The WCO SAFE Framework pillar on Customs-to-Customs network arrangements promotes the seamless movement of goods through secure international trade supply chains. These network arrangements will result, inter alia, in the exchange of timely and accurate information that will place Customs administrations in the position of managing risk on a more effective basis. The Customs-to-Business partnership pillar rests on the creation of an international system for identifying businesses that offer a high degree of security guarantees in respect of their role in the trade supply chain. Businesses that fulfil the criteria defined in the Framework will be regarded as partners and classified as “authorised economic operators” eligible for a host of tangible benefits that include:

� Quicker movement of low-risk cargo through Customs;

� Minimized Customs control interventions;

� Improved security levels;

� Optimized supply chain costs through security efficiencies;

� Enhanced trading reputation’

� Improved understanding of Customs requirements;

� Better communication between businesses and Customs.

During its June 2005 annual Sessions, the WCO Council adopted the Framework and encouraged its expeditious world-wide implementation. In June 2007 the WCO put both provisions for SAFE and AEO in a single comprehensive instrument.

The successful implementation of the SAFE Framework is one of the key challenges facing the international Customs community in the 21st Century.

Changes to the multilateral trade rules noted above can help in advancing transparent and predictable trading procedures for exporters and importers. Meeting trade facilitation goals in a broader and deeper context, however, will require action from outside and well beyond the WTO and WCO framework. More effective delivery of development aid and technical assistance especially in projects to advance regulatory reform and support public agencies that promulgate and administer trade regulations is needed.


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At regional level trade facilitation is needed to complement trade liberalisation so that businesses and consumers can enjoy the benefits of trade.

2.5 Trade Facilitation at Regional Level

At the regional level, the Regional Economic Communities (EAC, COMESA, and SADC) have been active in adopting trade facilitation programs to harmonise policies and regulations for the smooth flow of passengers and goods throughout the region. A number of instruments and common standards have been introduced to facilitate regional transport and trade including harmonised axle load limits, harmonised transit charges, regional carrier licensing, regional third-party motor vehicle insurance, and regional customs transit system. But despite being adopted by most member countries, effective implementation has been erratic and generally weak. The East African Community has committed itself to initiating one-stop border posts within the Community as a way of halving the amount of time spent at borders. A study and business plan for instituting a one-stop border post at Malaba for both road and railway traffic was undertaken in 2004 by the USAID ECA Trade Hub and the Kenyan Ministry of Transport. Currently Kenya and Uganda Revenue Authority at Malaba verify goods at one point on the Ugandan side. This has reduced the amount of time taken to process documents. Several initiatives have been put in place by EAC and East Africa Business Council to address the Non - tariff barriers (NTBs) within the region. At the same time, two studies have been done and a mechanism for monitoring (NTBs) developed.

2.6 Trade Facilitation in Kenyan Context Kenya is a founding member of WTO and therefore, commitment to WTO principles is integral to its economic policies. It accords Most Favoured Nation (MFN) treatment to all its trading partners. Kenya is also a member of COMESA, EAC, OAU, IGAD, and ACP/EU and pursues preferential trade agreement as a means of increasing the flow of trade. The country has amended some pieces of legislation, including anti-dumping, countervailing and intellectual property to bring them into conformity with the WTO Agreements. The 2002 development plan spells out a trade policy to be implemented, the continued reduction and eventual elimination of tariffs and government role way from control and regulation toward the facilitation of private sector development. Kenya now relies on the tariff as its main trade policy instrument Kenya also recognises the importance of trade facilitation and considers it to


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be a significant component of its trade policy especially with the major developments happening in the various trade agreements. Kenya is implementing all the WTO Agreements which relate to trade facilitation. These include the Customs Valuation Agreement, and Agreements on Pre-shipment Inspection, Rules of Origin, Import Licensing Procedures, Technical Barriers to Trade and Sanitary and Phytosanitary measures.

At the same time, Kenya is a member of the World Customs Organisation (WCO) and participates in negotiations towards accession to customs agreements with international application (such as the Harmonised System Convention that forms the basis for tariff classification of goods traded in the international market). Membership to WCO assists in developing best international practices through benchmarking, training of customs officers and networking with other members and organisations that have a stake in international trade, including the WTO, the International Chamber of Commerce, and UNCTAD among others.

Further to this, Kenya has embarked on a Customs Services Department Reform and Modernization Project (CRM). The aim of this project is to transform customs into a modern customs administration by 2008/09, in accordance with internationally accepted conventional standards and best practices as outlined in WTO agreements and the WCO Revised Kyoto Convention on Simplification and Harmonisation of Customs Procedures. Kenya has not yet ratified the Revised Kyoto Convention.

To date, trade facilitation in Kenya remains a challenge despite the signing of the various multilateral trade agreements that have been highlighted above. The prevailing inadequacy of a legal and regulatory framework, institutional and human capacity, poor ports, rail and road infrastructure and the inefficiency of trade documentation processes continue affecting the trade community by inflicting delays in the movement and clearance of goods at the various entry and exit points. This has resulted in the entire process being associated with high transaction costs which reduces the competitiveness of Kenyan products in the global market.


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Chapter 3

3.0 Situational Analysis of Kenya’s Trade Facilitation Systems

3.1 Trade Facilitating Agencies in Kenya Trade facilitation in Kenya is carried out by a number of institutions which perform various functions. The roles of the trade facilitating agencies range from revenue collection, provision of facilities to load and off-load cargo to carriers and checking goods conformity the the set standards and health regulations. The other function which is part of trade facilitation is that of transporting goods to their final destination. A brief summary of institutions which are involved in trade facilitation and their mandates are shown in the table below:

Table 1: TRADE FACILITATING AGENCIES AND THEIR MANDATES

TRADE FACITATING AGENCIES MANDATES 1. Kenya Revenue Authority (KRA) • Control of movement of passengers and

goods in and out of Kenya • Revenue Collection on behalf of the Government.

• Control of restricted and banned goods into Kenya

• Collection of trade statistics on imports and exports

2. Kenya Ports Authority (KPA) • Provision of marine services • Provision of Stevedoring and Shore handling services

• Collection of port charges • Ensuring security of cargo at the port • Collection of sea cargo statistics

3. Horticultural Crops Development Authority (HCDA)

• Provision of specialised extension services • Provision of marketing intelligence information for both export and local markets.

• Enforcement of appropriate quality standards for horticultural produce.

• Support horticultural training and


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research

4. Kenya Airports Authority (KAA) • To provide necessary facilities for aircrafts

• To provide facilities for loading and unloading of cargo

• Collection of concession fees 5. Kenya Bureau of Standards

(KEBS) • To develop National Standards • To provide Product Testing Services • To provide Metrology and Measurement Services

• To implement Standards in Trade and Industry (Quality Assurance Services)

• To provide Product and Management Certification Services

• To provide inspection services (imports and locally manufactured products)

• To promote standardisation in industry and commerce through awareness and training activities

6 Kenya Plant Health Inspectorate Services (KEPHIS)

• Co-ordination of all matters relating to crop pests and disease control

• Custodian of the Plant Breeders Rights Register

• Undertake inspection, testing, certification, quarantine control, variety testing and description of seeds and planting materials

• Issuance of all importation and exportation licenses for plants and seeds

7. Kenya Police • Provision of security services at the port of entry/exit

8.

Port Health Department (Ministry of Health)

• Inspection of food stuffs - both imported and exported

• Inspection of imported drugs • Inspection of chemicals • Inspection of used clothing • Ship clearance (Ensuring the ships are free from communicable diseases).

9 Container Freight Stations (CFS) • To decongest the port thereby allowing


25

KPA to handle more volumes (import/export).

• To serve clients faster and professionally as there is a "one stop centre" where concerned government authorities are based within the CFS.

• To facilitate faster clearance of cargo by C & F agents.

• Give optimum safety of the cargo as CFS operators are private companies.

10. Kenya Association of Manufacturers (KAM)

• Vetting and facilitating AGOA visa processing

• Receiving and facilitating the approval of use for Tax Remission for Export office (TREO)

• Private Sector advocacy for manufacturers

• Provision of Business Information.

11. Kenya International Freight & Warehousing Association (KIFWA)

• To promote the adoption of uniform documents and standard terms and conditions of services provided by members.

• To provide training opportunities and encourage consultation between and amongst its members.

• To collect, collate and circulate amongst its members’ information and statistics relating to or affecting the business interests of members.

• To establish a code of conduct for all members enforceable through the E.A. Customs Management Act.

12. Kenya Transport Association (KTA)

• To provide guidance on transport tariffs to both members and consumers of transport services.

• To discourage unfair competition without interfering with initiative and enterprise based on fair trading.

• To promote good corporate governance practices in the industry.

• To provide relevant information on road transport.


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• To establish a code of conduct for all members enforceable through the Transport Licensing Board

• Facilitate movement of goods to intended destination

13. Rift Valley Railways (RVR) • Transportation of goods (Transit outwards, transit inwards).

• Trade facilitation. • Transportation of passengers (Social/Community Services).

• Construction and maintenance of the permanent way (railway line).

• Clearing and forwarding at border stations.

14. Ship Agents • Act as agent for the master of a vessel • Provision of ocean manifest to KRA/KPA and other regulatory agencies

• Supervision of cargo operations- coordinating cargo discharge / loading operations.

• Issuance of cargo documentation 15. 16.

Department of Veterinary Services (DVS) Ministry of Roads and Public Works

• Livestock disease control through

monitoring of health status of livestock • Implementation of meat hygiene • Implementation of milk hygiene. • Implementation and supervision of

health and hygiene of all other livestock products

• Determine the existence of disease epidemics, quarantines, and disease free zones.

• The organisation works closely with the Kenya Bureau of Standards in the formulation of standards related to the health of animals and animal products.

• Maintain, rehabilitate and develop

roads • Develop and manage weighbridge

stations


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Source: Various Trade Facilitation Agencies Reports

The key trade facilitation agencies that the study shall focus on in a detailed analysis include:

Transportation Sectors Customs Kenya Bureau of Standards Kenya Plant Health Inspection Services Department of Veterinary Services Security Agencies Immigration Clearing and Forwarding

The above mentioned agencies play a major role in facilitating trade. The regulations, processes, procedures and operations of these agencies contribute to transaction costs of the products being sold to local, regional and international markets. The challenges experienced by the business community while dealing with the trade facilitating agencies are discussed in this chapter.

3.2 Transportation System - The Current Situation

3.2.1 Overview

Kenya’s transportation infrastructure consists of a network of airports, roads, rail, pipeline; a single commercial seaport at Kilindini, Mombasa and small local ports at Lamu, Malindi, Kilifi and Shimoni; and inland container depots in Nairobi, Eldoret and Kisumu. Ferry services on Lake Victoria are provided by the Kenya Railways Corporation. The private sector dominates road transportation and general aviation. The public sector currently owns and operates the ports, airports, part of the railway and pipeline. Today, Kenya’s economy today is largely dependent on road transportation, although railway still remains an important mode for long distance freight along the transportation corridor.

3.2.2 Railways The railway network operates a fleet of about 156 locomotives, with a carrying capacity of 6,407 wagons and 588 coach units. The rolling stock operates along the 2,700-kilometre route that connects Mombasa to Malaba, Nakuru to Kisumu, Kisumu to Butere, Voi to Taveta, Nairobi to Nanyuki, Eldoret to Kitale, Rongai to Solai and Gilgil to Nyahururu. There are over 150 stations. In addition, there is the Konza-Magadi line, which is maintained by the Magadi Soda Company. The Kenya–Uganda railway line was placed on management


28

concession to a South African company, Rift Valley Railways on November 1, 2006 for a period of 25 years. The Kenya railway runs the other lines. However, old and poorly maintained tracks, locomotives, coaches and wagons continue negatively affceting the performance of the rail.

3.2.3 Pipeline There is an oil pipeline that connects the Port of Mombasa to Nairobi, Eldoret and Kisumu. The pipeline began operating in February, 1978. The Nairobi-Mombasa pipeline segment (known as Line 1) has pumps at Mombasa and at three intermediate booster stations - at Maungu, Mtito Andei and Sultan Hamud. The Mombasa-Nairobi pipeline is 14 inches in diameter and approximately 450 Km long. The currently installed pumping capacity is 440m³/h per hour (440,000litres) although provisions were made during construction for increasing it to about 800m³/ per hour. The capacity of 440, 000 litres is way below the current demand for fuel in Kenya and the entire region which stands at over two million litres per day

3.2.4 Air Ports Kenya has relatively well developed airports which are managed by Kenya Airports Authority that was established in 1992 through an Act of Parliament. The three international airports are in Nairobi, Mombasa and Eldoret; four major domestic airports at Kisumu, Malindi, Wilson and Lokichoggio; and over four hundred smaller aerodromes and airstrips scattered in all parts of the country. Nairobi’s Jomo Kenyatta International airport handles 60 per cent of visitors who come in via air. The annual planned capacity for JKIA was 2.5 million passengers per annum and 200,000 tons of cargo. In 2006 JKIA handled 4.4 million passengers and accounted for over 86 of the total cargo traffic standing at 279 thousand tonnes. This was almost double the planned capacity.

3.2.5 Roads The country’s entire road network stands at approximately 151,000 Km. Out of this; over 63,000 Kms are under classified road system while 87,600 kms fall under unclassified road system category. Out of the classified network system, 7,943 Kilometres meet the bitumen standards, 26,181 Kilometres meet the gravel standard and the rest are earth.

3.2.6 The Port of Mombasa, Administered by the KPA, the Port of Mombasa is Kenya’s principal seaport and one of the modern ports in Africa. It handles all types of ships and cargo and serves not only Kenya but also the hinterland countries of Uganda, Rwanda, Burundi, Democratic Republic of Congo, Ethiopia, Southern Sudan, Northern-Eastern Tanzania and Somalia. Currently, the port faces stiff competition from


29

Durban and Dar es Salaam. Uganda accounted for 68.5 of transit goods via the Port in 2006 as compared to 77.4 in 2005. The port consists of 16 deep-water berths with a total quay length of 3,044 metres and a maximum dredged depth of 11 metres. It has important infrastructure which includes bulk oil jetties, handling facilities for coal clinker and cement and a three-berth container terminal as well as inland container terminals in Nairobi, Kisumu and Eldoret. The port has a rated capacity of 22 million tonnes annually, while the cargo handled has been on average approximately eight million tonnes per annum, rising from 9.2 million in the 2000 to 10 million in 2002, 12 million in 2003 and 13 million in 2004. Total cargo throughput handled at the Port rose by 8.4 from 13.3 million tonnes in 2005 to 14.4 million tonnes in 2006. This increase was attributed to a 10.6 rise in volume of imports which accounted for 82.2 of total cargo throughput. Between 2002 and 2006, the growth of containerised traffic represented one of the highest growth rates worldwide standing at 30 per cent. In 2006, a total of 479,355 twenty foot equivalent units (TEUS) were handled at the Port compared to 436,671 TEUS for a similar period in 2005. This has been due to growth of the economy in Kenya and the hinterland countries. The table below shows the trends of container traffic at the port of Mombasa. Table 2: Container Traffic; 2001-2006

CONTAINER TRAFFIC: 2001 - 2006 In (TEUs)

2001 2002 2003 2004 2005

2006

IMPORTS Full

117,855

127,424

159,379

189,911

193,223

217,869

Empty

16,642

15,935

14,160 14,007

14,573

11,596

Total

134,497

143,359

173,539

203,918

207,796

229,465

EXPORTS Full

72,176

75,765

78,460 90,539

94,120

86,317

Empty

58,058

58,935

78,749

109,895

107,467

132,237

Total

130,234

134,700

157,209

200,434

201,587

218,554

TRANSHIPMENT Full

24,727

26,746

43,778 29,336

22,318

21825

Empty

1,042

622

5,827 4,909

4,970

9,511


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Total

25,769

27,368

49,605

34,245

27,288

31,336

TOTAL Full

214,758

229,935

281,617

309,786

309,661

326,011

Empty

75,742

75,492

98,736

128,811

127,010 153,344

TOTAL:

290,500

305,427

380,353

438,597

436,671

479,355 Source: KPA, Website, 2007

The growth of Kenya’s economy by 7 per cent and that of Uganda; political stability in Rwanda, Burundi, Eastern Congo DRC and Southern Sudan have contributed to the over stretching of the trade facilitation capacity of the Mombasa Port. Challenges faced by the business community at the sea and airports are discussed below.

3.3 Key Challenges with Air and Sea Ports

The key challenges experienced at the sea and airports are discussed in figure1 and figure 2 below: Figure 1: Key Challenges with Air and Sea Ports

79

75 71

69

21

25 29

31

0

10

20

30

40

50

60

70

80

in Percent

Yes No

Response

Four Main Challenges Experienced with the Ports

Delays in processing documents at KPA/KAA

Delays in off loading cargo from the vessels

Poor communication with stakeholders

Breakdown or lack of equipments


31

Source: KAM Trade Facilitation Study; Field Survey, 2007

Figure 2: Other Major Challenges Experienced with Ports

Unpredictable

penalties/charges

Corruption Poor customer

relationship

Un-business like

attitude of ports

staff

Compatibility of

computer systems

with that of

stakeholders

Yes

No

36 36 3843

58

64 64 6257

52

Problems

Response

Other Major Challenges Experienced with Ports


The two figures above show the various problems experienced with KPA and KAA by importers and exporters at various sea and air ports. These include:

The delay in processing documents is a major challenge with 79 per cent of the respondents highlighting the issue

Delays in off-loading cargo from the vessels with 76 per cent of respondents indicating it is a problem

Poor communication with stakeholders was raised as a major problem with 71 per cent of respondents indicating so

Breakdown or lack of equipment was indicated by 69 per cent of the respondents to be a major problem

Both unpredictable penalty charges and corruption scored 64 per cent, followed by poor customer relationship with 62 per cent and un-business like attitude of staff at the port

Compatibility of the computer systems used by the ports with those of stakeholders is an issue according to 52 per cent of the respondents


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3.3.1 Other Challenges Experienced at the Air and Sea Ports Airports There is inadequate capacity for both cargo and passengers Port of Mombasa

Vessels take long to berth Late submission of manifest (up to 24 hours after vessel arrival). This delays lodging of declaration

Multiple versions of manifest (electronic and hardcopy) issued by Ship Agent to KPA and KRA are not identical

Lengthy manifest amendments procedures Inadequate equipment to offload containers/cargo Congestion at the port due to poor off-take delivery system The shortage of road trucks in the market coupled with the poor rail and road infrastructure

Poor co-ordination between trade facilitating agencies in clearing of goods

Multiple processes before gate exit Lengthy verification process Payment of port charges is lengthy (takes up to 6 hours) Delays in the processing of refunds on overcharges Corruption Inadequate staff training Incompatibility of computer systems with those of stakeholders Some traders refuse to clear their containers and claim the containers are double taxed. Some of these traders have already taken the Customs department to court. Meanwhile the containers are sitting at the port causing more congestion

Overstayed Containers; the table below shows containers which have stayed at port since October 2006 and have not been cleared for various reasons

Table 3: Overstayed Container

Overstayed containers Between October 2006-August 2007 Countries No. of Containers Kenya 2916 Uganda 1596 Sudan 158 Congo DRC 132 Rwanda 121 Tanzania 110

Source: KPA Website, 2007


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3.3.2 Implication of the Challenges Experienced at the Ports Figure 3: Implication of Challenges at the Ports

96

4

33

67

92

8

0

10

20

30

40

50

60

70

80

90

100

In percentage

High Cost Damaged or Lost Cargo Loss of Business

Effects

Effect of Challenges at the Sea and AirPorts

Yes

No


The effects of challenges experienced in clearing cargo at the ports are high cost of goods according to 96 per cent of the respondents. Theis results in loss of business as indicated by 92 per cent of the respondents. Only 33 per cent of the interviewed enterprises indicated they experienced either damaged or lost cargo problems.


