Thursday, June 20, 2024
BusinessRailway demurrage suffocates exporters, importers

Railway demurrage suffocates exporters, importers

EDR decries cargo delays are costing operations

Exporters, importers, and logistics companies are irked by the Ethio-Djibouti Railway’s (EDR) exorbitant demurrage charges for small delays. As an alternative to railway transportation, a significant number of businesses are switching to trucking.

Currently, the railway company is penalizing 32,000 birr per wagon if it is delayed by nine hours at Djibouti port or at Endode railway station, the beginning point near Addis Ababa.

The penalty reaches up to 42,000 birr if a wagon is delayed by 12 hours. The charging rate also varies from client to client.

“After the rail-wagon arrives at Djibouti or Endode, it takes some hours before the cargo is unloaded. The penalty rises very fast. They want the containers to be unloaded immediately after the wagon arrives at its destination,” a manager at one of the leading logistics companies in Ethiopia said.

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The manager says it is difficult to unload or load exactly when the wagon arrives. “There are also various issues delaying our operations.”

The penalty is double the railway transport cost between Djibouti and Ethiopia. Transporting a 40-foot container between Ethiopia and Djibouti costs 17,206 birr, while two 20-foot containers cost 17,506 birr.

“The railway transport cost between Ethiopia and Djibouti is cheaper, compared to trucks. It is also safer and faster. However, demurrage costs have become a big headache for us. We have been complaining to EDR for months,” said an exporter who talked to The Reporter on the condition of anonymity. “But currently, we have shifted to using trucks.”

However, according to officials at EDR, the source of the problem mainly emanates from transit companies and cargo owners.

“We have analyzed most of the causes of those complaints. But the source of the complaints is usually the cargo owners themselves. There is tons of paperwork that delays our wagons both in Ethiopia and Djibouti, including LCs, customs, and other documentation processes,” a senior official at EDR said.

The official says there are also challenges until the cargo arrives at the railway stations. “All these challenges should not be a concern for EDR. The central bank, customs commission, transporters, cargo owners, and other stakeholders must undertake their duties on time. The EDR cannot take responsibility for other institutions’ inefficiency.”

A rail-wagon must arrive according to the railway’s schedule. But exporters and importers usually fail to honor the time. If a rail wagon is delayed by even an hour, it has a huge impact on the EDR, according to the official.

“The ships at Djibouti cannot wait for us. They always operate on a time schedule. So when they miss our cargo, it is a huge cost for EDR. That is why we must put pressure on cargo owners to be precise. Otherwise, the whole system fails to interface with the sea shipment system. Our rail-wagons take 15 hours to reach Djibouti, maximum,” the official said.

Since the time the ships have to get the containers at Djibouti port is known, the official says, all clients are notified of the precise time schedule in advance. “The inland and sea schedules must be aligned. To avoid any delays, we must maintain a stiff penalty on exporters and importers.” 

On the other hand, cargo owners, the central bank, customs and other stakeholders blame each other. Of course, cargo owners do not know or undertake the nitty-gritty of the import-export process since they outsource the task to transitors.

Most Ethiopian import/export companies outsource almost all the tasks to transitors, who finalize everything from paper work to delivering the cargo.

Just like Ethiopian exporters and importers are represented by Ethiopian transitors, there are counter transitors on the Djiboutian side. The Ethiopian transitors usually email or phone their Djiboutian counterparts and tell them they have dispatched cargo from Ethiopia and vice versa.

However, Ethiopian transitors have no control since it is difficult to find information regarding the process in Djibouti, which also contribute to delays.

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