Annex 5: Import-Export Transaction and Freight Forwarding (Ethiopia)

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1 Annex 5: Import-Export Transaction and Freight Forwarding (Ethiopia) 1. Background Forwarders play a crucial role in the import and export logistics activities of Ethiopia. Currently, there are more than 200 licensed/registered transit operators conducting business in the country. The Maritime and Transit Service Enterprise (MTSE) is the only state owned agent working in this field of activity. All other operators are privately owned and operated. The work of freight forwarders is closely tied with the Customs Authority, transporters, shipping lines, Djibouti port and other Djibouti based forwarders. MTSE is the only Ethiopian company operating in Djibouti legally. However, other Ethiopian companies operate in collaboration with legally registered operators in Djibouti. The Government of Djibouti has restricted all activities related to forwarding to its own nationals, and only MTSE operates legally in Djibouti based on a bilateral agreement. Therefore, all other Ethiopian freight forwarders incur additional overhead costs by deploying employees that facilitate their jobs at the port. This is necessary since registered Djibouti transfer agents do not deliver the required services efficiently and effectively. Note that representatives in Djibouti serve only as facilitators under the umbrella of registered Djibouti forwarders. In general, forwarders provide essential services to importers and exporters by processing and fulfilling all the required logistical activities on behalf of the buyer and the seller by filling the gap left after processes at their respective banks are completed. In principle, forwarders provide the services, but ultimately it is the importer or exporter that pays all costs related with the transactions. In addition, forwarders charge a percentage or unit rates per transaction depending on the type of the service provided. The overall fees charged are estimated to fall approximately 3 percent - 5 percent of the total cost an exporter or importer pays for transit services. 2. Activities Involved in Export Logistics The activities involved in export starting from the exporter s presentation of his export permit to the transit service provider of his choice up to the loading of the cargo on the designated vessel. Communication of information to the exporter on the departure of the 439

2 vessel is summarized in Table 257 below. Any vessel from any shipping line can be used for export, as there is no limitation unlike for the import case where only Ethiopian Shipping Line (ESL) is to be used unless cargo comes from a port where ESL does not call. 440

3 Table Table 257: XXX: Summary Summary of Freight of Freight Forwarding Activities SN Activities Outcomes Time taken Costs Remarks 1 Exporter presents Export Permit from National Bank of Ethiopia to Forwarder 2 Documents presented by forwarder to Customs Authority 3 Arrange transporter to take cargo to Djibouti 4 Loading, Inspection by Customs, Sealing (plumbing) and allow cargo for transport to Port 5 Transport to Djibouti by trucks 6 Processes for unloading in Djibouti Pay road toll Pay gate pass fee at entrance to port Arrange for empty containers and clean them for stuffing of bulk items Arrange for equipments for unloading and loading 7 Arrange for loading on vessel Port Cleaning fee Bill of Lading (B/L) fee to liners Craft Paper fee Other port handling costs such as equipment rentals and labor costs Acceptance letter issued by the Authority Transport organized Cargo delivered at Djibouti Trucks allowed to enter port & unload; items stuffed in containers and made ready for loading onto vessel Very short i.e. within a few hours Less than a half day 441 ETB 35 paid for Revenue Stamp Very high and recommendable priority given for export processes 1-2 days Loading of bulk materials in Addis stuffing into containers in Djibouti Shortage of inspectors acute and cause for delays 2 3 days ETB (US$ Transporters taking cargo in bulk i.e. not in containers spend 3-5 days till containers are found Total days 52.6)/ton ETB 125/truck $17 per 20 container** $30 per B/L $15 per 20 container Containerization in Addis to be highly recommended for its many advantages and benefits to all stakeholders involved* Both Port Authority and liners are escalating costs e.g. Craft paper for container lining used to be for free port cleaning fee newly introduced