34

3.4 Key Challenges in Roads and Rail Figure 4: Key Challenges with Road and Rail


Figure 4 above shows that poor road infrastructure scored 100 per cent from the interviewed respondents. This is followed by numerous road stopovers along the key trade routes which had 96 per cent positive response from KAM members. Police road blocks and delays at weighbridges are major challenges as indicated by 91 per cent of the respondents. Inadequate wagons and rolling stock capacity for the Rift Valley Railways had a response of 82 per cent followed by delays at the border points with 80 per cent.

Yes

No

100

96

91 91

8280

0 4

9 9

18 20

0

10

20

30

40

50

60

70

80

90

100

In PercentIn PercentIn PercentIn Percent

ResponseResponseResponseResponse

Six Main Challenges ExperiSix Main Challenges ExperiSix Main Challenges ExperiSix Main Challenges Experieeeenced with Road and Rail Transportationnced with Road and Rail Transportationnced with Road and Rail Transportationnced with Road and Rail Transportation

Poor Poor Poor Poor road infrastructureroad infrastructureroad infrastructureroad infrastructure

Too many road stopovers alongToo many road stopovers alongToo many road stopovers alongToo many road stopovers along the key trade routes the key trade routes the key trade routes the key trade routes

Delays at the weighbridgesDelays at the weighbridgesDelays at the weighbridgesDelays at the weighbridges

Too many police road blocToo many police road blocToo many police road blocToo many police road blocksksksks

Inadequate rail wagons and rollingInadequate rail wagons and rollingInadequate rail wagons and rollingInadequate rail wagons and rolling stock capacity stock capacity stock capacity stock capacity

Delays at the border points Delays at the border points Delays at the border points Delays at the border points


35

Figure 5: Main Challenges with Road Transport

75 74

67

61 6058

40

25 26

33

39 4042

60

0

10

20

30

40

50

60

70

80

in Percent

Yes No

Response

Other Main Challenges With Road transportation

High toll charges on the road

Disharmonized axle load limits indifferent countries within the region Inadequate competence and skills forthe long distance driversIncidence of Cargo loss or damage

Claim processing in Cargo Insurance

Lack of adequate resting facilities for long distance transporters Delays at the exit gate of the KPA due tolong processes of checking cargo Inadequate trucks to transport cargo


In figure 5, high toll charges on the road and disharmonised axle load limit among different countries within the region scored 75 and 74 per cent respectively. Long distance drivers have low skills and competence according to 67 per cent of the respondents. Incidence of cargo loss or damage was reported to be an issue by 64 per cent of the interviewed enterprises. Insurance claim processing was a problem as indicated by 61 per cent of the companies who participated in the study. Inadequate trucks and resting facilities for long distance drivers was indicated to be a problem according to 60 per cent of respondents. Delays at the KPA gate was an issue for 58 per cent of the interviewed enterprises.


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3.5 Other challenges with overland transportation system:

Railways Level of automation of the Rift Valley Railways system is low. This causes delays

Processing of Rail age Consignment Note is highly inefficient Rail age Consignment Note (RCN) checked three times by RORO office, RVR CDO Office and RMG office

Poor communication with the customers RVR does not give prior information to clients whenever wagons or trains are to be delayed

Road Transport Inadequate road maintenance hence poor infrastructure and delays on the roads

Transit trucks have been designated particular routes to follow no matter how bad these roads are. This causes further delays and damage to vehicles hence increasing the freight charges

Trucks must pass through the six weighbridges along the transit corridor Equipment used at the weighing bridges are old and few; there are currently only two located at Mlolongo and Mariakani, hence the delays

Poor working conditions at the weighbridges. The interviewed officers pointed out that the working place is very dusty, rough and bumpy. They claimed that they suffer from respiratory related diseases as a result of this dust. There is lack of clean drinking water and washrooms.

Customs escort for transit trucks delays even for two days. This causes inconvenience to the cargo and truck owners as well as the drivers

Corruption Lengthy approval process for transfer of cargo from one transit truck to another in case of breakdown along the corridor

High freight charges - after all those challenges the owner of goods must pay for it, hence reducing the competitive advantage of the business

Pipeline There is inadequate capacity to transport fuel. Trucks from the region are travelling all the way to Mombasa to collect fuel which adds on to cost of petroleum products. Heavy trucks damage the road rapidly – a good case is that of the Sultan Hamud to Mtito road - this road which is hardly three years is already damaged in some sections and requires repairs. More trucks on the highway increase the occurrance of accidents


37

3.6 Implication of overland transport challenges to the business sector in Kenya.

Figure 6: Implications of overland transport challenges

100

5248

92

8

0

10

20

30

40

50

60

70

80

90

100

In Percentage

High Cost Damaged or loss of Cargo Loss of Business

Causes

Effects of Poor Roads and Rail Transportation Systems

Yes

No


The table above shows the effects of poor transportation systems to businesses in Kenya. A 100 per cent of the respondents indicated that poor transportation infrastructure adds high costs to the goods and services they offer to the market. The cost of transportation in Kenya is 30 per cent of the value of goods as indicated by respondents in this study. Another earlier study on “Cost of Transportation in East Africa”, carried out by USAID in 1997 gave a similar picture. The costs result in loss of business opportunities as pointed out by 92 per cent of the respondents.


38

3.7 Kenya Revenue Authority

The Kenya Revenue Authority (KRA) which was established by an Act of Parliament, Chapter 469 of the Laws of Kenya became effective on 1st July, 1995. The Authority is charged with the responsibility of collecting revenue on behalf of the Government of Kenya.

In terms of revenue collection and other support functions, the Authority is divided into the following Departments:

• Customs Services Department • Domestic Taxes Department • Road Transport Department • Support Services Department

The purpose of KRA is assessment, collection, administration and enforcement of laws relating to revenue.

3.7.1 The Customs Services Department

The Customs Services Department (previously known as Customs and Excise Department) of the Kenya Revenue Authority was established by an Act of Parliament in 1978. It is the largest of the four revenue departments in terms of manpower, revenue collection and countrywide operational network. The Vision of the department is to be globally recognised as a modern customs administration that is responsive to the needs of the 21st century customer.

The primary function of the Department is to collect and account for import duty and VAT on imports. Apart from its fiscal responsibilities, the Customs Services Department is responsible for facilitation of legitimate trade and protection of society from illegal entry and exit of prohibited goods. The Department is headed by the Commissioner of Customs Services Department.

As the agency of the government, the Customs and Excise Department is entrusted with the responsibility of monitoring and controlling imports and exports and is also responsible for the implementation of the ‘trade and customs’ clauses of the regional trade agreements. This function specifically covers issuance and monitoring of the certificates of origin for the COMESA region, European Union, United States under the AGOA programme and the various GSP schemes.

At the international level, KRA’s Customs and Excise Department is a member of the WCO and participates in negotiations towards accession to customs agreements with international applications such as the Harmonised System


39

Convention that forms the basis for tariff classification of goods traded in the international market.

Membership to the WCO assists in developing best international practices through benchmarking, training of customs officers through the WCO or Member States and networking with other organisations which have a stake in international trade including the WTO, ICC and UNCTAD, among others.

Since Kenya is a member of the WTO, the Department also implements and enforces those WTO agreements to which Kenya has acceded. These include the Agreement on Customs Valuation (ACV) adopted by Kenya in January 2000 and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The Department has also participated in negotiations and consultations toward the WTO Agreement on Rules of Origin.

The Department hosts the WCO Regional Intelligence Liaison Office (RILO) for Eastern and Southern Africa based in Nairobi. This office is a centre for gathering customs intelligence on drug seizures, methods of concealment of smuggled goods, money laundering and precursors among others, and is networked to the WCO Secretariat through the worldwide Customs Enforcement Network (CEN). It gathers information from 16 countries in the region, and feeds it to the CEN thus supporting global enforcement efforts.

The customs department has initiated a customs reform programme which is aimed at improving trade facilitation and security.

Kenya Customs is also implementing the WCO SAFE Framework of Standards. The Framework was developed with four principles or core elements in mind, namely:

Customs administrations commitment to harmonising advance electronic manifest information requirements to allow risk assessment of cargo;

Apply a common risk management approach; Use non-intrusive detection equipment to effect examinations; Provide benefits to businesses that meet minimal supply chain security standards and best practices.

The intention of the WCO SAFE Framework of Standards is to improve trade facilitation for the benefit of both the business community and governments. The business community benefits by obtaining enhanced competitiveness in both the national and international markets due to reduced delays and costs which are achieved with the predictable and efficient movement of goods across borders.


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3.7.2 Current Situation in Clearing Goods with the Customs

In international trade, Customs plays a critical role not only in providing expedited clearing processes but also in implementing effective controls that secure revenue, ensure compliance with national laws and ascertain security and protection of the society. Kenya’s customs department plays a vital role in the clearance of goods through the ports. This is so because under the customs law all goods entering Kenya belong to customs until all duties and taxes have been paid. The efficiency and effectiveness of Customs procedures has a significant influence on the economic competitiveness, the growth of international trade and the development of the global marketplace for Kenyan products.

In Kenya the prevailing inefficiency of trade documentation processes continues to inflict delays on the trade community in terms of clearance of goods at the various exit and entry points. This has resulted in the entire process being associated with high transaction costs. In this regard the Time Release Study undertaken over the period August – September 2004 with the assistance of the World Bank and the WCO provided objective measures for analysing existing performance along the different steps of the trade chain. The Study shows that the mean dwell time of cargo (from arrival to removal of goods) is 10 days and eight hours for maritime freight and five days and 11 hours for airfreight.


41

3.7.3 Key Constraints in Customs Department

The situation has not changed a lot since 2004. Analysis in the current study shows that delays in documentation at the customs is still a major issue in spite of the introduction of the computer based Simba system for processing import/export documents.

Figure 7: Main Challenges in Clearing Cargo with Customs

Yes

No

85

78 77 77

73

69

15

22 23 2327

31

0

10

20

30

40

50

60

70

80

90

in Percent

Response

Major Challenges in Clearing Cargo with Customs

Delays in processing lodgeddocument by customs officers

Un-business like attitude of customsstaff

Breakdown of the Simba system fordocument lodging

High valued transit bond fortransporters

Corruption

Resolving queries on valuation andtariff HS codes takes long


The top five problems experienced by importers and exporters are shown in Figure 7 above and includes; delays in processing lodged documents ranks highest with 85 per cent followed by un-business like attitude of customs staff with 78 per cent, breakdown of Simba system and high valued transit bond with 77 per cent each and corruption ranked fourth with 73 per cent indicating that it is a major problem. Resolving queries on valuation and tariff classification is also a major issue as indicated by 69 per cent of the respondents.


42

Figure 8: Challenges in Clearing with Customs


Figure 8 above is a continuation of figure 7 and indicates the other challenges experienced with customs including unpredictable penalties/charges and computer systems incompatibility with 64 per cent of responses from the survey respondents; inadequate communication with the business community on changes at the customs with a response of 63 per cent and incompetence of customs staff with a score of 61 per cent are issues of concern.

3.7.4 Other Problems in Dealing with Customs

Apart from those shown above, other problems include:

� Lack of consultation with stakeholders particularly when it comes to implementing new policies, for instance the intended implementation of advance payment of duty with the lodgement of declaration documents was not discussed with stakeholders

� Poor attitude of customs staff towards importers/exporters was cited as an issue

� Incompetence of customs staff and fear hence referrals of decision making which contribute to delays

Yes

No

64 64 63

61 60

59

36 36 37 39 40 41

0

10

20

30

40

50

60

70

in Percent

Response

Other Main Challenges in Clearing Cargo with Customs

Unpredictable penalties/charges

Incompatibility of computer systems with those of stakeholders

Inadequate communication withexporters/importers on changes atthe customs

Inadequate competence of customs staff

Delays in bond cancellation

Disempowered frontline officers in decision making


43

� Shortage of KRA staff slows the clearance processes and leads to additional costs such as demurrage charges

� Poor customer service � The customs does not profile their customers for purposes of enhancing

faster processing of cargo. � Poor internet connectivity hence the failure of the Simba system � Delays in transmitting data from the banks to KRA � Frequent changes in policy regulation � Multiple processes before gate exit � Lengthy verification process � Scanning of containers takes two days which means extra demurrage

charges � Inadequate office facilities at the entry and exit points. Such facilities

which lack space include; verification sheds and fire fighting equipments especially in Busia and Malaba where petroleum products of close to 10 million litres are cleared on a daily basis. The local authorities in the two locations do not own a single fire fighting engine and if an accident occurs, the nearest fire fighting engines are in Kisumu – which is 120 kilometres away.

3.7.5 Some Major Causes of the problems with Customs

Lack of clarity/transparency of procedures Direct transactions with several employees Numerous manual paperwork and many errors Many control entities with different policies and procedures Lack of coordination among various trade facilitating agencies An average of 40 steps and 20 signatures for imports Unclear standards for the valuation of goods

3.7.6 Implication of the problems to the businesses The immediate implication of delays in processing documents is an increase in the cost of keeping goods at the port which include high demurrage charges for the importers. This was indicated by 97 per cent of the interviewed respondents. In some cases the respondents claimed that the demurrage cost was sometimes higher than the duty charged on the same consignment. The delays in processing documents coupled with other problems shown above cause a chain reaction of problems and it can be urged that, these are major contributors to the current congestion at the port. The delays however contribute positively to KPA and KRA income from the demurrage charges.


44

Figure 9: Effects of KRA Challenges

High Costs

Damaged or Lost C

argo

Loss of Business

96.3

3.7

25

75

92

80

10

20

30

40

50

60

70

80

90

100

In Percentage

Effects

EFFECTS OF PROBLEMS IN CLEARING CARGO WITH KRA

Yes

No


About 92 per cent of the respondents claimed that they experienced loss of business due to problems with customs department. “Once the cost of goods goes up the final products become too expensive and the customers switch to competition”, claimed one of the respondents. The high cost of clearing goods escalates the total cost of goods by 15-20 per cent. This is very high when compared to similar costs in India where the cost of clearing goods is below five per cent. The competitiveness of Kenya’s products is hence eroded by the customs clearance costs.


45

3.8 Kenya Bureau of Standards (KEBS)

3.8.1 The Role of KEBS

This a statutory organisation that was established in July, 1974 by an Act of Parliament (Cap 496), Laws of Kenya. The main roles of KEBS are:

Development of standards relating to products, measurements, materials, processes and services

Promotion of the standards at national, regional and international levels

Certification of products, certification of management systems and assistance in the production of quality goods.

Improvement of measurement accuracies and dissemination of information relating to standards

In order to ensure conformity to standards, KEBS provides facilities and infrastructure for testing, measurements (metrology), quality assurance, inspection and training of personnel involved in the implementation of standards in industry or production of marketable products

Quality inspection of imports at the ports of entry Training programmes and technical assistance PVoC a conformity assessment procedure based on Article 5 of the WTO TBT Agreement

1) Standardisation

The aim of standardisation is to provide solutions to repetitive problems in the industry by providing uniformity in products and/or services. Product standards and codes of practice assist manufacturers to produce commodities that meet minimum specifications for quality and safety. KEBS has developed 3800 Kenya standards and harmonised 493 East African Standards. KEBS is involved in the development of ISO standards.

2) Testing The Kenya Bureau of Standards has well equipped laboratories that have the capability of testing a wide range of products. The personnel are well trained in their areas of expertise.

3) Metrology

Metrology is the science of measurement. KEBS keeps most primary standards such as time, frequency and length among others; and therefore does calibration of equipment so that they can measure accurately. Manufacturers and exporters can add value to their products by ensuring that their measuring equipment is accurate. Accurate measuring equipment used in production ensures that products are up to the required standards as formulations and processing depend on these measurements.


46

In addition calibration adds value to products by ensuring that the correct volume and weight are sold to the consumers thereby reducing related complaints.

4) Pre-Export Verification of Conformity (PVoC) Programme The PVoC relates to verification of quality for imported products against Kenyan standards or approved specification and technical regulations prior to shipping to Kenya. The basic aim is to offer health, safety and environmental protection for Kenyan consumers. Conformance to PVoC is a requirement stipulated in Legal Notice No. 78 Section 2 of July 2005 by Ministry of Trade and Industry (MOTI). KEBS has appointed Intertek International and SGS to carry out conformity assessment on regulated goods in the country of supply worldwide.

PVoC programme is independent of/and additional to any existing import processes such as Destination Inspection (DI). Goods accompanied by Certificate Of Conformance (CoC) will be subjected to surveillance inspection based on the pre-determined surveillance plan. Any regulated goods arriving at the port of entry without a CoC will be subjected to DI at a fee equivalent to 15 percent of the CIF value of the same. The importer will be further required to execute a redeemable bond of a similar amount pending quality verification.

5) Training

KEBS has over the years developed the necessary expertise to train the industry in areas of System Certification, Metrology, Standardisation, Testing and Quality Assurance. Training courses for system certification include:

� Food Safety through Hazard Analysis & Critical Control Points (HACCP) leading to HACCP system certification.

� ISO 9001:2000 Quality Management Systems � ISO 14000: Environmental Management Systems � Health & Safety through OHSAS 18001

This adds value to the food industry by ensuring the competence of personnel involved in the production of quality food that satisfy the needs of both local and the export markets.

6) Certification Certification is a term used when a third party gives written assurance that a product, service, system, process or material conforms to specific requirements. KEBS gives third party assurance for both product and systems.


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a. Diamond Mark of Quality for products that have consistently excelled in meeting the required product standards. Value is added on the product by assuring the buyer that the product is of good quality and therefore the diamond mark can be used as a marketing tool for the manufacturer.

b. Hazard Analysis and Critical Control Points (HACCP) certification

- Export markets are increasingly demanding for clean and safe foods that are free of harmful substances and food borne disease-causing organisms. The HACCP system is a scientific rational and systematic approach for the identification, assessment and control of hazards during production, processing, manufacturing, preparation and use of food to ensure that food is safe when consumed (i.e. it does not present any unacceptable risks to health).

c. ISO 9001:2000 Quality Management Systems (QMS) - ISO 9001:2000

specifies requirements for a quality management system where an organisation needs to demonstrate its ability to consistently provide products that meet customer expectations.

d. ISO 14000: Environmental Management Systems (EMS)

Consumers and governments are becoming increasingly conscious of the need to preserve the environment to maintain its sustainability in terms of production. They are therefore demanding that foods that are offered for sale are produced in an environmentally friendly manner. ISO 14001 EMS is a means by which companies’ world wide can ensure that their production does not impact negatively on the environment. KEBS certifies firms to ISO 14001 as means of value addition to products because it ensures the sustainability of the environment from which they are produced.


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3.8.2 Key Constraints in Dealing with KEBS Figure 10: Issues with KEBs

Yes No

84

65

6161

35

65

16

35

39 39

65

35

0

0

10

20

30

40

50

60

70

80

90

in Percent

Response

Main Challenges Experienced While Dealing with KEBs

Delays in inspection and testing for conformance tostandard

Application of Import Declaration Form

Services from the Pre-shipment Companies

Obtaining product information from suppliers tofacilitate the processing of CoC

Taking bigger samples than necessary for testing

Inadequate competence and skills of KEBs staff.

