Why trade facilitation matters
Ghana: Chartered Impex
Based in Ghana’s capital, Accra, Solomon Benjamin has been in the pineapple business since 1997, selling pineapples for juices as well as salads. Some of his fruit is targeted for domestic consumption, but most is exported to Germany, France, Italy and North Africa. Today, more than 100 people work for his company, Chartered Impex Ltd, of which he is the Managing Director. The company exported approximately 3,000 tons of pineapple in 2015—a difficult year due to low rainfall that affected produce. Business has been good in general, says Solomon. His company has been growing “significantly” in recent years. Weather patterns, however, are not the only factors casting a degree of unpredictability on his supply chains.
When asked whether it has become easier for him to export, Solomon replies that it has actually become more complicated, with control mechanisms designed to crack down on illicit trade at ports cutting across to other products, including his time-sensitive pineapples.
At the airport for example, Chartered Impex must arrive with its pineapples before customs and other regulatory authorities close for the night, which itself is a challenge given the unpredictable traffic situation on Ghana’s highways. “What we go through before getting to the airport is already a problem,” Solomon notes. Several government authorities must then scan the goods before undergoing physical checks, after which they must get to the plane on time. At the seaport, there is a danger of missing the vessel that takes the pineapples to their destination. This means the company must not only wait an extra week for the next ship; it must also pay for the storage and electricity that keeps the fruit fresh in the meantime. All of this risks delaying the delivery of the pineapples, which have a very clear expiry date.
“It’s not that we are against the process,” Solomon maintains, “it is about improving the efficiency of the process. Predictability is crucial [when] you’re dealing with perishables. If your transit time is 10 days, it should take 10 days, not 12 or 14.”
Nevertheless, Solomon says he remains more positive than negative about the future of trading internationally from Ghana, arguing that relatively small reforms could make a big difference for his company. “If we could get a separate scanner for perishables [for instance], that would solve the problem,” he offers. “When you stay in the queue for hours, it affects the quality of the product. We say time is money, and that is true.”
Kenya : Royal Garments Industries EPZ Ltd
The first time Sharon Kimanini engaged in international trade was when she joined the procurement team of Royal Garments Industries EPZ, a Kenyan company that supplies approximately one million items of clothing each month to clients in the United States. Royal Garments sits at the centre of its global supply chain, importing fabric from China, Hong Kong and Dubai that it then manufactures into hospital uniforms and other garment pieces in Kenya before shipping them stateside.
After gaining experience in procurement alongside her American and Kenyan colleagues, Sharon slowly moved into the shipping department, dealing with import and export documents. Today, she serves as the company’s Head of Logistics, overseeing the company’s global logistics operations.
“There are so many processes, so much documentation,” Sharon says when asked about the key challenges of her work. A recurring problem is the temperamental computer systems on which everyday customs operations depend.
“We use a system for booking shipping containers. If it’s not working, you can never pick up a container. We have a customs system. If it’s down, you can never have the export documents.
For Sharon, the key issue is efficiency. “Sometimes you’re stuck for three days,” she explains. “You have the entry in the system but the system is down and the customs officers will never release your shipment unless they see the message online.”
When Sharon’s garments are delayed, Royal Garments must pay for the cost out of pocket, sometimes resorting to expensive air shipments to make sure clients get their orders on time.
Sharon offers an example: “Maybe I was supposed to produce 1,000 pieces and was only able to get 500 to the ship on time. I would then have to airlift at my own cost, and airlifting to Dallas is US$3.30 per kilogram.”
Importing can also be burdensome, as Royal Garments must consult individually with a host of public authorities, including the Kenya Trade Network Agency (KenTrade), the Kenya Revenue Authority (KRA), the Kenya Ports Authority (KPA) and the Kenya Bureau of Standards (KEPS) during the process. “It’s like you have to deal with everybody,” says Sharon.
What kind of trade facilitation reform would be most meaningful for her business?
“If we could have a centralized information centre and deal with just one body instead of KenTrade, KRA, KPA… it would be much easier. A centralized place of clearance could solve anything.”
Colombia: Calderas Continental
Founded in Bogotá, Colombia 49 years ago, Calderas Continental began by buying technology from a recently closed Pennsylvania (USA) boiler company. Calderas initially imported boilers from the U.S. while the dollar-Colombian peso exchange rate was stable, then eventually built its own steam boiler and hot water boiler manufacturing workshops in Bogotá. Now, in 2016, the company employs 36 people and imports only around 10% of its basic building materials.
“We started trading internationally with a dairy company in Venezuela,” Gonzalo Gomez, General Manager, explains. “Now Venezuela is one of our main targets. It’s a really good market for us.”
Calderas also exports boilers to Ecuador, Nicaragua, Guatemala and Peru—countries Gonzalo describes as “really diverse and really difficult” because of the varying customs procedures and requirements.
“This region is a tough neighborhood,” says Gonzalo. “Each country has its own personality, which changes a lot. You might think you know all the paperwork for one export to Venezuela, but if we’re going to trade with Ecuador, it’s a different situation.
“You get all your papers, you hand them in and usually there’s something wrong but you don’t know what. Someone will come up with something you had no clue that you needed—an extra copy of something or a whole other paper.”
Crucially, a missing document and other bureaucratic mysteries often lead to rigorous physical inspections, increasing the time and cost of trading. “For three major boilers we shipped last year, we weren’t able to submit our certificate of origin online and had the DIAN [Colombia’s National Taxes and Customs Direction] in our office for three days checking everything in the boilers,” Gonzalo says. “With physical inspection, they check everything.”
The complexity and diversity of export procedures have led Calderas to sell most of its boilers ‘Ex Works’: buyers pick up the equipment in Colombia and take on the export responsibilities themselves.
“If we could have one standard trade system for all the countries in the region, then we could export ourselves. Because they’re all different, we need somebody that knows all the little details. If that standard system could be on the internet as well, that would be amazing. The less time you need to spend on customs, the easier life is.”