International traders can't interpret trade terms

By Prossy Nandudu

The lack of knowledge to interpret international terms of trade (INCOTERMS) is to blame for the high cost of doing businesses among importers and exporters, the secretary general of the Uganda Shippers Council, Amos Kankunda says.

She said many importers do not understand international terms of trade such as Cost and Freight, Free on Board and Cost Insurance and Freight (CIF), yet in Uganda, taxation is done based on CIF.

“This means that a Ugandan trader who is importing or exporting goods has to pay freight costs in the East African region, whose headquarters are based at Mombasa, in addition to cost of goods, insurance and freight charges for the goods,” explained Kankunda.

“If a Ugandan trader is able to understand these terms, then they will be in position to secure a local shipping line and pay a slightly lower cost compared to paying from the country where the goods are coming from.”

Kankunda was speaking at a three-day workshop on INCOTERMS for importers and exporters from the East Africa region at the Sheraton Kampala Hotel recently.

The training was aimed educating international traders best practices in handling INCOTERMs and other international freight transactions.

It is expected to contribute to reducing the cost of cargo handling and shipment along East African corridors by enabling importers and exporters to efficiently apply proper commercial terms and practices.

Kankunda said the application of inappropriate commercial terms, insurance policies and inefficient processing of various trade transactions when importing or exporting goods are some of the causes of the high cost of doing business in the region.

It is estimated that transport costs make up 30% to 40% of CIF value of imported goods in East Africa, compared to about 5% to 10% in other regions.

The training was organised by Trade Mark East Africa, with the Kenya Shippers Council and the Intergovernmental Standing Committee on Shipping.