Inadequate laboratories facilities


The table above shows that the key challenge experienced by the business community in dealing with KEBS is the delays in inspection and testing as indicated by 84 per cent of the respondents. This is followed by inadequate laboratories facilities and services from pre-shipment inspection companies with a score of 65 per cent each. The respondents also indicated that taking a bigger sample than is necessary and obtaining product information from the suppliers abroad was a challenge as per 61 per cent response. 3.8.3 Other Problems Experienced in Dealing with KEBS.

• Some products have no written standards by KEBS • Insincerity and corruption resulting in delays • Penalties on duty exempted goods such as airline and ship stores • Lack of modern lab equipment • Delays in offering required services • KEBS is not interfaced with Simba system hence delays in clearing goods


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3.8.4 Implication of challenges at KEBS

Figure 11: Implication KEBS Challenges

5

77

11

95

23

89

0

10

20

30

40

50

60

70

80

90

100

In Percentages

High Cost Damaged or Lost

Cargo

Loss of Business

Yes

No

Effects

Implications of KEBS Challenges

Yes

No


The challenges experienced at the KEBS contributed to high cost of doing business and hence loss of business as indicated by the 95 per cent and 89 per cent of the respondents respectively.


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3.9 Kenya Plant Health Inspectorate Service (KEPHIS) KEPHIS is established under The State Corporation Act, Cap 446. The organisation facilitates agricultural trade between Kenya and other trading partners by ensuring that requirements for Phytosanitary measures and other quality standards are met.

3.9.1 The Role of KEPHIS The specific roles of KEPHIS are:-

Co-ordinate all matters related to crop pests and disease control; Establish service laboratories to monitor the quality and levels of toxic residues in plants, soil and crops;

Undertake grading and inspection of plant produces at ports of entry/exit;

Administer Plant Breeders Rights (PBR) in Kenya and serve as liaison office to the International Union for the Protection of new Varieties of Plants (UPOV), thus, the custodian of the plant breeders rights register;

Approve all importation and exportation licenses for plants and seeds issued by the ministry Responsible for commerce and industry before such importation is implemented;

Establish posts at convenient locations for quarantine, inspection and quality control of fertilizer and seeds and monitor the residues of agricultural inputs and their environmental effects;

Approve all importation and exportation licenses for plants and seeds; Develop and implement standards for both imported and locally produced seeds;

Implement the national policy on introduction and use of genetically modified plant species, insects and micro-organisms in Kenya;

Establish linkages for collaboration with various local and international government and non-governmental organisations so as to execute its task more professionally; and to enforce standards for good husbandry and the control in irrigation schemes in conjunction with the National Irrigation Board (NIB).

5.1.1 Phytosanitary Services KEPHIS enforces regulations and procedures for importing and exporting any plant material such as seeds, propagation material, fresh fruits, flowers, plantlets and agricultural produce. The regulations are aimed at protecting Kenya’s agriculture from foreign pests (insects and pathogens) and also ensuring compliance with the export market requirements. So as to facilitate trade, KEPHIS gathers information required for pest risk analysis (PRAs) by the importing countries. This is done in collaboration with other institutions.


51

All importers wishing to bring plant material and products into Kenya must obtain a plant import permit issued at KEPHIS and issuance of Phytosanitary certification is done for all the export plant and plant products that are in conformity with the requirements of the importing country. KEPHIS plant health inspectors carry out inspection and other related activities leading to the issuance of Phytosanitary certificates in Kenya.

3.9.2 Key Constraints in Dealing with KEPHIS Figure 12: Issues with KEPHIS

Inadequate

Staff Delays in

Inspection

and Testing

Centralised

Laboratories Uncredited

and ill

equipped

Laboratories

Yes

NO

6

55

48

60

94

45

42

40

0

10

20

30

40

50

60

70

80

90

100

in Percent

Issues

Response

Challenges Faced in Dealing with KEPHIS

Yes

NO


The analysis on KEPHIS in Figure 12 above shows that the main challenge that was experienced by enterprises interviewed was inadequate staff as indicated by 94 per cent of the respondents. Other challenges include delays in inspection and testing with 45 per cent and centralised laboratories as per 42 per cent of the respondents.


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3.9.3 Other Problems Experienced while Dealing with KEPHIS Inadequate testing and inspection equipment Inadequate office facilities at various entry and exit points

3.10 Department of Veterinary Services (DVS) 3.10.1 The Role of Department of Veterinary Services The Veterinary Department in Kenya was established in 1900 to offer disease control and other animal health services. The Department is currently under the Ministry of Livestock and Fisheries Development. It is headed by a Director who is responsible for all matters pertaining to animal health in the country on behalf of the Minister. All the eight provinces and seventy districts are each headed by veterinarians who are graduates of veterinary medicine. Service divisions within the veterinary division include Animal Disease and Pest Control, Veterinary Public Health and Meat Inspectorate, Vector Control, Veterinary Laboratory Services, Artificial Insemination and breeding, extension and training projects/programs management and monitoring. In Kenya responsibility for the control of animal health rests with the Department of Veterinary Services within the Ministry of Livestock and Fisheries Development. The Division of Veterinary Public Health is responsible for the quality and safety of livestock and livestock products including meat, dairy products, and eggs among other livestock products. The relevant legislations include the Animal and Disease Act, (Cap 364), The Pest Control Products Act, (Cap 346), The Fertilizer and Animal Foodstuffs Act, Cap 345 and The Meat Control Act, (Cap, 356). The Department of Fisheries within the same Ministry is responsible for fish health. The main functions of DVS are:

• Livestock disease control through monitoring of the health status of livestock, regular vaccinations, vaccine production and distribution and the importation of suitable vaccines

• Implementation of meat hygiene through the supervision of slaughter houses and meat processing facilities, facilitating inspection and the certification of meat imports and exports

• Implementation of milk hygiene • Implementation and supervision of health and hygiene of all other

livestock products and livestock feeds and usage of drugs, vaccines and chemicals for animal use

• Determine the existence of disease epidemics, quarantines and disease free zones


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• The organisation works closely with KEBS in the formulation of standards related to the health of animals and animal products

Currently the Veterinary Department has 533 public veterinarians, 210 livestock health officers, 2110 Animal health assistants, 777 trained meat inspectors and 19 laboratory technologists working in the provinces, districts and veterinary laboratories. In addition the country has another 867 veterinarians in private practice.

3.10.2 Challenges experienced in dealing with DVS

Figure 13: Challenges in Experienced with DVS

57

83

57

643

17

43

94

0

10

20

30

40

50

60

70

80

90

100

In Percentage

Delay

s in inspection an

d testing

Centralize

d laborato

ries

Unaccredited a

nd ill eq

uipped laborato

ries

Inadequate

staff an

d facilities

Yes

No

Issues

Challenges with DVS

Yes

No


Figure 13 above shows challenges experienced by the DVS. A major challenge is the inadequate facilities and staff at the various ports and border points. This was pointed out by 94 per cent of the enterprises interviewed. The other challenge raised by 83 per cent of the respondents was centralised testing laboratories in Nairobi. Only 57 per cent of the respondents pointed out that there are delays in inspection and testing.


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3.11 Clearing and Forwarding Agents

3.11.1 Key Constraints Experienced

Figure 14: Issues with Clearing and Forwarding Agents

73

27

69

31

67

33

60

40

0

10

20

30

40

50

60

70

80

in Percent

Incompetence Accountability Poor Customer

Relationship

Transparency

Issues

Challenges in Dealing with Clearing Agents

Yes

No


Figure 14 above shows some of the shortcomings of the clearing agents as they facilitate trade to the enterprises. One of the main issues is that, the level of competence is low according to 73 per cent of the respondents. Accountability of client funds by the agents was a key issue according to 69 per cent of the interviewed enterprises. About 67 per cents of the respondents also indicated that customer relationship of the clearing agents is an issue. Another 60 per cent of the participating enterprises mentioned transparency as a challenge. 3.11.2 Other Challenges

• Misuse of client funds • Wrong declaration which lead to penalties and hence high costs to the

enterprises


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3.12 Security System in Trade

3.12.1Key Challenges with Security System Figure 15 Issues with Security Systems

88

12

82

18

76

24

0

10

20

30

40

50

60

70

80

90

in Percent

Corruption Too many police road

blocks

Un-business like attitude

of security agentsIssues

Main Challenges with Security Agents

Yes

No


Figure 15 above on security systems indicates that about 88 per cent of the respondents identified corruption along the highways as a major challenge. This is followed by the hig number of road blocks along the Northern Corridor road with 82 per cent of the respondents stating so. The consultant for this project observed 14 police road blocks between Kisumu and Busia a distance of about 150 km during the field study. About 76 per cent of the interviewed enterprises indicated that the security agents have un-business like attitudes and normally stop the trucks, harass the drivers with the aim of soliciting for bribes without caring about the resultant delays. “This is the second day since we arrived from the port and the police have stopped us from off-loading the cargo claiming that, adequate duty has not been paid”, lamented a truck driver. “Do police also charge duty?” the driver asked our questionnaire enumerator.


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3.13 Certificate of Origin

3.13.1 Key Challenges The certificate of origin is one of the key documents used in implementing the tariff preferential agreements. Some of the challenges experienced by traders are shown in the figure below. Figure 16: Key issues with Certificate of Origin

Certificate of Origin Challenges

40%

10%

50%

Non-acceptance of COMESA certificate of origin Incompetence and lack skills on rules of origin

Certificates of origin provided after the goods arrival


As shown in figure 16, the respondents who had issues with the provision of Certificates of origin after the arrival of goods were 50 per cent. About 40 per cent of the interviewed enterprises cited non-acceptance of the COMESA certificate of origin as a problem. Only 10 per cent mentioned incompetence and lack of skills by customs staff on rules of origin. 3.13.2 Other Challenges

� KRA does not provide information on the verification process of the certificates of origin

� Verification of authenticate signatures from countries such as Rwanda and Burundi take too long because the officers at the border points do not have the signature specimen from those countries. This delays the


57

process since the documents have to be sent to Nairobi to confirm from those countries by fax.

� Tanzania no longer accepts COMESA’s certificate of Origin. The EAC certificate of origin has been introduced and this is what the member countries recognise currently.

3.14 Immigration

3.14.1 Key Challenges Figure 17: Immigration Key Challenges

Immigration Challenges

86%

14%

Delays in issuing work permits

Scarcity of specialized labour skills


As shown in figure 17 above, the main challenges enterprises encounter with immigration department is delays in getting work permits as indicated by 86 per cent of the respondents. The delay causes loss of business opportunities; loss of skilled staff due to lack of renewal of work permits; increases the cost of doing business in Kenya and discourages investors.


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3.15 Summary of key challenges with various trades facilitating agencies, along the trade chain. Table 5: Summary of Key Challenges

SEA CARGO CLEARANCE CHALLENGES

ISSUE RESPONSIBLE AGENCY

SOLUTION

1 Delays in issuance of vessels ETA to consignees/C&F Agents

SA Prompt issuance of vessel ETA

2 Undefined approval criteria on supplementary/ partial manifest submission

KRA Defined approval criteria

3 Manual amendment on Delivery Orders.

SA Ship Agents should issue new D/O

4 Acceptance and closing dates by KPA

KPA KWATOS implementation

5 Improper/falsified cargo declarations

C&F/SA/Importer/Exporter

Hefty penalties & de-registration of parties involved

6 Extension of Transit period by Customs

KRA C&F Agents to apply for extension on time

7 Generation of too many documents

KRA/KPA/OGAs/C&F As per the Kyoto Convention Article VIII documents should be kept to a minimum

8 Transit lorries are not allowed to transport local cargo

KRA Review of current policy

9 The execution of various bonds by C&F Agents in Cargo Clearance.

KRA Review of current policy

10 Trucks subjected to passing through the Six weighbridges along the transit corridor

M.o.T Review of current policy

11 Lengthy approval process for transfer of cargo from one transit trucks to another in case of breakdown along the corridor

KRA Implementation of Electronic Cargo Tracker system

12 Falsification of weight on rail bound containers. Disparities on recorded weights.

KPA/Importer/RVR/SA Stiff penalties on non compliant parties

13 Lack of a permanent KRA Officer at RORO section

KRA Additional staff

14 RVR documentation checked thrice (Duplication)

RVR Simplification of current process

15 Containers loaded without any particular order

KPA KWATOS Implementation


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BORDER POINTS CHALLENGES

ISSUE RESPONSIBLE AGENCY

SOLUTION

16 Dilapidated facility at the Malaba and Busia Border point

Municipal Council Embrace joint border EATTF Project

17 Congestion of the Malaba Border post due to trucks using the parking facility as a storage area

Transporters/ Municipal Council

Payment based on duration parked

18 Frequent linkage (VSAT) problems at the Malaba Border post

KRA Improve network infrastructure

19 Delays by TMU staff in submitting documents to the weighbridge staff upon truck arrival at the border post.

KRA Implementation of cargo tracker system

20 Lack of verification shed. Municipal Council/ KRA Embrace joint border EATTF Project

21 Lack of lifting equipment at the facility

Municipal Council/ KRA Procure lifting equipment

22 Frequent power failure and fluctuations

KPLC/ KRA Improve power supply

23 Staffing shortage of all Government Agencies operating at the boarder, vis-à-vis 24 hr work program

KRA/ OGAs Adhere to the 24/7 hours operations

24 Insufficient patrol vehicles KRA Procure additional patrol vehicles

25 Collection of KAA charges (Kshs 250) via KRA is a major inconvenience to faster clearance of cargo

KRA/KAA De-link payment of KAA charges through SIMBA. KAA should collect these charges independently

26 C&F Agents are not able to clear consignments meant for other destinations after the craft’s first port of call. They are forced to make fresh declarations

KRA Review the existing regulation to allow crafts delivery cargo at other airports within the country after the first port of call.

27 Meeting cut-off times for flights

KRA/ Banks/ KAA/ C&F Efficient clearance system

28 Lack of recognition of Courier express consignment by law

KRA Review current policy

29 Reduction of storage duration by the TSO from 72 hours to 48 hours

TSO Review current policy

30 Inadequate manning levels by KEPHIS at the airport.

KEPHIS Adhere to 24/7 hours operations


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31 Delays in payments Bank/C&F EFT/RTGS 32 Delays in approving EPPO documents

KRA SIMBA enhancements

33 TradeX processing speed is slow at times.

KRA Expand bandwidth

34 Delays in issuance of Phytosanitary certificates by KEPHIS. Long queues at the facility

KEPHIS Automate the process

KISUMU PIER ACTION POINTS

35 Dilapidated storage facilities at the pier

KRC Upgrade facility

36 Lack of Railways Police knowledge on cargo clearance procedures.

Police Training on cargo clearance documentation

37 Lack of lifting and fire fighting equipment at the facility.

KRC Procure lifting equipment

Source: KPA/KRA, Development of the Community Based System in Kenya, September 2007

3.15.1 Overall Implication of all Trade Facilitation Challenges Firms in Kenya have to bear the direct costs associated with the movement of goods; including freight costs, port and handling charges, procedural fees (such as customs bonds), agent fees and side payments. But they also have to absorb the induced costs associated with hedging for the lack of predictability and reliability of the supply chain as indicated by respondents in this survey. They either carry higher inventories of supplies or finished products or switch to more expensive modes of transportation to be sure to meet delivery schedules. Induced costs are inversely related to predictability and also tend to rise steeply with declining logistics performance. About 60 per cent of the interviewed companies indicated they maintain three months of inventories or more due to anticipated delays at the port and along the supply chain in Kenya. Companies also face the double challenge of maintaining an efficient chain not only for exports but also for imported inputs and components which presents a real burden for these companies because inputs are sourced from countries outside the COMESA and EAC region. Predictability is therefore central to the overall costs that companies in Kenya incur along the trade facilitation system and thus to their competitiveness in global supply chains.


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Chapter 4

4.0 Bench Marking Kenya’s Trade Facilitation with other Countries 4.1 Benchmarking Trade Facilitation in Kenya with other Countries This chapter is dedicated to benchmarking trade facilitation in Kenya with those of other countries including Egypt, South Africa, Mauritius, Singapore and China. Before comparing performance in these countries, it is necessary to have a common understanding of what benchmarking means and why it is necessary in trade facilitation. Benchmarking is the process that uses systematic research, analysis and comparison to identify and learn from good or better practices in other organisations

4.2 What is Benchmarking? Benchmarking1 is a process of identifying, learning from and adapting good and better practice in similar countries, companies or organisations in order to improve performance. Comparing performance in international trade has become an important issue for governments and business. 4.3 Why Benchmark? In trade facilitation, benchmarking can help governments define and develop trade policies as well as design more effective and efficient official controls. On the other hand, businesses need benchmarks toenable them plan their marketing, sales and purchasing strategies and speed-up the optimum movement of goods and services across the international borders. 4.4 Benefits of Benchmarking The Government benefits through:

Better regulation and control Greater efficiency of regulatory agencies Improved trade performance Improved economic competitiveness

Businesses benefit through: Reduced costs, increased productivity and improved customer satisfaction

A clear understanding of one’s own operations Identification of training and capacity building needs Prioritised opportunities for improvement

1UN/CEFACT, Guide to Benchmarking


62

Increased awareness of one’s own performance relative to that of other countries or organisations.

4.5 Indicators for Benchmarking The aim of benchmarking in this study is to compare the procedures and processes of Kenya’s trade facilitation with those of other countries and to identify weak areas which KAM can propose for improvement to trade facilitating agencies. In trade facilitation, different countries have various procedures, processes and even capacities to carry out facilitation. Rules of trade facilitation are in existence. The existing WTO provisions, in particular GATT Articles V (freedom of transit), VIII (fees and formalities connected with importation and exportation) and X (publication and administration of trade regulations) would be the starting point for trade facilitation rules. Among the examples given by supporters of what could be covered by such rules are the simplification/minimisation of data and documentation requirements, the streamlining of data entry and exchange (e.g. electronic transmissions) and the use of international standards where appropriate and possible. Over the past 40 years, the UN/CEFACT has developed and maintained a series of over 33 recommendations and standards which are used worldwide to simplify and harmonise trade procedures and information flows. The ISO has adopted many of them as international standards. These recommendations and standards contribute to the growth of global commerce. Examples of these are outlined below: Recommendation 1: For instance, the United Nations Layout Key for Trade Documents, is now the international standard for international trade documents. It is the basis for many key trade documents such as the European Union’s SAD. Other examples of its application include:

• Freight Forwarding Instruction International Federation of Freight Forwarders’ Associations (FIATA)

• Dangerous Goods Declaration United Nations Economic Commission for Europe (UNECE)

• Goods Declaration for Export (revised Kyoto Convention) WCO The recommendations also cover more general aspects of trade facilitation implementation, such as:

• Recommendation 4 on National Trade Facilitation Organs which outlines an approach for setting up a consultative mechanism between trade and government for implementing trade facilitation measures and instruments


63

• Recommendation 18 on facilitation measures related to International Trade Procedures proposes a series of measures that could be taken by Governments and businesses for the facilitation of trade transactions

The latest recommendation, Recommendation 33, offers Guidelines on establishing a “Single Window”2

facility. Setting up Single Windows is one of the

new approaches that can help in trade facilitation that can provide extensive benefits to both Governments and trade. Today the focus of trade facilitation lies in securing the supply chain. After the destruction of the World Trade Towers on 11 September 2001, the emphasis, particularly in the United States, has understandably shifted from trade facilitation to trade security. The implications of this shift are both global and economy-specific. In global terms, the system has moved from one where individual customs authorities monitor and control imports to a system of international and cooperative customs assessment of exports. The WCO Members have developed a regime that will enhance the security and facilitation of international trade. This is the WCO SAFE Framework of Standards3 to secure and facilitate global trade (hereafter referred to as the "SAFE Framework"). The SAFE Framework sets forth the principles and the standards and presents them for adoption as a minimal threshold of what must be done by WCO Members. The overall aim of benchmarking in trade facilitation context is to improve efficiency and effectiveness in Kenya’s trade facilitation administrations by comparing procedures or processes with the same or similar procedures or processes carried out by others, then identifying and implementing the best practice. Kenya is a member of a number of international organisations which recommend and write standards for processes and procedures for trade facilitation. These are the same recommendations and standards that are being used by member countries including Kenya to enhance the smooth flow of global commerce. It is therefore prudent to use the same standards and recommendations as indicators for benchmarking trade facilitation in Kenya with those of other countries in Africa and Asia.

