Ethiopian Freight Forwarders and Shipping Agents Association

EFFSAA Weekly Newsletter Vol. 02 No. 098

International Trade and Import Procedures Training Concludes Successfully

International Trade and Import Procedures Training Concludes Successfully
International Trade and Import Procedures Training Concludes Successfully

The 6-day training program, “International Trade and Import Procedures of Ethiopia,” wrapped up on the 3rd February 2024, equipping 35 professionals from various institutions, including EFFSAA member companies, with valuable knowledge.

24 hours spread across six consecutive days, participants explored deep into the intricacies of international trade, customs procedures, INCOTERMS (International Commercial Terms) etc.

Feedback from the trainees was overwhelmingly positive, highlighting the program’s effectiveness in providing them with the necessary skills and knowledge.
Our association extends its sincere gratitude to all participants for their active engagement.

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From Djibouti’s Grip to Keya’s Embrace

Ethiopia is preparing to send its first shipments through Kenya’s Port Lamu, in a move to diversify its trade routes and reduce heavy reliance on ports in Djibouti.

Set to commence with fertiliser imports within the next two months, the move represents a broader strategy to secure alternative maritime gateways, according to Alemu Sime (PhD), minister of Transport & Logistics. He told Parliament last week that Ethiopia is eyeing the Kenyan port for trade activities, including exporting livestock through the Southern border.

Djibouti ports, operated by the Djibouti Ports & Free Trade Zones (DPFTZ), have served as the main entrance point for fertiliser inbound to Ethiopia through its 18 berths over the last two decades, costing Ethiopia around 1.5 billion dollars annually. From the 7.6 million tons of freight goods imported or exported in the past six months, 95.1pc went through Djibouti, with Tadjoura Port accounting for 2.75pc. The remaining 1.78pc was processed through the Berbera Port in Somaliland, with 0.2pc coming through Sudan.

Two months ago, leaders of the Ethiopian Freight Forwarders & Shipping Agents Association (EFFSAA) raised concerns about the stringent requirements on imports through Djiboutian ports.

Ethiopia’s interest in Port Lamu comes at a time when the logistics and trade dynamics in the Horn of Africa are increasingly complex. Ethiopian officials believe the region’s strategic importance, coupled with ongoing geopolitical shifts, demands a diversified approach to international trade. According to Alemu, by tapping into Port Lamu, Ethiopia aims to secure a more stable and efficient route for its trade.

The logistics industry veterans, including Daniel Zemichael, former president of the EFFSAA, stressed the need for infrastructure upgrades and policy harmonisation with Kenya. These include increasing the maximum load capacity for trucks at the border and updating insurance policies, which are critical steps to ensure smooth trade operations through Port Lamu. He supports the idea of diversifying access, particularly to facilitate shipments of essentials like fertilisers or aid during exceptional circumstances such as the ongoing attacks on ships by the Houthi military in Yemen.

“The Red Sea has everyone concerned,” said Daniel.

According to Daniel, Lamu’s current capacity is well-suited for fertiliser shipments. However, he stressed the crucial role of private investment in both Lamu and Berbera ports for long-term success.

“Strategic foresight in the protocol agreement will be critical,” Daniel said.

Daniel recommends prudent planning to capitalise on the potential for lower logistics costs offered by the Lamu Port.

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Logistics Industry Expresses Concerns Over New Directive Permitting Private Sector Participation in Dry Ports

(This news was first shared on Misrab radio program, which is produced and hosted by EFFSAA on Ahadu Radio 94.3 FM.)

The Ministry of Transport and Logistics (MoTL) is in the process of drafting a directive to allow private sector involvement in the dry port scheme as part of efforts to liberalize the logistics industry. However, logistics actors have raised concerns, stating that the proposed directive fails to consider the practical realities on the ground.

During a meeting held on January 30 at the Ethiopian Maritime Authority’s premises, logistics actors reviewed the draft paper, which outlined expectations of private sector investment from both domestic and foreign businesses. The draft directive specified that private sector participation would be limited to a special terminal.

Despite the government’s intentions to liberalize the logistics industry, local logistics actors expressed dissatisfaction with the proposed directive during the conference. They argued that the directive did not consider the challenges faced by logistics businesses in Ethiopia, particularly in acquiring the specified land.

Logistics players highlighted the difficulty in accessing 5,000 to 10,000 square meters of land for warehouse construction, stating that the directive did not account for the capabilities of local logistics actors. They suggested that the directive might be more feasible for foreign investors rather than local businesses, unless through joint ventures.

Local logistics players expressed concerns that failure to address these issues could lead to the dominance of foreign investors in the industry. They emphasized the gradual development of capacity to meet the sector’s demands.

Currently, dry ports in Ethiopia are owned and operated by Ethiopian Shipping and Logistics, a state-owned logistics company with a monopoly on dry ports for multimodal transport services since 2009.

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Red Sea Conflict Seen Doubling PH Logistics Costs

The Italian Chamber of Commerce in the Philippines (ICCP) has voiced concern over the impact of the situation in the Red Sea, fearing that the conflict in the commercial sea lane will double the already high logistics costs of their member-companies operating in the Philippines.

Last week, ICCP executive director Lorens Ziller said that the main issue that their members will face are higher logistics costs as shipping firms are expected to take alternate routes to avoid the Red Sea, where an estimated 12 percent of global trade passes through the Gaza Strip.

In the Philippines, at least 84 export enterprises said they see a significant impact of the conflict, according to a survey conducted by the Philippine Economic Zone Authority. This includes delays in import shipments of goods ranging from seven to 20 days, as well as longer lead times and reductions in production capacity resulting from the rearrangement of vessels for materials coming from Europe.

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Chinese Ships Get Cheaper Insurance to Navigate Red Sea

CHINESE-owned merchant ships are getting hefty discounts on their insurance when sailing through the Red Sea, another sign of how Houthi attacks in the area are punishing the commercial interests of vessels with ties to the West.

While the overall picture is mixed, some Chinese-linked vessels are having to pay as little as 0.35 per cent of their hull and machinery value to obtain insurance for transit, according to sources involved in the market. Most ships are paying somewhere between 0.5 per cent and 0.75 per cent – although that can vary significantly, they said.

The discounts would translate into savings of US$150,000 and US$400,000 for a transit of a vessel with a hull-and-machinery value of US$100 million.

It means the Chinese carriers are gaining another edge in addition to being able to use a short cut between Asia and Europe in relative safety. Hundreds of ships are simply avoiding the area, sailing thousands of miles around Africa instead. Since the attacks mushroomed, there have been no reports of significant damage to Chinese-owned vessels.

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