4 *Shortage of empty containers in Djibouti is considered to be one of the biggest problems in the export activity and an inhibitor preventing forwarders from being more competitive Savings from labor cost for stuffing bulk material into containers ( less in Addis than in Djibouti) Stuffing done in the presence of owner/ representative, product mishandling avoided, quality of delivered item improved Truck turnaround time greatly reduced (only one day could suffice to unload container) with no time lost searching for empty containers. More efficient transporters could even reduce tariffs if they know there is less time to wait for unloading at the port Vessel lines will be loaded much faster Less follow up costs for forwarders Less costs for exporters ** Charges and fees for 40 containers are double that of 20 containers ***Currently, five shipping lines calling at Djibouti port, including ESL, have carrier agents that issue B/L within 15 minutes after loading. It is therefore recommended that all shipping lines have their agents locally that are capable of issuing B/L in time in order to increase the competitiveness of forwarders and exporters. Source: Global Development Solutions, LLC 3. Logistics for Import Activities 1. Obtain Transit Declaration (which is in effect and Import Permit) from customs authority based on shipping documents collected from the bank. This activity takes two days but could be reduced to a day. The Customs Authority claims to complete issuance of the permit within eight hours after importer or his agent (forwarder, delegated in writing) presents full documentation to the customs. 2. Documents are sent to Djibouti by courier to process clearance from port and arrange transport to the hinterland. 4. Pay Port Fees for Storage Storage grace period has been reduced from 30 days down to fewer days from date of cargo unloading at the port and it varies depending on the shipping line as shown in Table 258. Table 258: Storage Grace Period per Shipping Line Shipping Line Grace Period MESINA 15 PIL 10 ESL 8 MSC 10 MAERSK 10 Source: The Maritime and Transit Service Enterprise Almost all importers incur storage fees due to 442

5 Lengthy processes to acquire a permit, Time required to send documents to Djibouti, Completing the administrative process in Djibouti; and Arranging for transport. Negotiation with the Djibouti government is required to re-establish the previous 30-day grace period. Steps after arranging for transport include: Arrange insurance inspection (otherwise no eligibility for claims for damages that may have taken place). Inspection time depends on the size of cargo but does not take more than half a day. Pay container demurrage based on size of container and the operating shipping line as shown in Table 259. Table 259: Container Demurrage Based on Size and Operating Shipping Line Line Grace Period 1st phase (US$) 2nd phase (US$) thereafter (US$) (Days) 20' 40' 20' 40' 20' 40' MESINA PIL ESL MSC MAERSK Compiled by Global Development Solutions, LLC Arrange transport from Djibouti port to Addis Ababa. Cost of inland transport as of December 2010 is shown in Table 260 below. Moreover, unstuffing of a 20- foot container in Djibouti costs US$50. Table 260: Inland Transportation Cost from Djibouti Djibouti to Djibouti to Semera Modjo dry port (US$) (US$) Djibouti to Addis (US$) 20' return empty container Full 40' container ( cost per ton) >30 ton ton ton Return empty container Global Development Solutions, LLC 443

6 Once cargo arrives at the customs warehouse, unstuffing/unloading, customs inspection and loading onto trucks takes place. Waiting for inspection at customs, however, takes up to seven days, as there is a dire shortage of inspectors as well as strict inspection processes. Consequently, unnecessary storage fees are paid to Comet Transport Enterprise (a state owned enterprise the premises of which customs are using in Addis). Materials on truck, however, can be inspected in half a day. 5. Critical Issues Exporting companies who import inputs do not get the preferential treatment in a similar way as when they export. Exporters get preferential treatment in export. The exporter also gets good treatment in the import process through a separate window reserved for them. It can generally be said the treatment is better when exporting than importing inputs. Lack of available containers (refer to end notes to Table 257). The critical shortage of inspectors contributing to delays. Transport-containerized cargo is not allowed to an exporter s warehouse. Allowing this and conducting inspection at the exporter s factory premises would save costs of additional unloading and loading. An alternative would be to allow importers to use a bonded warehouse. This, however, would only save storage costs. 444

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