2 UN/CEFACT, Recommendation and Guidelines on establishing a Single Window, 2005

3 WCO, SAFE Framework of Standards, 2007


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The key indicators in benchmarking in this study will therefore be compliant with the SAFE Framework of Standards by WCO, 2005, 2007 and the international supply chain model of Buy>Ship>Pay as outlined in UN/CEFACT Recommendation 18 on facilitation measures related to International Trade Procedures and Integrated Supply Chain Guideline. BUY - covering all commercial activities related to the ordering of goods; SHIP - covering all activities involved in the physical transfer of the goods, including official controls; PAY - covering all activities involved in the payment for the goods. Within these three main components of the international trade transaction, the official procedures, trade practices and business processes that will form part of the indicators for benchmarking in this study will only focus on those recommendations and standards that relate to SHIP - covering all activities that are involved in the physical transfer of the goods, including official controls. They include, but are not limited to:

Application of international trade laws - Rec.18 Application of trade facilitation recommendations and standards (Kyoto Convention) and WCO SAFE Framework of Standards, 2005, 2007-(WCO), Rec.18

Customs to customs network arrangements (WCO) Co-operation between Customs authorities and other border agencies -(WCO)

Customs-to-Business Partnership - Authorized Economic Operator (AEO)– (WCO), Rec.18

Level of transparency and access to required regulatory and other official information and documentation - Rec.18

Application of Information Communication Technology (ICT) – Towards Paperless Trade and Single Window - Rec.18, 33

Risk Assessment and Management - (WCO) International Ship and Port Facility Security (ISPS) Code (IMO) Transportation measures - Rec.18 Time taken to clear goods – (WCO), Rec.18 Access to an arbitration and dispute resolution process. - Rec.18

4.6 How is Trade Facilitation Achieved? Trade facilitation is achieved through various rules and standards. A brief outline of some of these standards is given below. The application of these rules, recommendations and standards determine the efficiency and effectiveness of trade facilitation in a country.


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Application of international trade laws and rules The WTO rules have set out high level principles generally applicable to any official trade procedures. Another trade facilitating Maritime Organisation (IMO) among others provides the implementation standards.

Application of trade facilitation recommendations, instruments (Kyoto Convention) and WCO framework of standards

Consistency and predictability in the application of rules and procedures is also important. Traders need to know what to expect in their everyday dealings with Customs and other border agencies and how to act in case a problem arises. The ratification of the revised Kyoto Convention (June 1999) and adoption of WCO SAFE Framework of Standards 2005, 2007 create consistency and predictability in the clearance of cargo with customs.

Customs-to-Customs Network Arrangements

Customs administrations must work co-operatively with common and accepted standards to maximise the security and facilitation of the international trade supply chain as cargo and container shipments move along the nodes of the global trading system. Traditionally, Customs administrations inspected cargo once it has arrived at their domestic ports. Today, there must be an ability to inspect and screen a container or cargo before it arrives. Using automated targeting tools, Customs administrations identify shipments that are high-risk as early as possible in the supply chain, at or before the port of departure. Provision should be made for the automated exchange of information. Systems should therefore be based on harmonised messages and be interoperable. Customs administrations should use modern technology to inspect high-risk shipments. This technology includes, but is not limited to, large-scale X-ray and gamma-ray machines and radiation detection devices.

Co-operation between Customs authorities and other border agencies

For governments, there is also the issue of co-operation between Customs authorities and other border agencies including sanitary, agriculture and police authorities. The SAFE Framework of Standards encourages the establishment of co-operative arrangements between Customs and other government agencies. There should be recognition of other already existing international standards and formal framework to ensure inspection by different authorities at the same time - it does happen in practice. At the border entry of Malaba along the


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Kenya/Uganda border, cargo inspection is normally carried out on the Ugandan side by the two countries’ authorities. Uganda has a verification shed which Kenya lacks.

Effectiveness of Customs-to-Business Partnership - Authorized Economic Operator (AEO)

In Pillar 2, the Safe Framework of Standards states that each Customs administration will establish a partnership with the private sector in order to involve it in ensuring the safety and security of the international trade supply chain. The main focus of this pillar is the creation of an international system for identifying private businesses that offer a high degree of security guarantees in respect of their role in the supply chain. These partners are the AEO and include inter alia, manufacturers, importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors. The business partners should receive tangible benefits in such partnerships in the form of quicker movement of low-risk cargo through customs; improved security levels; optimised supply chain cost through security efficiencies; enhanced reputation for the organisation; increased business opportunities;, improved understanding of Customs requirements and better communication between the AEO and the customs administration.

Level of transparency and access to required regulatory and other official information and documentation

Transparency of relevant domestic regulations, procedures and practices, consistency, predictability and non-discrimination are widely recognized as essential for ensuring that regulatory objectives are achieved efficiently, while at the same time enhancing the benefits from trade and investment in liberalization. Businesses need to be able to fully understand the conditions and constraints for entering and operating in a market. Openness is about the way the system works also improves public confidence in the government’s performance and that of the regulatory system. Traders also need to be able to provide feedback on where the system works well and where it poses them problems

Application of ICT, Single Window, Towards Paperless Trade The simplification of border procedures is at the heart of trade facilitation. One method that helps reduce waiting time at the border is to allow traders and transporters to file the documentation for shipment before it actually arrives at the border. This requires a certain degree of automation on the Customs side because the most efficient way of doing this is online. Recommendation 33, offers Guidelines regarding the establishment of a “Single


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Window” facility. Setting up Single Windows is one of the new approaches to

trade facilitation that can provide extensive benefits to both Governments and trade. The establishment of a “Single Window” offers an opportunity whereby trade-related information and/or documents are submitted only once at a single entry point to fulfil all import, export, and transit-related regulatory requirements. The recommendation also suggests that participating authorities and agencies should co-ordinate their respective controls through the Single Window and consider providing facilities for payment of relevant duties, taxes and fees. Adopting ICT, thus enabling a paperless4 environment could save billions of dollars annually. Switching from paper documents would increase security and transparency in the supply chains and provide Governments and the private sector with higher revenues. Electronic information is also easier to process and more reliable. It reduces costs and delays all along the supply chain. Since goods cannot travel faster than the information that controls them, speeding up the information exchange makes trading more competitive and efficient.

A number of countries within the Asia-Pacific region including Singapore, Malaysia, Japan, Korea, Hong Kong (China), have already established their ICT-enabled Single Window facilities. Such a facility plays a vital role in trade facilitation, speeding up submission of trade documents for importation/ exportation/transit of goods, thus saving time and money.

Risk Assessment Another useful tool is risk assessment - a technique that is used to assess and manage the risk that an individual shipment violates border controls. This allows Customs administrations to devote minimal attention to “low risk” travellers and shipments, allowing the re-deployment of Customs resources on intensified controls for travellers and shipments judged to represent a higher or unknown risk. Such systems also do away with unnecessary burdens on traders by downscaling physical inspection and reducing bottlenecks at border crossings. This is one of the most costly trade facilitation measures as it requires investment in infrastructure and specialist training. However, it also produces significant benefits, not just in terms of reducing the amount of cargo that needs to be inspected, but also in speeding up the processing of advance documentation.

International Ship and Port Facility Security (ISPS) Code At its Diplomatic Conference in December 2002, the IMO adopted the ISPS Code as part of an amendment to the SOLAS Convention on Safety of Life at Sea. The

4 UN/CEFACT Recommendation 33 “Handbooks and Roadmap for Paperless Trade”, 2006


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objectives of ths Code are to establish an international framework involving cooperation between contracting Governments, government agencies, local administrations and the shipping and port industries; to detect security threats and to take preventive measures against security incidents affecting ships or port facilities used in international trade. The Code further establishes the respective rules and responsibilities of the parties involved at the national and international levels for securing maritime security. It provides a methodology for security assessment in order to have in place plans and procedures to react to changes in security levels. The Code came into force on 1 July 2004. The implementation of the ISPS Code is mandatory for all SOLAS Contracting States irrespective of their level of development.

Transportation Measures The UN/CEFACT recommended that Governments establish and support national trade facilitation bodies with balanced private and public sector participation in order to:

identify issues affecting the cost and efficiency of their country’s international trade;

develop measures to reduce the cost and improve the efficiency of international trade;

assist in the implementation of those measures The safe, reliable and accurate physical transfer of the traded goods from the supplier to its customer is essential to the satisfactory conclusion of a trade transaction. Transport is therefore one of the main functions in international trade and the procedures related to transport are therefore of utmost importance for its efficiency. In addition to the transport operators and carriers; the freight forwarders, Customs agents (brokers), cargo handling agencies and port warehouse and terminal operators all play an essential role in providing intermediary services while goods are on their way between exporters and importers. Some of the other recommended transport related measures include:

Timely arrival notice Transport operators and carriers should ensure that arrival notices are availed to all the concerned parties well before the arrival of the goods and should - depending on the time factor - use facsimile, electronic mail or similar means.

Standard practices for pre-arrival notices Transport operators, carriers, freight forwarders, importers, customs and other authorities should review each party’s need for pre-arrival notices in order to develop simple, advertised and known practices, particularly for very short routes.


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Cargo tracking and tracing systems Transport operators and carriers should be encouraged to introduce computerised cargo tracking and tracing systems to provide clients with advance information on the location of their consignments In addition, poor transport infrastructure increases trade-related transaction costs such as freight charges and other logistical expenses. Infrastructural development is a crucial factor in trade facilitation and a country’s ability to participate competitively in the global economy. It is the role of the member countries to develop their transport infrastructure so as to ensure competitiveness in trade.

Time taken to clear goods One of the methods used for the review of clearance procedures is the measurement of the average time taken between the arrival of goods and their release. This enables Customs to identify both the problematic areas and potential corrective actions that can be undertaken to increase efficiency in trade facilitation.

Access to an Arbitration and Dispute Resolution Process. The introduction of appeal procedures enables traders’ to air their complaints and resolve disputes. In Custom Valuation WTO has instituted appeal institutions and procedures to resolve valuation dispute. The benchmarking process will compare the extent to which some selected countries in Africa and Asia have adopted and implemented recommendations and the SAFE Framework of Standards as outlined above and in the table below. The parameters used for measuring the extent of implementation of trade facilitation standards and recommendations will be limited to the scope of this study which limits the data source for benchmarking to secondary sources only - mainly from print and electronic media. Number, fully implemented, partial implementation and no implementation parameters have been used to benchmark trade facilitation in selected countries in this study.


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Table 6 : Trade Facilitation Benchmark for Selected Countries in Africa and Asia

Key to the table below: FI = Full Implementation PI= Partial Implementation NI= No Implementation Numbers=Days Areas of Benchmarking Kenya Egypt Mauritius Singapore South

Africa

1.Application of international trade laws - Rec.18 FI FI FI FI FI 2. Level of Transparency in official procedures Application of trade facilitation recommendations, instruments (Kyoto) and SAFE Framework of Standards

PI PI PI FI PI

3. Customs to customs network arrangements --(WCO)

FI FI FI FI FI

4. Co-operation between Customs authorities and other border agencies, -(WCO)

PI FI FI FI FI

5. Customs-to-Business Partnership - Authorized Economic Operator (AEO)– (WCO), Rec.18

NI PI PI FI PI

6.Level of transparency and access to required regulatory and other official information and documentation - Rec.18

PI PI FI FI PI

7. Application of Information Communication Technology (ICT) – Towards Paperless Trade and Single Window - Rec.18, 33

PI PI PI FI PI

8.Risk Assessment and Management - (WCO) PI PI PI FI PI 9.International Ship and Port Facility Security (ISPS) Code (IMO)

FI FI FI FI FI

10.Transportation Measures PI PI FI FI FI 11. Access to an arbitration and dispute resolution process.

PI PI FI FI PI

12. Time taken to clear goods in (days) 4 2.5 0.7 0.1 1.7

Source: Various Trade Facilitation Documents


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4.7 Benchmarking Results Table 7 Benchmarking Results Country Full

Implementation Partial Implementation

No Implementation

Time Release in Days

Kenya 3 7 1 4 Egypt 4 7 0 2.5 Mauritius 7 4 0 0.7 Singapore 11 0 0 0.1 South Africa

5 6 0 1.7

China 8 3 0 1.4 Source: Table 6

The results of the benchmarking indicates that those countries that are implementing the trade facilitation rules, recommendations and standards fully tend to have a shorter time release in clearing cargo. Singapore has full implementation rules and standards which have resulted into a time release of two hours. Kenya, which has fully implemented only three standards, seven partially and one not yet has a time release of four days. This makes Kenya very uncompetitive in terms of trade and attracting investment. 4.8 The Trade Facilitation Situation in Some of the Above Countries 4.8.1Mauritius: The customs clearance of goods take one hour as stated below by Mauritius Revenue Authority. This is due to the use of an ICT system that is well integrated with all other trade facilitating agencies that approve the documents simultaneously, reducing delays and enhancing fast clearance of cargo.

The Mauritius Customs offers standard and quality services to its stakeholders (trade and business) through the speedy clearance of goods with the least costs and hassles.

All Customs declarations (Bills of Entry) are processed electronically through the Mauritius TradeNet System. This Electronic Data Interchange (EDI) network links all commercial operators with the Customs and Excise Department.

The Customs House Brokers, Clearing and Forwarding Agents and importers registered at the TradeNet System submit their Customs declarations electronically through TradeNet and after processing,


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electronic responses of the acceptance or rejection of the declarations are sent to their offices.

Clearance formalities are completed within an overall turnaround time of one hour for both seaport and airport sites, and messages for cargo release are thereafter sent to clearing warehouses. At the same time declaring agent, importer/exporter is informed to proceed with the removal of their goods.

4.8.2 Egypt

In Egypt the two ports which are fully operating online are the Alexandria and Damietta ports. The situation at the Damietta Port is as follows:

There is a good roads, rail and river infrastructure for transporting cargo to and from port

Well developed port infrastructure according to IMO, EMS and conforms to ISPS code

Single Window and Paperless Operation The whole port is managed using EDI- Right from the time the cargo ships’ arrival to departure, cargo clearance to removal from the port.

All port operations can be viewed by various users on computer screens at the information centre

Weighbridges are situated within the port; in case of overweight, the containers or cargo can be offloaded easily from the vehicles.

Well developed logistics centre, the document processing can be viewed from wall mounted display screens as the clearing agents have a cup of tea. There is video conference system with customs and port authority.

All port gates are electronically controlled with pre-paid cards for trucks and port users.

4.8.3 India The customs clearance in India is also normally on time due to the use of an integrated ICT/EDI. ICEGATE which stands for the India Customs /Electronic Data interchange Gateway (EC/EDI is a portal that provides e-filing services to the trade and cargo carriers and other clients of Customs & Central Excise. The Indian Customs EDI System (ICES) is now operational at 23 major customs locations handling apprximately 75 per cent of India’s international trade in terms of import and export consignments. ICES has two aspects:

Internal Automation of the Custom House for a comprehensive, paperless, fully automated customs clearance system that makes the functioning of Customs clearance transparent.

Online, real-time electronic interface with the trade, transport and regulatory agencies that are concerned with the customs clearance of import and export cargo.


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An ICE is designed to exchange/transact customs clearance electronically using Electronic Data Interchange (EDI). A large number of documents that trade, transport and regulatory agencies (collectively called trading partners) are required to submit and receive in the process of live customs clearances which are now being processed online.

4.8.4 Malaysia

In facilitating trade, Malaysia Royal Customs Department has successfully implemented the following:-

Direct Release for export and import shipments. Mobile Examination Unit Selected scheme-release system Single Tariff Partial Shipment Inter Terminal Transfer Sea Air Manifest Pre-clearance for import and export shipments. Golden Service Scanning Machine Examination Self Assessment System

As in the case of Electronic Data Interchange EDI SMK Dagang Net, the overall implementation has been successful in that:

Major customs stations in Malaysia have been implementing the usage of EDI SMK Dagang Net

More effective and efficient process of collecting customs duties and taxes under the Electronic Fund Transfer (EFT)

Paperless transactions Faster processing of customs documentations thus enabling quick dispatch of both import and export consignments

All the above facilities are being implemented with an in-depth study between the private sectors and the Malaysia Royal Customs Department. 4.8.5 China Customs The clearance process of cargo within the Shanghai ports is also electronic with the customs ICT system well integrated with other trade facilitating agencies. The Customs also have adequate capacity to patrol the sea and the waterways hence enabling it to capture smugglers. In Kenya this capacity is not well developed, a factor that limits customs from performing some of its key functions of reducing smuggling of prohibited goods. China’s Customs has specialised units which focus on specific sectors. Cases of captured illegal products or avoidance of tax payment are exposed on the internet.


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4.8.6 Singapore Customs

a) Key Service Standards In the delivery of services, Singapore Customs has set high service standards to ensure the department responds to its customers in a timely manner.

• The Customs in Singapore processes cargo clearance documents using an EDI system called Trade-Net which was first introduced in 1989

• Declarations through Trade-Net take 10 minutes • Permit amendments take four hours upon receipt of the applications • Applications for duty refunds is within five working days for claims

submitted by electronic filing and within 12 working days if supporting documents are requested

• Requests to deploy officers for supervision of stuffing and un-stuffing of containers at licensed warehouses takes place within half an hour of the requested time

• Customs complete supervision of stuffing and un-stuffing of containers within two and a half hours.

• Applications for Warehouse Licenses is processed within seven working days

• Applications for Certificates of Origin are processed within two hours. • Applications for Import Certificates and Delivery Verifications takeplace

within two hours • Assessment and collection of duty from passengers and crew members is

done within eight minutes. • Endorsement of Tourist Refund Claim Forms from tourists is done within

10 minutes

b) Consultation with stakeholders: When formulating policies and procedures, Singapore adopts a consultative approach through focus-group discussions or public consultations. Singapore has an ongoing programme to conduct regular dialogue sessions, briefings and training courses for members of the trading community.

c) Customs Advisory Committee Singapore has a Customs Advisory Committee (CAC), comprising of key personnel drawn from both the public and private sectors. The CAC advises the department on trends that impact Customs operations, gives feedback and strengthens ties between the department and the trade.

d) Traders’ Satisfaction Surveys As part of Customs drive for continuous service improvement, regular surveys are conducted to measure customers’ perception and satisfaction level with their services and to gather feedback for future development. For two consecutive years - 2005 and 2006 - Singapore Customs was ranked third out of


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25 government agencies in the Pro-Enterprise Survey conducted by the Action Community for Entrepreneurs. There was a marked improvement from the previous year’s ranking of 11. The survey assessed compliance cost, pro-enterprise orientation, customer responsiveness, review of rules and transparency. Similarly, Singapore Customs continued to achieve high ratings in the annual surveys. On a scale of eight, the Customer Satisfaction Index improved from 5.5 in 2003 to 6.8 in 2005, demonstrating that customers are satisfied with the services provided by Customs. 4.9 Trade Facilitation Gaps Kenya has been very proactive in signing agreements to most of the major trade and standards bodies. Kenya is however one of the countries which has not ratified The Revised Kyoto Convention. Inadequate policy and legal framework, institutional and human capacity as well as low financial resource have all contributed to poor trade facilitation. Another factor that has also contributed to Kenya lagging behind in trade facilitation is the slow implementation of various recommendations and standards which have been put in place to enhance global commerce. The Customs department lacks the following at various entry points:

Travellers' Satisfaction survey as part of KAA and other agencies drive for continuous service improvement.

Tourist tax refund counter at departure/arrival terminals in all the entry/exit ports.

Annual Traders’ Satisfaction survey

Lack of key Service Standards with measurable indicators in the trade facilitating agencies such as KRA, KEBS KEPHIS, KPA, KAA. The standards should also provide information on what the trade facilitating agencies expect from the travellers, importers and exporters.

Inadequate capacity, to fully implement all functions of the Customs department. As mentioned above, Customs has no speed boats to catch


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up with smugglers in either the ocean or inland water especially along the coastline and in Lake Victoria

Inadequate involvement of stakeholders when formulating policies and procedures

Lack of an ICT system which integrates all trade facilitating agencies in the process of clearing goods

Poor development and maintenance of roads, rail, waterways, and air and sea ports

Standards and code of ethics for the operations of the Clearing Agents and Transport Providers either do not exist or have not been fully implemented.

4.10 Current Initiatives Being Undertaken to Improve Trade Facilitation for Kenya and the Region

4.10.1 Kenya Ports Authority Kenya Ports Authority (KPA) aims to reduce average dwell time to five days through the efficient use of space and improved cargo handling facilities a factor that will effectively raise the capacity of the terminal. The following are some of the initiatives which KPA has undertaken to reduce the challenges at the Port of Mombasa:

1. One –Stop Centre A new office has been built within the terminal to accommodate all parties involved in container operations including; the Customs Department, the Port Police and KPA Security. This new facility which opened in July 2003, provides customers with a One-Stop Centre for document clearance

2. Use of IT system At the same time, the Port’s Authority is using its recently installed information technology (IT) system to reduce time-consuming documentation procedures, speed the flow of traffic and produce quicker turn-rounds for ships, trains and trucks.

3. Community Based System The CBS is an Electronic Data Interchange (EDI) that is meant to be accessible countrywide in order to improve the flow of goods into and out of Kenya’s


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borders. The CBS will integrate and process interface to all stakeholder groups that are involved in external trade process chain. CBS will facilitate the dissemination of information to stakeholders in a structured manner. Computer systems of stakeholder organisations will be linked through the computerised platform. Electronic information distributed to stakeholders will be processed in an automated manner in order to expedite processing and reduce the costs of trade related transactions Key process flows which will be streamlined using ICT include:

Submission of Manifest data and any amendments

Customs declarations will be submitted electronically and the status of processing transmitted electronically across the stakeholders

Status for the release of goods by controlling agencies (KEBS, Port Health Department) will be undertaken electronically and distributed to the relevant stakeholders

Facilitation of payment of duties and taxes in order to support prompt settlement of dues

Provision of data on transit goods immediately the consignments either exit or enter the country

Status of cargo in, out and landed at the Port of Mombasa will be transmitted to relevant recipients by cargo handling operators

Equipment upgrade

The KPA has invested over Ksh 5 billion in equipment modernisation within the past six years. This has boosted the handling rate to about 25 moves per hour for cellular vessels, thus bringing the terminal in line with international standards. KPA is planning to spend a further Ksh 2.5 billion on purchasing extra equipment by the end of the year 2007/08.

In June 2007, KPA bought three new reach stackers for use in the terminal yard and 17 new terminal tractors for distribution of containers in the yard.

The Authority is also currently tendering for two additional ship-to-shores (STS) cranes and 6 rubber tyred gantries (RTG’s), to be delivered by June 2008.

Dredging of the harbour channel

The KPA is determined that the Port of Mombasa does not remain a feeder port. In this regard, the KPA is dredging the harbour channel and


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vessel turning basin to allow bigger ships with a carrying capacity of over 2300 TEUs. Funds for dredging have already been allocated and KPA is in the process of tendering.

Hiring the services of Container Freight Stations

In a bid to hasten ship operations, KPA has undertaken to hire private container freight station operators who will act as its agents in handling freight containers directly from vessels.

Lease of more Port area

KPA is also negotiating with a local company, Matt International, to lease its six acre land that is adjacent to the port area to use as storage for long stay containers. KPA expected to start using this plot by end of 2007.

Private company at the port

KPA has agreed to dedicate berths 13 and 14 to Maersk Shipping Line vessels. This will ease pressure on the container terminal berths and give other vessels a wider window since the line is a major user.

Introduction of 24 hour Operation

In order to improve service at the port, KPA announced in September 2007, that it had speeded up work schedules and extended working hours from 6:00 pm to 6:00 am in loading, delivery, KPA gates and key operational areas to enable it cope with the rise in the amount of cargo that has been arriving steadily at the Port of Mombasa over the past nine months.

Transfer of Containers to ICD

KPA has also entered into agreement with seven transport companies to transfer containers to its inland container depots (ICDs) in Nairobi and Kisumu by road on the basis of a bill of lading (TBL). The transfer of containers would be effected once KRA gives a go ahead. KRA must be assured that the custom duty for the containers being moved is secured through a custom bond.

Reduction of container verification and scanning

KRA has also assisted in the delivery by effecting a deliberate reduction of the number of containers targeted for verification and scanning by over 50.

Second Container Terminal

KPA will establish a second container terminal, south of the existing facility, to give a combined throughput capacity of 700,000 TEUs. Berths 11 to 14 will be converted into a second facility referred to as the East


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Container Terminal. Work has already begun on demolishing old sheds on these berths to free up space for the new terminal.

Removal of overstayed containers

KPAI is taking several steps to tackle congestion and improve productivity at the Port of Mombasa. First, it will remove up to 8000 containers that have been waiting for collection for many months or even years.

4.10.2 Reform Programmes Being Undertaken by KRA–Customs The KRA is undertaking a number reform in order to conform to Kyoto convention and WCO SAFE Framework of Standards for trade facilitation. These reform measures include: 1. Community Based Systems (CBS) - Its main objective is to facilitate

external trade in Kenya by reducing delays and lowering costs associated with clearance of goods at the Kenyan borders, while at the same time maintaining the requisite controls and collection of duties and taxes on goods that are either imported or exported.

2. Classification of Customers - The current classification of customers by

the customs department are: a. Wet goods b. Dry goods c. Transit goods

By the end of the year, the customs department intends to classify the customers in a more specific manner such as agriculture and manufacturing.

3. Customs Revenue Accounting Module - This is another mode of classifying importers/exporters through an automated system which will give a single view of the customers in all aspects of dealing with the customs. The programme will also give a monthly status of the customers at a glance.

4 ORBUS (A computer bus) - It is meant to facilitate the collection of pre-

clearance documents including the import declaration form which importers can print from the comfort of their offices.

5. Regional Authority Digital Data Exchange (RADDEX) - This is a regional

initiative which allows various authorities in the region to share trade information. It was ready by the end of October, 2007. RADDEX is being launched initially as part of a study in Uganda. The Uganda Revenue Authority will be able to view the transit cargo cleared at the port of Mombasa. Deviation of cargo will be easily detected. The programme


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will be launched early next year with Tanzania Revenue Authority. The discussion to launch RADDEX in other EAC countries - Burundi and Rwanda are in progress.

6 Advance collection of vehicle registration fee with duty payment -

This process started on 15th October, 2007. It enhances the clearance of vehicles and also reduces congestion at the port.

7 Authorised economic operator - The Kenya Revenue Authority’s

Customs Service Department intends to introduce an accreditation programme for Authorized Economic Operators to enhance its working relationship with the stakeholders. Under this programme, operators who are compliant with KRA procedures have been given some preferential treatment when processing their transactions. This is part of compliance with the World Customs Organisation SAFE Framework of the standards that fulfil the global best practice of granting special authorisation and other privileges to reliable economic operators.

8 Vehicle Tracking System - The customs department is in the process of

introducing a computerised vehicle tracking system which will replace the current vehicle escort system. The system is intended to reduce delays in cargo transportation as well as deviation of transit goods into the local markets.

Chapter 5

5.0 Recommendation and Way Forward in Trade Facilitation in Kenya The following are the recommendations which if implemented will go a long way in improving trade facilitation in Kenya. Trade facilitation reforms should improve the predictability and reliability of shipments and not just focus on reducing average costs and delays. An integrated and comprehensive reform of trade facilitation is essential in improving coordination among the trade facilitation agencies and building strong private sector support within the shipping and airlines, railway and transportation sector and amongst the clearing and forwarding agents. The creation of an effective trade facilitation system requires consistent improvements and the continuing participation of all stakeholders, who can demand concrete and practical improvements in performance. Although the problems that need to be addressed are rather specific, the ability to tackle them depends largely on Kenya’s institutional and human capacity development along the trade facilitation chain.


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5.1 Transportation system in Kenya 5.1.1 The Ports

Adopt and fully implement the international standards for port management

and security improvement such as ISPS Code. This will enhance the Port’s

image

Implement Community Based System - an ICT program - to assist in faster

processing of documents by all trade facilitating agencies and hence reduce

delays. This will harmonise KPA and KRA procedures and improve

turnaround time for vessels

Bill of Lading should be in the name of the consignee as this is the industry

trend. This would reduce the need for amendment and demurrage charges

which occur. Congestion at the Port will also be reduced

Equip the Port with adequate equipment to hasten the removal of

containers

Improve overall efficiency in the Port’s operations through training and

motivating staff

Privatise the Port and clear cargo 24-7-365 days

Carry out cargo pre-arrival clearance

Enhance better communication between KRA and KPA at all levels

Share information with other stakeholders

Conduct stakeholders’ workshops regularly and in a scheduled manner

Provide proper and clear guidelines for Port users on the website

Expand the Port of Mombasa, Jomo Kenyatta International Airport and other

ports

Establish a free Port in Mombasa

Separate the locations of transit cargo from those that are local bound

Reduce the huge volume of cargo from the Port by disposing of the 10,000

plus overstayed containers at the port


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5.1.2 The Roads Improve the roads infrastructure in Kenya and within the entire region

Re-train officers within the transportation chain

Develop concrete roads for trucks only

Recondition and maintain roads all year round

Develop international highways

Concession of highways construction and maintenance

Reduce fuel levy funds in order to reduce fuel cost for freight vehicles

Replace the current weighbridge equipment with new and more efficient

ones

Introduce mobile weighbridge machines

Enforce the law on axle load limits

Simplify road toll payment mode (Copy the USA road toll payment system)

Privatise weight bridges functions

Harmonise axle load limits within the EAC region

Enhance health and safety at weighbridges and border points

Provide better supervision of staff at the weighbridges in order to reduce

corruption

Enact a law limiting the hiring of drivers to those that have attained a

minimum of form 4 education level

Develop resting facilities with washrooms, food facilities and

accommodation along all the highways

Construct proper office facilities at the weighbridge stations with all

amenities for the staff and truck drivers. The offices should be adequately

equipped with health and safety gears to protect staff from dust and motor

vehicle fumes

5.1.3 The Railways

Upgrade and expand railway tracks and services Increase the rolling stock to adequately improve the RVR capacity

5.1.4 The Pipeline

Upgrade and expand the pipeline to enable it cater for oil demand in Kenya and the entire region


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5.2 KRA - Customs At International Level

WTO should adopt the revised Kyoto Convention in trade facilitation negotiations to assist in the enforcement of trade facilitation

At Regional Level Trade Facilitation should be a core area of negotiations and focus at both the COMESA and EAC

Establish and strengthen trade facilitating institutions within the region

At Country Level (The KRA-customs department)

Kenya should ratify the revised Kyoto Convention, 1999 which came into force on 3rd February, 2006

Implement the principles of the WCO Immediate Release Guidelines and the Kyoto Convention

Implement the WCO Framework of Standards Improve transparency of customs procedures via a web site Apply WTO Valuation Agreement countrywide Improve risk management techniques

The following are the specific suggestions from the interviewed respondents on how to alleviate the problems they encounter with the customs.

Customs officers should be well trained and empowered to make decisions

The Simba system should be interfaced with all stakeholders so that the release of cargo is carried out simultaneously by all regulatory agencies

Customs bonds should be cancelled online to avoid delays caused by the current semi-manual system

Customs should acquire a more reliable internet connectivity system to improve the functioning of the Simba system

Customs should continuously train stakeholders on the Customs Act and the procedures of declaring documents

Customs should set a daily performance evaluation system which should target to monitor the rate of cargo release. The current system mainly focuses on the revenue collected


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Adequate communication should be enhanced among the various agencies with regard to clearance of goods in order to avoid delays

Hasten the implementation of the community based system – a computer system which is interfaced with all stakeholders to help improve communication among the stakeholders and the release of cargo

Improve office facilities at all entry and exit points. This is crucial at the border stations where facilities such as verification sheds, warehousing and fire fighting equipment do not exist

Develop a customer database that will help in profiling the customers

Carry out regular customer satisfaction survey quarterly - this will help improve services

Recruit competent staff, retrain them regularly, delegate responsibilities and remunerate the staff adequately to enhance decision making and ethical practices among the customs staff

Adopt a policy of ‘customer first, customer friendly’ and then revenue within KRA and improve communication with stakeholders by developing an interactive website. The current website mainly provides for one-way communication which gives information and has a limited feedback mechanism

Allow amendments of minor errors without penalties

Hold regular scheduled meetings with stakeholders to discuss new policies and raise issues related to the clearance of goods

Fully implement the post clearance audit to enhance release of urgent shipments

Implement Authorised Economic Operator as per the WCO SAFE Framework of standards

Update a valuation database to reduce disputes on the valuation of goods

Strengthen and full functionalise the customs valuation appeal board

Customs should implement the 24 hour working schedule to avoid back log. A memorandum on the same was signed sometime back among the various operators; the department should therefore lead the way. More


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staff should be recruited to enhance the current capacity to enable it operate 24 hours a day; 7 days a week; and 365 days a year adequately.

Open transport under bond to increase the number of trucks to carry cargo

KRA should continuously update the business community on changes relating to certificates of origin. Trade is dynamic and real-time information could enhance Kenya’s competitiveness a great deal

Enterprises should be trained regularly on the rules of origin and rules of trade in general

KRA should develop a ‘listening’ website and use it to update and receive feedback from the stakeholders on a regular basis

The Customs department should focus on two major areas in service improvement. These are:

Customer first always Staff empowerment and motivation

CUSTOMER FIRST, ALWAYS -Delighting Customs’ Customers KRA –Customs should:

Provide its customers with prompt, professional, responsive and sincere service

When formulating policies and procedures, KRA-Customs should adopt a consultative approach through focus-group discussions or public consultations

Conduct regular dialogue sessions, briefings and training courses for members of the trading community

Through active engagement with its customers and benchmarking of best practices, KRA should strive to add value to its customers by delivering services more efficiently and at the lowest possible cost

Hold dialogue sessions with traders, shippers, logistics companies and other stakeholders to update them on improvements to customs procedures or schemes. This is also a useful platform for enabling Customs have a better understand of business needs and gather feedback for services offered

KRA-Customs should take its relationship with customers to the next level with more advisory services and client-oriented programmes


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Provision of best fit services for customers should be the promise for the future

KRA-Customs must stay one step ahead of criminals to avert their illegal activities and ensure that Kenya is safe and the choice trading hub for East and Central Africa

Customs should also sensitise it customers on their obligation by providing prompt and adequate information regarding any changes and consulting with the stakeholders on various developments and changes.

Customs Staff Motivation Programmes

Holding regular dialogue sessions with the Director-General and informal lunches are some of the ways that officers can provide feedback to the management annual work plan seminar. It is also an opportunity for the management to discuss strategic directions and plans for the department with officers

Provide customs officers with ample training and development opportunities to ensure that they have a rewarding career with the department. Have a comprehensive training framework to equip the officers with the right knowledge and skills and to align officers’ training needs with the department’s strategic direction

Provide incentives for the customs officers to continuously improve since they are the department’s most valuable asset. Constant improvements ensure that the officers stay relevant and competitive to ensure Kenya Customs is able to continue meeting the needs of the customers

Introduce and sustain an innovative culture within the organisation. This can be achieved by forming teams to look at customs processes and coming up with solutions to improve services

Encourage continuous e-learning initiatives for staff to enable them learn and use a wide range of creative thinking tools to solve work-related issues and also help officers turn ideas into reality more quickly

Introduce different channels for officers to voice out their views and exchange ideas with the management

Kenya Customs should put in place a fair and constructive appraisal system to give each officer due credit. Achievement of targeted revenue should not be the only performance indicator for appraising officers. Contributions to project teams and committees, achievement of branch


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key performance indicators, awards received, demonstration of corporate values and other such ‘soft skills’ should also be taken into consideration in a more structured manner.

Customs should also formulate a Human Resource Planning Framework to ensure that the human resource processes are transparent and objective. Selected officers should be given greater exposure to the work of the department by taking on concurrent appointments in different branches. The department should continuously plan and map out suitable career paths for the officers in order to develop their potential so as to project a competent and professional image to customers, partners and stakeholders.

Establish Institutions for further improvement KRA –Customs should establish and strengthen institutions and systems such as:

1. Customs Advisory Committee (CAC) The CAC would comprise of key personnel from both the public and private sectors. The committee would advise the customs on trends that impact on Customs operations, give feedback and strengthen ties between the department and the trade

2. Traders’ and Travellers’ Satisfaction Surveys

As part of KRA-Customs drive for continuous service improvement, a framework for regular surveys should be established with other stakeholders such as KAM. The survey would be conducted to measure customers’ perception and satisfaction level with customs services and to gather feedback for future development

3. Customs Information

KRA-Customs should have more and up-to-date information on its website. Such information should include circulars, publications and information brochures on customs requirements which can be downloaded from the website

4. Customs Call Centre

KRA-Customs should establish an efficient call centre open 24/7/365 for responding to its customers queries

5. Customs Hotline

KRA-Customs should also establish a Customs hotline for reporting on smuggling activities and evasion of payment of duty and value added tax


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6. Complaints and Compliments

KRA-Customs should also establish a complaint or compliment window by designing a ‘listening’ website, hotline mails and in person. The current one only provides information which in a number of cases is inadequate. The complaints and compliments should be published weekly and action taken by the departments that are indicated. This would enhance the image of the customs department

7. Introduce Excellent Service Awards

This would target the trade facilitating agencies in East Africa.

5.3 Kenya Bureau of Standards Streamline inspection services

Provide continuous training to KEBS staff

Ensure all required standards have been published

Mobilise adequate staff at various stations to reduce waiting time for the

provision of services

Harmonise standards with various trading partners

Speed up the inspection process in order to cut-down on the demurrage

costs incurred by importers

Spares for machinery should not be part of the PVOC list of goods

Inputs for pharmaceutical manufacturers should be exempted from PVOC

Modernise and interface ICT programs with KRA, KPA, KEBS and all

stakeholders involved in clearing cargo at all stages

Reduce penalties for destination inspection

Provide adequate laboratory facilities that are well equipped at various

border points to improve inspection and testing

Hold regular and scheduled meetings with stakeholders to discuss and

inform on issues pertaining standards

Reduce the number of samples required for testing

Provide information on various testing processes such as the PVOC to

reduce delays and costs incurred due to lack of information

Eliminate corruption at the KEBS


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5.4 Kenya Plant Health Inspection Services (KEPHIS)

There is need to invest in more facilities at the border points including adequate offices with laboratories and equipment for testing and inspection. KEPHIS and other trade facilitation agencies should establish inspection and verification sheds at all ports and border points

KEPHIS should also recruit more staff to man the various trade exit and entry points

Staff should be trained continuously to enhance their technical skills and customer relationship management

Invest in an integrated ICT system with other agencies at various ports and border points in order to hasten cargo clearance process

5.5 Department of Veterinary Services (DVS)

The interviewed respondents recommended that that there is need to put up facilities in terms of holding grounds for livestock inspection with adequate water, testing laboratories and well trained personnel. The Port of Mombasa has no such facilities. When exporting live animals, holding grounds are about 20 km or more from the Port

Invest in an integrated ICT system with other agencies at various ports and border points in order to hasten cargo clearance process

5.6 Clearing and Forward Agents

Establish a regulatory body to regulate and punish unethical agents Establish standards and code of ethics for clearing and forwarding agents

Train and certify clearing agents through the regulatory body Empower and professionalise KIFWA, so that it can in turn support the members and gain more credibility from various stakeholders

Incorporate a customer relationship module which will enhance the relationship between all trade facilitators and the enterprises under the Community Based System being developed under KPA to integrate all trade facilitating agency

5.7 Security Systems

Train and motivate the security agents particularly the police manning the road networks. The training should cover areas of integrity, the role of trade to Kenya’s economy and customer relations

Pay the security officers well and provide them with good facilities. This will boost their self dignity and remove the desire to take bribes


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Measure performance of the police working along the highways against the reduction on corruption cases, harassment of truck drivers, unnecessary delays of transit and local cargo

Reduce road blocks Enhance security along the cargo transit routes to reduce loss of goods due to theft

5.8 Immigration Department Communicate the work permit issuance policy in advance

Improve efficiency at the immigration department Reduce corruption

Chapter 6

6.0 Specific Advocacy proposals for KAM to advocate with Trade Facilitation Agencies.

6.1 Overview The analysis of the trade facilitation in Kenya has revealed that a lot of progress has been madewith regard to improving trade facilitation over the years. There are however other major issues that need to be addressed in order to match Kenya’s trade facilitation systems with those of other countries globally, and in the process improve the competitiveness of Kenyan products in the world market. Some of the key areas which need improvement include: Compliance with international Agreements, Standards, Recommendations and Best Practice Procedures. The smooth and efficient movement of goods and people across borders in the region requires close collaboration between ministries, trade facilitation agencies and support from all stakeholders, including the private sector. It includes the following activities:

� The review and enactment of a legal framework which supports compliance with international standards and agreements

� Establishment of institutions which support, co-ordinate and influence the trade facilitation policies and checklists covering the various international trading practices


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� Development of human capacity to offer staff within the trade facilitation system the necessary skills with which to implement international standards, recommendations and best practice procedures

The Kenya Association of Manufacturers is a major stakeholder in trade facilitation systems in Kenya and the region and should therefore play a major role in influencing trade facilitation policies and promoting the implementation of international agreements, standards and best trading practices. A review of some of the critical standards which affect trade facilitation is given below to provide a better appreciation of the specific advocacy proposals by KAM to trade facilitation agencies.

6.2 A Review of International Standards in Trade Facilitation

The international Agreements, Standards, Recommendations and Best Practice Procedures for trade facilitation are developed by various international organisations including the WTO, UN/CEFACT, WCO, ISO and IMO and others. 6.2.1 The United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) It has developed and maintained a series of recommendations and standards for international trade for over 40 years. These reflect best practices in trade procedures, data and documentary requirements. They are used worldwide to simplify and harmonise international trade procedures and information flows. The ISO has adopted many of them as international standards. For instance, Recommendation 1 - the United Nations Layout Key for Trade Documents, is now the international standard for international trade documents. It is the basis for many key trade documents such as the European Union’s Single Administrative Document (SAD). Other examples of its application include:

Freight Forwarding Instruction � International Federation of Freight Forwarders’ Associations

(FIATA) Dangerous Goods Declaration

� United Nations Economic Commission for Europe (UNECE ) Goods Declaration for Export (revised Kyoto Convention)

� World Customs Organisation (WCO )

Another example, is the International Standard for Electronic Data Interchange (Recommendation 25) - This Standard is used throughout the commercial and administrative world. Complementing this Standard are a variety of recommendations on codes for use in international trade, including the:


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Code for Trade and Transport Locations (Recommendation 16) Codes for Modes of Transport (Recommendation 19) Code for Representation of Names of Countries (Recommendation 3).

Other standards which cover more general aspects of trade facilitation implementation are:

• Recommendation 4 on National Trade Facilitation Organs which outlines an approach for setting up a consultative mechanism between trade and the government for implementing trade facilitation measures and instruments.

• Recommendation 18 on Facilitation Measures Related to International Trade Procedures proposes a series of measures that could be taken by Governments and business for the facilitation of trade transactions.

The latest recommendation, Recommendation 33, offers Guidelines on establishing a “Single Window”

facility. Setting up Single Windows is one of the

new approaches to trade facilitation that can provide extensive benefits to both Governments and trade. 6.2.2 The Revised Kyoto Convention by World Customs Organisation (WCO): The International Convention on the Simplification and Harmonisation of Customs Procedures (Kyoto Convention) came into force in 1974. Since then, the growth in international cargo, the incredible developments in information technology and a highly competitive international business environment, based on quality service and customer satisfaction are all influences that have created conflict within traditional Customs methods and procedures. The WCO therefore, revised and updated the Kyoto Convention to ensure that it meets the current international trade demands. The WCO Council adopted the revised Kyoto Convention in June 1999 which came into force on 3rd February 2006, after 40 Contracting Parties to the original Kyoto Convention of 1974 acceded to the Protocol of Amendment to the revised Convention. The revised Convention is the blueprint for modern and efficient Customs procedures in the 21st century. It is the tool that assists in the development of global Customs procedures. Once implemented widely, it will provide international commerce with the predictability and efficiency that modern trade requires. The Core Principles The revised Convention is a quality standard for a modern well functioning Customs administration. The revision process has incorporated important modern concepts, which include the application of new technology; the implementation of new philosophies on Customs control; and the willingness of private sector partners to engage with Customs in mutually beneficial alliances.


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Chief among the new governing principles of the Kyoto Convention is the commitment by Customs’ administrations to provide transparency and predictability for all those involved in aspects of international trade. The revised Kyoto Convention recommends the following principles that a modern Customs administration should implement:

♦ Standard, simplified procedures ♦ Continuous development and improvement of Customs control

techniques ♦ Maximum use of information technology ♦ A partnership approach between Customs and Trade

The key elements within the revised Kyoto Convention to be applied by modern Customs administrations are:

♦ the maximum use of automated systems; ♦ risk management techniques (including risk assessment and

selectivity of controls); ♦ the use of pre-arrival information to drive programmes of selectivity; ♦ the use of electronic funds transfer; ♦ co-coordinated interventions with other agencies; ♦ making information on Customs requirements, laws, rules and

regulations easily available to anyone; ♦ providing a system of appeals in Customs matters; and ♦ formal consultative relationships with the trade.

The revised Convention also contains new and obligatory rules for its application which all Contracting Parties must accept without reservation. A Management Committee will be established to ensure that the provisions are kept relevant and up-to-date. WCO’s Revised Kyoto Convention also emphasises on effective Customs controls. It requires that all goods, including means of transport, which enter or leave the Customs territory, regardless of whether they are liable to duties and taxes shall be subject to Customs control. Customs control refers to measures applied by the Customs to ensure compliance with Customs law. This includes all the statutory and regulatory provisions relating to the importation, exportation, movement or storage of goods, the administration and enforcement of which are specifically charged to the Customs, and any regulations made by the Customs under their statutory powers. The revised Kyoto Convention provides implementation guidelines to ensure that the principles of simplification and modernisation that are contained in the Convention are applied effectively by Customs administrations. Guidelines on simplification through the use of effective control techniques and automation, which also include examples of best practices, are being


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developed for each procedure and practice of the General Annex and the Specific Annexes of the Revised Convention.

6.2.3 International Ship and Port Facility Security (ISPS) Code IMO adopted the ISPS Code as part of an amendment to the Safety of Life at Sea (SOLAS) Convention. The objectives of the Code are to establish an international framework involving co-operation between contracting governments, government agencies, local administrations and shipping and port industries to detect security threats and to take preventive measures against security incidents affecting ships or port facilities that are used in international trade.

The ISPS Code provides a framework through which ships and port facilities can co-operate to detect and deter acts which pose a threat to maritime security. The Code:

Enables the detection and deterrence of security threats within an international framework

Establishes roles and responsibilities Enables collection and exchange of security information Provides a methodology for assessing security Ensures that adequate security measures are in place

It requires ship and port facility staff to:

Gather and assess information Maintain communication protocols Restrict access and prevent the introduction of unauthorised weapons, among others

Provide the means to raise alarms Put into place vessel and port security plans and ensure training and drills are conducted.

The regulatory provisions do not extend to the actual response to security incidents or to any necessary clear-up activities after such an incident.

Implementation of these proposals would help standardise the various processes in cargo movement and clearance at entry points and also reduce transaction costs and improve the competitiveness of the Kenyan products.

6.2.4 WCO SAFE Framework of Standards In the light of increasing threats of global terrorism, the issue of security of global trade has attracted considerable attention in the international community. It is often pointed out that Customs should play a vital role to


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secure and facilitate global trade, because of its unique authority and expertise to inspect cargo that is shipped in, through, and out of a country. In response, the WCO, as the sole global organisation in charge of Customs matters, has developed the Framework of Standards to secure and facilitate global trade (hereinafter referred to as “the Framework”).

The Framework, a consolidation of various agreed security and facilitation measures, contains 17 agreed upon standards that should be adopted and implemented by Customs administrations and their business partners. It is aimed at providing uniformity and predictability to the global trade environment by safeguarding the end-to-end security of the international trade supply chain even as facilitating the passage of legitimate goods through Customs control.

The Framework was developed with four principles or core elements in mind, namely:

Customs administrations commit to harmonising advance electronic manifest information requirements to allow risk assessment of cargo;

Apply a common risk management approach; Use non-intrusive detection equipment to effect examinations; Provide benefits to businesses that meet minimal supply chain security standards and best practices.

The SAFE Framework rests on the twin pillars - Customs-to-Customs network arrangements and Customs-to-Business partnerships. The two-pillar strategy has many advantages. The pillars involve a set of standards that are consolidated to guarantee ease of understanding and rapid international implementation. Moreover, this instrument draws directly from existing WCO security and facilitation measures and programmes developed by member administrations. The WCO SAFE Framework pillar on Customs-to-Customs network arrangements promotes the seamless movement of goods through secure international trade supply chains. These network arrangements will result in the exchange of timely and accurate information that will place Customs administrations in the position of managing risk on a more effective basis. The Customs-to-business partnership pillar rests on the creation of an international system for identifying businesses that offer a high degree of security guarantees in respect of their role in the trade supply chain. Businesses that fulfil the criteria defined in the Framework will be regarded as partners and classified as “authorised economic operators” eligible for a host of tangible benefits that include:

� Quicker movement of low-risk cargo through Customs;


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� Minimized Customs control interventions;

� Improved security levels;

� Optimised supply chain costs through security efficiencies;

� Enhanced trading reputation;

� Improved understanding of Customs requirements;

� Better communication between business and Customs.

During its June 2005 annual Sessions, the WCO Council adopted the Framework and encouraged its worldwide implementation as expeditiously as possible. In June 2007, WCO put provisions for both SAFE and AEO into a single comprehensive instrument.

Successful implementation of the SAFE Framework will be one of the key challenges facing the international Customs community in the 21st Century.

Countries such as Singapore, Mauritius, and South Africa which have adopted and fully implemented these standards are experiencing shorter time release of cargo.

6.3. Overall Proposals

The following are key proposals which KAM should propose to the various trade facilitation agencies. If adopted, these proposals will also contribute to the achievement of Kenya’s major development strategies the Vision 2030 and the Private Sector Development Strategy.

Proposal No. 1: Improve Trade Facilitation Policies KAM should propose to the Government to formulate and improve existing trade facilitation policies to tackle the challenges of international trade in Kenya. This requires a comprehensive and coordinated approach that entails:

1. The enactment of a legal and regulatory framework that will enhance modern ways of trade facilitation.

2. The ratification and accession to international agreements and standards; promotion of best trading practices and procedures in trade facilitation; improvement in infrastructure and provision of efficient and competitive services with regard to roads, railways, ports, information and communications technology; the removal of unnecessary roadblocks; and the simplification and harmonisation of customs and border procedures.


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Proposal No. 2: Implementation of Trade Facilitation International Agreements Standards, Recommendations and Best Practices

KAM should propose to trade facilitation agencies to fully adopt and implement trade facilitation standards, recommendations and best practices which have been developed by various international bodies including the WTO, UN/CEFACT, WCO, IMO and UNCTAD among others.

Proposal No. 3: Implementation of Community Based System (CBS)

KAM should propose for the faster implementation of CBS. The CBS is an Information and Communication Technologies concept which is intended to integrate and simplify the sharing and processing of documents amongst the broad set of stakeholders who are involved in international trade of goods. The CBS project is being spearheaded by KPA and KRA. This will enhance time release for cargo and improve trade facilitation as a whole. The implementation of CBS will help Kenya move towards compliance to UN/CEFACT’s Recommendation Number 33 - the establishment of a “Single Window” - whereby trade-related information and/or documents need only to be submitted once at a single entry point to fulfil all import, export, and transit-related regulatory requirements. The UN/CEFACT Recommendation also suggests that customs and other trade facilitating agencies should co-ordinate their respective controls through the “Single Window” and consider providing facilities for payment of relevant duties, taxes and fees. Setting up Single Windows is one of the new approaches to trade facilitation that can provide extensive benefits to both the governments and trading community in Kenya and the entire region. The implementation of CBS will also be a major step towards paperless trading. A switch from paper documents would increase security and transparency along the supply chains and provide the governments and the private sector with higher revenues. Electronic information is also easier to process and more reliable. It reduces costs and delays all along the supply chain. Since goods cannot travel faster than the information that controls them, speeding up the information exchange makes trading more competitive and efficient. The implementation and integration of CBS with the Simba System for customs and Waterfront System for Port management will help eliminate delays in documentation processing by Customs, KPA and other trade facilitating agencies. Some of the challenges experienced by KAM/KSC which will be addressed by the CBS implementation include:


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Improvements on: Vessels berthing Manifest submission Pre-arrival clearance Cargo inspection processes Documentation processing Multiple documents checks by various agencies/departments Duty and other charges payment Bond cancellation Approval processes by various trade facilitation agencies Staff shortage in various trade facilitating agencies Delays in off loading cargo from vessels Transparency and accountability of various agencies including Clearing and Forwarding

Corruption at the Port, customs and weighbridges Cargo tracking and tracing systems Assessing cargo weights and road maintenance Computer compatibility with those of stakeholders and assistance in documents processing and cargo clearance

Communication with all stakeholders Duty and other tax payments

Reduction or elimination of congestion at:

♦ The Port and ♦ The borders stations ♦ The weighbridge stations

Proposal No. 4: Develop Trade Facilitation Centres at Border Points

KAM should propose for the development of joint and centralised office facilities that are well equipped with various communication and office equipment including computers and printers at all entry and exit points. Such facilities which should located at Namanga, Busia Malaba, Isebenia and other border points should be referred to as Trade Facilitation Centres and should include:

Offices for trade facilitating agencies (KEBS, KEPHIS, DVS, Health, KRA) among others

Verification and warehouse sheds Security at the border points Staff housing Fire fighting equipment Parking space for trucks Holding grounds for livestock


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Laboratories and testing equipment

Proposal No. 5: Public – Private Partnership in Trade and Transport Facilitation

KAM should also advocate for the improvement of transportation systems. The advocacy role should include:

a. Proposal for developing a network of public-private partnerships for trade facilitation in order to improve collaboration among relevant agencies and identify needs and priorities for the business community. Establishment of a National Trade and Facilitation Committee would be in line with UN/CEFACT Recommendation 4 on National Trade Facilitation Organs which outlines an approach for setting up a consultative mechanism between trade and government for implementing trade facilitation measures and instruments

b. Proposal for the preparation and publication of guidelines on establishing

or strengthening national facilitation coordination mechanisms in transportation

c. Proposal for organisation of scheduled workshops, seminars and advisory

services for establishing or strengthening national facilitation coordination mechanisms and the organisation of regional forum for trade facilitation coordination mechanisms.

The immediate objective of such activities is to promote collaboration between all stakeholders who are involved in the facilitation of international transport from both the public and private sectors.

Proposal No. 6: – Capacity Building for Trade Facilitation Agencies.

KAM should propose to trade facilitation agencies to continuously train staff operating at various points from the Port to the border. Such training should cover operation skills upgrading, customer relations management, anti-corruption issues and new developments and approaches to trade facilitation. A proposal for joint training programmes for the trade facilitating agencies that should be scheduled to take place twice a year would enhance trade facilitation in Kenya. Training is a fundamental part of any reform process.


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Proposal No. 7: – Measuring and Evaluating Trade Facilitation Performance in Kenya

KAM should propose for the establishment of a system of measuring and evaluating performance of the trade facilitation systems. A customer satisfaction survey in trade facilitation could be the starting point.

Proposal No. 8: – Regional Excellent Service Awards for Trade Facilitating Agencies and Partners.

KAM should propose for the introduction of “Excellent Service Awards” for trade facilitating agencies and partners with the East Africa and COMESA regions. Such a programme would enhance positive recognition and motivate various trade facilitating bodies to improve on their performance.

6.4 Specific Advocacy Proposals by KAM

Proposal No. 9: Customs KAMS Proposals should include the following:

1. That the Kenya Customs ratifies the Revised Kyoto Convention, 1999. The ratification of the Revised Kyoto Convention will help Customs improve and modernise trade facilitation in Kenya and improve on the competitiveness of Kenyan goods. The key elements within the revised Kyoto Convention to be applied by modern Customs administrations are:

the maximum use of automated systems; risk management techniques (including risk assessment and selectivity of controls);

the use of pre-arrival information to drive programmes of selectivity;

the use of electronic funds transfer; co-coordinated interventions with other agencies; making information on Customs requirements, laws, rules and regulations easily available to anyone;

providing a system of appeals in Customs matters; and formal consultative relationships with the trade.

The revised Convention also contains new and obligatory rules for its application which all Contracting Parties must accept without reservation.

2. The Kenya Customs adopts and fully implements the WCO SAFE

Framework of Standards. The aim of the Framework is to establish a set of standards that provide supply chain security and facilitation at a global level and to promote certainty and predictability. The aim is also to move from a set of security-related guidelines to standards


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that WCO Members are able to implement in a pragmatic and flexible manner. Most security-enhancing measures in the Framework have been developed based on modern Customs procedures in relevant WCO guidelines, recommendations and instruments. At the same time, those measures will facilitate the legitimate trade as well as promote Customs reform and modernisation.

3. Customs establishes a Customs Advisory Committee (CAC) which

would comprised of key personnel drawn from both the public and private sectors. The committee would advise on trends that impact on Customs operations, give feedback and strengthen ties between the department and the trade

4. Customs should have more useful and up-to-date information on its

website and at all entry and exit points. Information which includes Customs requirements, prohibited goods and any changes should be in form of brochures which can be downloaded from the website. Passengers entering into Kenya should be provided with information on Customs requirements in the air craft before landing.

5. Customs establishes an efficient call centre open 24 hrs, 7days a

week and 365 days a year for responding to its customer’s queries.

6. Customs puts in place a hotline for reporting on smuggling activities and evasion of duty and value added tax.

7. Customs establishes a complaint or compliment window by designing

a ‘listening’ website, hotline mails and in person and publish complaints and compliments weekly and also indicates action taken by customs. This will enhance the image of the customs department

Proposal No. 10 Transportation

8. Improvement of Infrastructure: In the area of transportation, KAM should continuously advocate for infrastructural improvement; roads, rail, pipeline and airports and sea ports. The road from Mombasa to Busia and Malaba are the main arteries of trade not only for Kenya but for the entire Eastern and Central African region. The rail track is too old and requires rehabilitation and construction of a new track with modern standards in order to enhance the current rail cargo capacity of 10 per cent to 40 per cent in the next five years. The pipeline capacity is still low standing at 440,000 litres per hour; way


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below the consumption capacity of over 3,000,000litres per day in Kenya and the region as a whole. The Mombasa Port needs to be expended further to enable it cater for the current economic growth in Kenya and need to be expanded and addition of other facilities such as hotels for transit passengers and cold storage for cargo.

9. National Trade and Transport Facilitation Committee (NTTFC): KAM

should propose for the establishment and strengthening of the existing trade and transport facilitating committees or associations including the Kenya Shippers Council, Kenya Transport Association, Northern Corridor Transit Transport Authority and others. There is need to establish or strengthen a National Trade and Transport Facilitation Committee (NTTFC). This is a mechanism which could serve as a national forum to propose, discuss, consult and search consensus between commercial parties and governmental authorities on facilitation measures towards improving international trade and transport. As a result of a joint public and private initiative, this forum would aim at providing a coordinated, coherent and harmonious environment that would enhance the competitiveness and quality standards of Kenya’s trade and transportation system. Membership to the NTTFC should include all key partners in trade, drawn from both the public sector and the private sector. By meeting regularly and reaching decisions that are agreed upon by all key partners in trade the members of the Committee, the NTTFC is able not only to handle misunderstandings, but also to propose widely acceptable solutions to trade and transport problems and, therefore promote transport efficiency

10. KAM should propose for the harmonisation of commercial vehicles

Standards and regulations at the EAC and COMESA level. The axle load limit should also be harmonised at regional level. This will reduce delays at the weighbridge stations.

11. KAM should propose for the establishment of Kenya Transportation

Safety Board. The board would promote safety on the roads.

12. KAM and KSC should propose to the Ministry of Transport to develop Commercial Vehicle Maintenance Standard Regulations. The standard regulation should include: the standard, inspection schedule, maintenance and inspection program, replacement of parts, notice of defect and maintenance and interference with records.


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13. KAM should call for the establishment of standards and code of ethics

for transporters. This should include the terms of services, code of conduct for drivers and adherence to safety and traffic regulations. Level of education to become a commercial vehicle driver and continuous learning should be part of these standards.

14. KAM should propose for the enactment of a legal framework for

commercial vehicles driver’s service regulations. This should cover, principal place of business where the owner of the vehicle operates from. It should also state the on-duty and time required to be off duty, limitation on being on duty, time break, prohibition from driving, daily logs manually recorded, documents to be in drivers possession, schedule of medical check-up, distribution of daily logs, driver inspection and prohibition, minimum level of education and continuous training schedules.

15. KAM should propose for the enactment or review of Dangerous Goods

Transportation and Handling Act. This should comply with international agreements, inspection, liabilities, prohibitions, penalties and disposal of such goods. Other provisions of the act should be emergency response assistance plans and regulations. The act should also cover requirements for financial responsibility.

16. KAM should propose for the establishment of highways resting

facilities with washrooms, food and accommodation facilities.

Proposal No. 11 Kenya Bureau of Standards 17. KAM should advocate for regular and scheduled meetings with

stakeholders to discuss and inform on issues pertaining to the development and harmonisation of standards within the region

18. KAM should propose to KEBs for the harmonisation of standards with

various trading partners

Proposal No. 12 Advocacy to Kenya Plant Health and Inspection Services

19. KAM should propose to KEPHIS to hire and post more staff with

adequate facilities in order to enhance the inspection function at various border posts. Inadequate staff is the main challenge which was raised by members of KAM in this study.


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Proposal No. 13 Advocacy to Clearing and Forwarding Agents

20. KAM should propose to Customs and KIFWA to establish Clearing Agents standards and code of ethics in their operations.

Proposal No. 14 Advocacy to Security Agencies 21. KAM should propose for the implementation of motivation

programmes for the security staff in order to reduce corruption and delays on the roads. Such programmes include - better working conditions and training on the importance of trade and customer relationship.

Proposal No. 15 Advocacy to Immigration

22. KAM should propose for the establishment of an immigration listening website with all necessary information and an effective feedback system which is monitored and updated daily. Such a system would provide an efficient system that is corruption free.

6.5 Consultant Views for Improving KAM Internal Capacity Kenya Association of Manufacturers being a major organisation that represents manufacturers can contribute immensely to the enhancement of trade facilitation in Kenya and the entire Eastern and Central Africa region. KAM should therefore do the following: � Enhance its institutional and human capacity by establishing a specific trade

department with staff to handle lobby activities in trade facilitation. The department would carry out a monitoring role continuously on whether trade facilitation agencies are implementing reforms or programmes aimed at improving trade facilitation as stipulated in international recommendations, best practices and standards. This could be carried out through the establishment of specific committees in each of the trade facilitation area for example; a trade and transport facilitation committee would monitor policy issues, infrastructure, procedures and processes relating to transportation. A standard and health committee would monitor trade facilitation in those areas.

� The KAM trade department would also evaluate and measure performance

level and improvement programs planned by various departments in the trade facilitation system.


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6.6 Implementation Matrix for Advocacy Proposal by KAM

Specific Advocacy Proposal for Addressing the Challenge

♦ Objective ♦ Problems / challenges Identified

♦ Causes of the Problems

Expected Out Put

Implementing Agencies

Proposal No.1: Improve and Integrate Trade Facilitation Policies

♦ Formulate integrated trade facilitation policies

♦ Inadequate or lack of integrated trade facilitation policies

♦ Lack of appreciation on the need to integrate policies in trade facilitation.

Integrated Trade Facilitation Policies

Ministry of Trade and Industry, Ministry of Finance, Ministry of Roads, Ministry of Transport, KRA, KPA, KEBS, KEPHIS, DVS, RVR, KAA,

Proposal No. 2: Implementation of Trade Facilitation International Agreements Standards, Recommendations and Best Practices

♦ Conform to international best practices.

♦ Lack of or partial implementation of International Agreements Standards, Recommendations and Best Practices on trade facilitation.

♦ Inadequate legal and institutional capacity

Full Implementation of Trade Facilitation Standards and application of best practices

KRA, KPA, KAA, KEBS, KEPHIS, Ministries of Trade and Industries, Ministry of Transport and all stakeholders in the private sector


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Expected Out Put


Proposal No. 3: Implementation of Community Based System (CBS)

♦ Enhance time release for cargo

♦ Improve trade facilitation as a whole.

Delays in documentation processing by; Customs, KPA, KEBS, KEPHIS DVS and other trade facilitating agencies

♦ Lack of an integrated ICT system with all trade facilitating agencies.

An integrated CBS for processing trade documents.

KRA, KPA, KEBS, KEPHIS, DVS, RVR, KAA, Ministry of Roads, Shipping Agents, KIFWA, Banking sector

Proposal No. 4: Integrate transportation systems from seaports, airports, rail, roads and waterways.

♦ Improve transport infrastructure in order to reduce cost and enhance Kenya’s competitiveness

♦ Poor road and rail infrastructure,

♦ Inadequate capacity

of pipeline, sea and airports.

♦ Inadequate development of transport infrastructure over the years.

An integrated transportation system

MRPW, KRB KPA, RVR, KPC, Local Authorities

Proposal No. 5: Develop Trade Facilitation Centres at Border Points

♦ Improve overall trade facilitation for competitiveness

♦ Lack of adequate trade facilitation facilities such as;

♦ offices, equipment, fire fighting engines, parking areas for trucks, drivers resting areas

♦ Limited appreciation on the need to develop facilities for trade facilitation,

♦ Inadequate funds

Well equipped modern trade facilitation centers

KRA, KPA, KEBS, KEPHIS, DVS, Local Authorities at the border points and along the trade routes,


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Expected Out Put


allocation, ♦ Lack of an

integrated approach to trade facilities development.

Proposal No. 6: Public – Private Partnership in Trade and Transport Facilitation

♦ Improve public – private partnership in trade facilitation systems

♦ Inadequate consultation with the private sector by various trade facilitation agencies.

♦ Limited appreciation of the private sector role.

Cohesive public/private partnership in trade facilitation.

KRA, KPA, KEBS, DVS, KEPHIS, Immigration, private sector stakeholders,

Proposal No. 7: Capacity Building for Trade Facilitation Agencies

♦ Develop skills in trade facilitation.

♦ Inadequate human capacity along the trade facilitation system

♦ Lack of adequate training, Limited budget allocation on training.

Well trained staff in trade facilitation chain

KPA, KRA, KEBS, KEPHIS, KIFWA, Police, Immigration

Proposal No. 8: Measuring and Evaluating Trade Facilitation

♦ Improve the level of satisfaction for importers and

♦ Inadequate improvement in trade facilitation system

♦ Lack of an integrated performance evaluation

Measuring and Evaluating Trade

KRA, KPA, KEBS, KEPHIS, DVS, MRPW, KRB, MT


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Expected Out Put


Performance in Kenya

exporters in Kenya and the region.

♦ Improve continuously the trade facilitation system.

mechanism of trade facilitation systems

Facilitation Performance mechanism established

Proposal No. 9: Regional Excellent Service Awards for Trade Facilitating Agencies and Partners

♦ Recognise those who have performed well,

♦ Promote

improvement in performance

♦ Currently no Award system for trade facilitation agencies

♦ Lack of a recognition mechanism in trade facilitation

Regional Excellent Service Awards established

KAM, Kenya Shippers’ Council, Media Houses, All Stakeholders in Trade Facilitation.


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Sector Proposals Specific Advocacy Proposal for Addressing the Challenge



Expected Out Put


Proposal No. 10: Customs 1. KAM should propose to Kenya customs to ratify the Revised Kyoto Convention, 1999

♦ Apply modern simplified, harmonised and standardized procedures

♦ Inadequate predictability and efficiency that trade requires by customs department.

♦ Inadequate simplification of customs procedures,

♦ Lack of an

integrated information technology to process trade documents.

♦ Lack of formal

consultative relationships with the business community.

Ratification of Revised Kyoto Convention

KRA, MoF, MTI, KPA, KEBs, KEPHIS

2. KAM should propose to Kenya customs to adopt and fully implement the WCO SAFE Framework of Standards

♦ Provide uniformity and predictability to the global

♦ Potential threat of terrorist activity on the movement of

♦ Terrorists, riots and other unpredictable social unrest

Adoption and full implementation of WCO SAFE Framework of Standards

KRA, KPA Police, Armed Forces


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Expected Out Put


trade environment by safeguarding the end-to-end security of the international trade supply chain

goods around the world

3. The KAM should propose to customs for establishment of a Customs Advisory Committee (CAC) would be comprised of key personnel from both the public and private sector

♦ Involve both public and private sectors in decision making

♦ Lack of involvement of private sector in decision making process by customs

♦ Lack of legal and regulatory framework for establishment of Customs Advisory Committee

A Customs Advisory Committee established

MOF, KRA, KAM and other trade associations

4. KAM should propose to customs to have more useful and up-to-date information on its website and at all entry and exit points.

♦ Provide easily accessible information on Custom’s requirements, laws, rules and regulations to

♦ Inadequate information on customs procedures and requirement

♦ Inadequate use of ICT to disseminate information,

♦ Poor ICT

infrastructure

♦ Up to date information on KRA website provided

♦ Customs

requirements

KRA, KPA, KEBS, KEPHIS, Ministry of ICT, CCK


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Expected Out Put


anyone, ♦ Improve ICT

infrastructure

provided at all entry and exit points

5. KAM should propose to customs to establish an efficient call centre open 24 hrs, 7days, 365 days for responding to its customer’s queries.

♦ Provide customs services all time

♦ Currently there is no mechanism of responding to customer’s queries. 24/7

♦ There are no customs call centres currently.

♦ Inadequate

institutional capacity in KRA

♦ Efficient call centres established

♦ Developed

capacity in KRA to implement call centres

KRA, KPA, KEBS, KEPHIS, Police,

6. KAM should propose to customs to establish a complaint or compliment window by designing a ‘listening’ website, hotlines, and mails as well as in person.

♦ Provide an effective system of appeal

♦ Current complaint and compliment system is not adequately structured and not fully utilized.

♦ In adequate KRA institutional capacity

♦ Complaint and Compliment window established

KRA, KPA, KEBS, KEPHIS,

Specific Proposal No. 11 on Transportation

7. Improvement of Infrastructure: In the

♦ Reduce the cost of

♦ Poor transportation

♦ Poor maintenance

♦ Well maintained

MRPW, KRB,


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Expected Out Put


area of transportation, KAM should advocate continuously for improvement of infrastructure; roads, rail, pipeline, airports and sea ports.

transportation infrastructure programme, ♦ Inadequate

resource allocation towards infrastructure development

transportation infrastructure Developed

MOT, KPA, RVR, Local Authorities,

8. KAM should propose for the establishment of National Trade and Transport Facilitation Committee (NTTFC):

♦ Provide a coordinated, coherent and harmonious environment to enhance the competitiveness and quality standards of Kenya’s trade and transportation system.

♦ Lack of a well coordinated and inclusive trade and transport mechanism to advise and consult between private and public sector

♦ Fragmented trade and transport associations focusing on narrow areas of individual interest.

♦ An effective National Trade and Transport Facilitation Committee (NTTFC) established

Kenya Shippers Council, KPA, KRA, Ministry of Transport, Transporters Associations


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Expected Out Put


9. KAM should propose at the EAC and COMESA level for harmonisation of commercial vehicles Standards and regulations.

♦ Improve turn around time for the cargo trucks and hence reduce cost of transportation.

♦ Trucks delays on the trade transport route, at the weighbridge and due to police road blocks.

♦ Different countries using Kenyan roads have different regulations and standards to comply with causing delays of cargo.

♦ Harmonised Standards and Regulations for commercial vehicles instituted

EAC, COMESA level and in Kenya to; MRPW, KRB, MOT, Police, KRA, KPA, KEBS, KEPHIS, Kenya Shippers’ Council and Transporters Associations


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Expected Out Put


10. KAM should propose for establishment of Kenya Transportation Safety Board. The board would promote safety on the roads.

♦ Promote transportation safety

♦ High rate of accident on the highways and rail

♦ Poor safety standards and regulatory measures

♦ Kenya Transportation Safety Board established

MRPW, MOT, KRB, RVR, KPA, Police, KRA, Kenya Shippers’ Council and Transporters Associations.

11. KAM and Kenya Shippers Council should propose to the Ministry of Transport to develop Commercial Vehicle Maintenance Standard Regulations.

♦ Promote safety and reduce cost of transportation.

♦ Poorly maintained commercial vehicles

♦ There are no set standards for maintaining commercial vehicles

Commercial Vehicle Maintenance Standard Regulations developed

MRPW, MOT, KRB, RVR, KPA, Police, KRA, Kenya Shippers’ Council and Transport


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Expected Out Put

Implementing Agencies ers Associations

12. KAM should propose for establishment of standards and code of ethics for transporters.

♦ Promote professionalism in cargo transportation

♦ Unethical practices of transporters

♦ Lack of operation and ethical standards

♦ Transporters operation standards and code of ethics established

MRPW, MOT, KEBS, RVR, KPA, Police, KRA, Kenya Shippers’ Council and Transporters Associations

13. KAM should propose for enactment of a legal framework for commercial vehicles driver’s service regulations.

♦ Promote professionalism of commercial vehicles,

♦ Promote

safety and ethical

♦ Long working hours for drivers of commercial vehicles,

♦ Low level of education, unethical practices

♦ Lack of commercial vehicles driver’s service regulations.

♦ Commercial Vehicles driver’s Service Regulations established

MRPW, MOT, KRB, RVR, KPA, Police, KRA, Kenya Shippers’


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Expected Out Put


practices Council and Transporters Associations

14. KAM should propose for enactment or review of Dangerous Goods Transportation and Handling Act.

♦ Protect human life and the environment

♦ Poor handling of dangerous goods

♦ Inadequate legal and regulatory framework is not adequate

♦ Dangerous Goods Transportation and Handling Act reviewed

MRPW, MOT, KRB RVR, KPA, Police, NEMA, KRA, Kenya Shippers’ Council and Transporters Associations


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Expected Out Put


15. KAM should propose for establishment of highways resting facilities with washrooms, food and accommodation facilities.

♦ Promote safety and welfare of the highway users.

♦ Inadequate resting facilities on major trade routes.

♦ No provision for the facilities by various roads and local authorities.

♦ Modern resting facilities developed

MRPW, MOT, KRB, Local Authorities, RVR, KPA, Police, KRA, Kenya Shippers’ Council and Transporters Associations


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Expected Out Put


Proposal No. 12 Kenya Bureau of Standards

16. KAM should advocate for regular and scheduled meetings with stakeholders to discuss and inform on issues pertaining developing, conformity and harmonisation of standards at country and regional levels.

♦ Promote inclusiveness, reduce disputes and transaction costs.

♦ Dispute in application of PVOC on machinery, spares, airlines stores

♦ Lack of

written standards for some products or processes

♦ KAM members are not fully involved in policy formulation on issues relating to Standards Conformity (PVOC)

♦ A stakeholders forum for policy formulation in standards established

KEBS, MTI, Pre-shipment Inspection Companies working with KEBS.

17. KAM should propose to KEBs for harmonisation of standards with various trading partners

♦ Reduce transaction costs

♦ Improve

conformity to Kenyan Standards

♦ High penalties on destination inspection,

♦ PSI delays in

issuing COC

♦ Delays due to varying standards used by different trade partners

♦ Harmonised standards with trading partners attained

KEBS, Ministry of Trade and Industry, Pre-shipment Inspection Companies, Trading


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Expected Out Put

Implementing Agencies Partners with Kenya.

Proposal No. 13 Advocacy to Kenya Plant Health and Inspection Services

18. KAM should propose to KEPHIS to hire and post more staff with adequate skills and facilities in order to enhance the inspection function at various border posts

♦ Reduce delays and promote conformity to SPS requirements

♦ Delays in inspection of cargo

♦ Inadequate staff, equipment and facilities

♦ Adequate staff in all entry and exit points achieved

KEPHIS, Ministry of Agriculture, Ministry of Trade and Industry, KAM

Proposal No. 14 Advocacy to Clearing and Forwarding Agents

19. KAM should propose to Customs and KIFWA to establish Clearing Agents standards and code of ethics in their

♦ Promote professionalism and accountability,

♦ Lack of ethics, accountability and competence.

♦ Lack of Clearing and Forwarding Agents code of ethics

♦ A code of ethics developed

♦ Improved

KIFWA, KRA, KPA, Kenya Shippers


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Expected Out Put


operation.

♦ Improve on

competence

♦ Inadequate

skills and knowledge on trade.

Competence of Clearing and Forwarding Agents

’ Council

Proposal No. 15 Advocacy to Security Agencies

20. KAM should propose for the implementation of motivation programmes for the security staff in order to reduce corruption and reduce delays on the roads. Such programmes include; better working conditions and training on the importance of trade and customer relationship.

♦ Improve on turn around time of trucks

♦ Reduce

corruption ♦ Provide

knowledge on the importance of trade to the economy

♦ Too much delays along the major trade routes

♦ Too many road blocks, corruption, poor public relations,

♦ Well trained security staff on trade and public relations,

♦ Improved turn

around time

Kenya Police, Office of the President, Ministry of Trade and Industry.

Proposal No. 16 Advocacy to Immigration

21. KAM should propose for ♦ Provide ♦ Lack of ♦ Limited use of ♦ An up to date Immigrat


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Expected Out Put


the establishment of an immigration listening website with all necessary information and an effective feedback system which is monitored and updated daily.

information on immigration processes especially work permit.

adequate and easily available information on immigration.

ICT and Kenya immigration website

ion Department


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6.7 Conclusion

The globalisation of business and markets is making it essential for all the countries to conduct their international trade according to internationally agreed norms and standards. Trading that is based on outmoded procedures and documents results in higher costs, longer lead times and lower profits. Kenya needs to adapt to international best practices in trade facilitation in order to remain competitive. Participation of various stakeholders in both public and private sectors in the stages of trade facilitation improves security of the supply chain and promotes SAFE and competitive trade. Trade facilitation reforms should therefore improve the predictability and reliability of shipments and not just focus on reducing average costs and delays.

In Kenya the challenge of trade facilitation which ranges from port congestion, poor road, and rail infrastructure to inadequate implementation of facilitation standards and best practices are major of concern to manufactures, exporters and importers.

Improving on trade facilitation is a must for Kenya if she has to participate in the global market competitively. KAM and other stakeholders must tirelessly continue advocating for trade facilitation improvement if the members are to gain from the trade liberalisation.


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7.0 ANNEX 7.1 Kenya’s Trade Facilitation Questionnaire - a Kenya Association of

Manufacturers Project SECTION A: Identifying the Firm: 1 Name of company:…………………………………………………………….

Address:……………………………………………………………………………

Telephone:… …………………..… E-mail:……………………………

2 Name of respondent:……………………………………..Title:……….………….. 3 Type of business: (Please tick � the appropriate box using the legend below):

a. Manufacturer for domestic and export ……………………….

b. Manufacturer/Exporter only …………………………..

c. Importer for domestic and export …………………………

d. Trading company……………………………………

e. Clearing /forwarding agent……………………………..

f. Transporters…………………………………………..

g. Service Providers ………… (Specify)……………………….

h. Others (specify):……………………………………………………………..

Sector of your company as per KAM directory classification ……………………………………………………………………………… Year established …………………………… Authorized capital …………… (Please tick � the appropriate box using the legend below): Legal status


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- Limited company……. -Partnership……. -Private Company …. - Association -State corporation……. Others (please specify): ………………………………………………………………………………………………………………………………………………………………………………. Ownership Local % ……………………………………… Foreign %……………………….. ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 6. Main import Products a).………………………………………………………………………………………… b)……………………………………………………………………………………………c)……………………………………………………………………………………………d)…………………………………………………………………………………………… 7. Volume of imports in (US$): In the years 2006 ……………………. 2007……………..……. Target for 2008………………………………….. 8. Main export products: a).………………………………………………………………………………………… b).………………………………………………………………………………………… c).………………………………………………………………………………………… d).………………………………………………………………………………………… Export Volume

Volume of Sales Volume of Export in US$

2006 2007 TARGET- 2008

a) Domestic Sales

b) Annual export sales

c) %share in total sales

What has contributed to your company’s competitive advantages of main export products (e.g. (Please tick � the appropriate box using the legend below): Unique technology …………………………….. Novel product attributes ………………………. Competitive cost advantages……………………… The only supplier of the product…………………..


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10. Additional information about the company not recorded elsewhere (e.g,. brief history, special problems, unique characteristics) …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… SECTION B: Challenges Faced While Dealing with Trade Facilitation Agencies 1. Which of the following problems do you face while dealing with Kenya Ports Authority (KPA) and Kenya Airports Authority (KAA) in exporting or importing? Ports Authorities (KPA/KAA) (Please tick � the appropriate box using the legend below): Delays in off loading cargo from the vessels 6 Yes 6 No Delays in on-loading cargo to the vessels � Yes 6 No Delays in processing documents at KPA/KAA 6 Yes 6 No Breakdown or lack of equipments 6 Yes 6 No Delays in sorting out lost or damaged cargo 6 Yes 6 No Poor communication with stakeholders � Yes 6 No Poor customer relationship management 6 Yes 6 No Unpredictable penalties/charges 6 Yes 6 No Corruption 6 Yes 6 No Un-business like attitude of customs staff 6 Yes 6 No Compatibility of computer systems with that of stakeholders 6 Yes 6 No Others (please specify) …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. 1.3 What has been the effect to your business due to cargo clearance problems at KPA or KAA? Incurred high cost � Yes 6 No Damaged/lost cargo � Yes 6 No Loss of business6 Yes 6 No Others (please specify) ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………


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1.4 What should be done to improve the situation at KPA and KAA? ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 2. Which of the following problems do you face while dealing with the Customs Department as a trade facilitating agency in exporting or importing? 2.1 KRA Customs Department: Key Challenges (Please tick � the appropriate box using the legend below): Breakdown of the Simba system for document lodging 6 Yes 6 No Delays in processing lodged document by customs officers’ 6 Yes 6 No Unpredictable penalties/charges � Yes 6 No Resolving queries on valuation and tariff HS codes takes long 6 Yes 6 No Delays in bond cancellation 6 Yes 6 No High valued transit bond for transporters 6 Yes 6 No Post clearance audit 6 Yes 6 No 100% Verification of Goods 6 Yes 6 No Inadequate communication with exporters/importers on changes at the customs 6 Yes 6 No Corruption 6 Yes 6 No Delays in duty refund /waiver 6 Yes 6 No Un-business like attitude of customs staff 6 Yes 6 No Disempowered frontline officers in decision making 6 Yes 6 No Inadequate competence of customs staff 6 Yes 6 No Compatibility of computer systems with that of stakeholders 6 Yes 6 No Others (please specify) ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………… 2.2 What has been the effect to your business due to cargo clearance problems related to Customs Department? (Please tick � the appropriate box using the legend below): Incurred high cost � Yes 6 No Damaged/lost cargo 6 Yes 6 No Loss of business 6 Yes 6 No Others (please specify) …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. …………………………………………………………………………………………… 2.1 Please make suggestions on how to reduce these challenges faced at the customs ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..


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3.0 Transportation Systems: Which of the following problems do you face in dealing with cargo Transportation Systems in Kenya and especially in exporting or importing? 3.1 Transportation Problems experienced (Please tick � the appropriate box using the legend below): Poor road infrastructure 6 Yes 6 No Inadequate wagons and rolling stock capacity for RVR to transport cargo from the port 6 Yes 6 No Delays at the exit gate of the KPA due to long processes of checking cargo 6 Yes 6 No Inadequate trucks to transport cargo 6 Yes 6 No Lack of adequate resting facilities for long distance transporters 6 Yes 6 No Delays at the weighbridges6 Yes 6 No High toll charges on the road 6 Yes 6 No Disharmonised axle load limits in different countries within the region 6 Yes 6 No Too many road stopovers along the key trade routes 6 Yes 6 No Police road blocks 6 Yes 6 No Incidence of Cargo loss or damage 6 Yes 6 No Delays at the border points 6 Yes 6 No Inadequate competence and skills for the long distance drivers’ 6 Yes 6 No Claim processing in Cargo Insurance6 Yes 6 No Others (please specify) ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 3.2 What has been the effect to your business due to problems related to transportation systems? (Please tick � the appropriate box using the legend below): Incurred high cost 6 Yes 6 No Damaged/lost cargo 6 Yes 6 No Loss of business 6 Yes 6 No Others (please specify) ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 3.1 What can be done to improve the transportation systems? ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 4. Which of the following problems do you face in dealing with Kenya Bureau of Standards?


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4.1 Kenya Bureau of Standards (Please tick � the appropriate box using the legend below): Delays in inspection and testing for conformance to standard 6 Yes 6 No Application of Import Declaration Form 6 Yes 6 No Services from the Pre-shipment Companies 6 Yes 6 No Obtaining product information from suppliers to facilitate the processing of certificate of conformance 6 Yes 6 No Taking bigger samples than necessary for testing 6 Yes 6 No Inadequate competence and skills for KEBs staff. 6 Yes 6 No Inadequate laboratories facilities6 Yes 6 No Others (please specify) ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 4.2 What has been the effect to your business due to problems related to Kenya Bureau of Standards? (Please tick � the appropriate box using the legend below): Incurred high cost 6 Yes 6 No Damaged/lost cargo 6 Yes 6 No Loss of business 6 Yes 6 No Others (please specify) ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 4.3 What can be done to improve trade facilitation by Kenya Bureau of Standards? ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 5. What problems do you face in dealing with Kenya Plant Health and Inspection Services (KEPHIS)? (Please tick � the appropriate box using the legend below): 5.1 KEPHIS Delays in inspection and testing 6 Yes 6 No Centralized laboratories 6 Yes 6 No Unaccredited and ill equipped laboratories 6 Yes 6 No Others (Please specify) ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 5.2 What can be done to improve trade facilitation by KEPHIS? ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 6. What problems do you face in dealing with Department of Veterinary Services (DVS?)


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6.1 Problems with DVS (Please tick � the appropriate box using the legend below): Delays in inspection and testing 6 Yes 6 No Centralized laboratories 6 Yes 6 No Unaccredited and ill equipped laboratories 6 Yes 6 No What can be done to improve trade facilitation by DVS? …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. 7. What are some of the problems you experience with your clearing and forwarding agent (s) Problems with Clearing Agents (Please tick � the appropriate box using the legend below): Accountability 6 Yes 6 No Transparency 6 Yes 6 No Incompetence Customer Relationship Management 6 Yes 6 No Others (please specify) 7.2 What can be done to improve trade facilitation by clearing agents? …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. 8. What are some of the problems you experience with security agents at the ports and on thee highways? Security Measures (Please tick � the appropriate box using the legend below): Police road blocks Corruption Un-business like attitude of security agents Others (Specify) ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 8.2 What can be done to improve trade facilitation by security agents ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 9. What are some of the problems you experience with certificates of origin? 9.1 Problems with Certificate of Origin (Please tick � the appropriate box using the legend below): Non-acceptance of COMESA certificate of origin Incompetence and lack skills on rules of origin Certificates of origin provided after the goods arrival


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Others (specify) ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 9.2 What measures can be taken to improve the certificate of origin challenges? ……………………………………………………………………………………… ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 10 What are some of the problems you experience with the immigration department? 10.1 Visa requirements problems Delays in issuing work permits Scarcity of specialized labour skills Others (specify) ……………………………………………………………………………………… ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 10.2 What can be done to improve trade facilitation by immigration department? ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 10. 3 What are the effects of all the visa acquisition to your business? ……………………………………………………………………………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………… 10.4 Please suggest how these challenges could be dealt with ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 11.0 In all the above problems what should Kenya Association of Manufacturing (KAM) focus on in its advocacy role? Please list your suggestion below: ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… EXPORT/ LOGISTICS ORGANISATION Logistics personnel How many professionals in your firm specialize in logistics?


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None ______ ________: For these employees please indicate Responsibilities Qualifications Experience (in years) ………………………. ……………….. …………………… ………………………. ……………….. …………………… ………………………. ……………….. …………………… ………………… ……………………. What kind of organisational arrangement does your firm have for its Import/export operations? Export unit handles export……………………. __ Same person/unit handling domestic sales /exports __ Import unit handles imports………………………. __ Import/export units are combined …………… __ External agents/trading company handle exports/imports __ Other (Please specify) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, …………………………………………………………………………………………………………………………………………………………………………………………………………… **********Thank for your time***********


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B. QUESTIONNAIRE FOR INSTITUTIONS/ ASSOCIATIONS Name of Ministry/Department: Nature of activity/ Business:……………………………………………………...……………… Name of responding Officer: ……………………………………………………………………. Designation: ………………..……………..……………………………………………………. Postal Address: ………………………………………………………………………………….. Phone: ……………………… Fax: Office E-Mail: …………….……………………………… Personal Email: …………………………….. What are the key mandates of the organisation? ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 2. What are some of the key challenges you are facing which have a bearing on: …………………………………………………………………………………………………………………………………………………………………………………………….. Policy (Government/Organisation) ……………………………………………………………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… Legal Framework (Law establishing the institution) ……………………………………………………………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………… Institutional Capacity ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… Human Capacity ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 4. How do you communicate with the stakeholders? Mail 6 Yes 6 No Phone 6 Yes 6 No Customer relationship management system 6 Yes 6 No Meetings 6 Yes 6 No


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5. How often do you have meeting with trade associations such as Shipping lines, KIFWA, KAM, Transport Associations and others to discuss issue relating to your service delivery? Once a week 6 every two weeks 6 every month 6 After six months 6 Once a Year 6 Never 6 6. Has your organisation categorized its customers/stakeholders into e.g high/low volume, frequent/rare importers/exporters? 6 Yes 6 No 7. What benefits do you give to each of these categories? High, low volume, frequent and rare importers/exporters? ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… For Customs Department Only What valuation methods are currently in use? WTO ACV……………………………. Others………………………………… a. Are these methods consistent in all ports of entry? b. How do you ensure consistency in the methods used? 9. “Un-business like attitude of customs staff” A comment made by some of the importers/exporters. 6 True 6 False 6 N/A 10. If the statement is true, what do you think should be done to improve on the attitude? ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 11. Do you carry out regular training of your officers who deal with importers/exporters on a daily basis? 6 Yes 6 No


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12. What kind of training do you carry out? Customs Profession only 6 Simba System Operation 6 Other Computer Skill 6 Customer Relation Management 6 Business Management Skills 6 Others (Please specify) ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 13. Do you think the importers/exporters and clearing agents and other port users need training? 6 Yes 6 No


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7.2 Respondents to the Study by KAM Members Table 8

Name of Company

Respondent Postal Address Telephone

1. Galana Oil (K) Simon Gatuhi 11674 020-340713 2. H.Young and Co. Festus Muthengi 30118 00100 530145 3. Ashut Engineering R.D. Shah 44669 00100 651166 4. Chania Feeds

Manufacturers Rosemary Kirika 1780 0100 2011547

5. Manji Food Industries Limited

Christopher Nzioka 78277 00507 020555167

6. Regal Pharmaceuticals Bindi Shah 44421 0208564211 7. Phillips Pharmaceuticals

Ltd Daniel Ngure 46662 823660

8. General Motors East Africa Gerald Muli 30527-00100 0206936305 9. Statpack Industries Fred Amalemba 22015 00400 020821404 10. Expolanka Freight Michael Osinde 49096 3512122 11. Bayers East Africa 28608 8560667 12. Worldwide Sires E.A Elizabeth Munene 7940 00100 020245313/4 13. Steel Structures Victor Ndege 49862 020781479 14. Henkel Kenya Junior Muema 40050 8561891 15. Kenya Airways Limited Stephen Odhiambo 19002-00501 6423009 16. Laboratory and Allied Manesh Patel 42875 00100 530101 17. Ecolab E.A (K) Kenneth M. 63497 00619 8560547 18. Dawa Limited Jedidah Mwangi 16633 00620 8561554 19. Assia Pharmaceuticals Ltd Richard Kimani 30620 -00100 537622/6 20. Toyota East Africa Lillian Wambugu 3391-00506 6967350 21. Philip Wangombe Promasidor Ltd 10336-00100 0202053027 22. Nutro Manufacturing (EPZ) Factory Manager 10100 04526205 23. Kenol/Kobil Lubricants

Suppliers 30322 -00100 249333

24. Maersk Mr Madeep 25. Kenya Bureau of Standards Jennifer Kyenze 99376-80100 072411116 26. Kenya Roads Transport Shanti Shah 556767 27. Swifttruckers Limited manyatta 0723114055 28. Sara lee Kenya Benson Lubembe 30457-00100 3635000 29. Wilmar Agro ltd Ruth Muiruri 1682-00100 0202096452 30. Polythene Industries Ltd V.S. Rao 17931-00500 3517940 31. Elys Chemicals Industries

Ltd Ashok Patel 40411-00100 020650503

32. Prestige Packaging ltd Mr. Shah Mitul 48826 33. Bidco Oil Refinaries 239-0100 067 282100 34. East African Foundry Works Veronicah Kiarie 48624-00100 35. Murphy Chemicals E.A Musyimi P.M. 20415-00200 2017992 36. Beth International ltd Sarah Gatura 42542 00100 2225735 37. Osho Chemicals Kampesh Parekh 49916 00100 533621 38. Siginon Freight Ltd Grace Obuki 55953 00200 822600 39. Alpha Knits Ltd Hiran G. Bid 47018 00100 06754722 40. Pipe Manufacturers Ltd Hardip Singh 18628 00500 823422


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7.3 Respondents to the Study by Trade Facilitating Agencies

1. Kenya Revenue Authority, Nairobi, Mombasa, Namanga, Busia, Malaba

2. Uganda Revenue Authority – Malaba

3. Kenya Airport Authority , Nairobi, Mombasa

4. Kenya Ports Authority, Nairobi, Mombasa

5. KIFWA, Mombasa, Nairobi

6. RVR, Mombasa, Nairobi

7. KEBS, Mombasa, Nairobi, Namanga, Busia

8. KEPHIS Mombasa, Nairobi, Namanga, Busia

9. Departments of veterinary services, Namanga, Nairobi

10. Ministry of Public Works-Axle Load Limit Unit, Nairobi (HQS), Mlolongo

11. Ministry of Transport- Nairobi

12. Trade facilitation agencies, Ministry of Trade and Industry, Municipal

Council, Busia


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7.4 Bibiliography:

1. Dr. Esther Kimani, Capacity Building Program for SPS Systems, 2006

2. World Customs Organisation, Customs International Benchmarking,

Benchmarking Manual

3. World Customs Organisation, Revised Kyoto Convention, 1999

4. World Customs Organisation, SAFE Framework Standards, 2007

5. OECD, The Costs and Benefits of Trade Facilitation, 2005

6. UN/CEFACT, United Nations Layout Key for Trade Documents,

Recommendation 1, 2001

7. Kenya Revenue Authority, Time Release Study, 2004

8. UN/CEFACT, National Trade Facilitation Organs, Recommendation 4

9. UN/CEFACT, Facilitation Measures related to International Trade

Procedures Recommendation 18

10. European Commission, Benchmarking Trade Facilitation, 2007

11. Pakistan International Freight Forwarders Association, Standard

Trading Conditions for Freight Forwarders, 2005

12. KPA/KRA, Development of The Community Based System In Kenya,

September 2007


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