5 Strategies for the Development of Food Importers and Exporters in Africa

During the pandemic, logistics activities in foreign trade were also affected, the global container crisis began and its impact still continues. There were also some changes in customs, as they have found their space in digitalization process, and some changes in the way of doing business.

In this interview, we discussed the ongoing global container crisis and the digitalization process in customs after the pandemic with Yahya Erdogan, the founder of Hür Line Customs Consultancy, one of the leading names in the customs sector.

Mr. Erdogan, first of all, thank you for participating in our interview.

There is an agenda that closely concerns foreign traders: the container crisis. What stage are we currently in with this global container crisis? What is happening?

Yahya Erdoğan: We are right in the middle of the global container crisis. With the COVID-19 epidemic, many sectors and many businesses seized some opportunities. In the beginning of 2020, container freight between Turkey and China was between $1,800-2,000, but now it fluctuates between $9,000 and $10,000.

So, what happened? Let’s start from there, if you wish…
If you look at the shipowners, they say that empty containers are moving back and forth between China and America. Empty containers are in these two countries, and since there are no empty containers here, freight rates have risen. This is what they want to show, but it’s not actually true. Why not? Container manufacturers are constantly producing containers. They have now increased their production capacity by 50%. Our exports are increasing every year. This means there must be containers available somehow. If containers could not be found, our exports would not increase, and goods would remain unsold. But for some reason, there are no containers, and prices have risen because of it. Why? Global crisis, global pandemic, etc.

Where are we in the global container crisis?

Where are we in the global container crisis? Why did it start, and how will it end?
Imagine you are a businessman. You produce a product with a 10-20% cost, and you have a risk. Previously, you made $2,000, but now you make $10,000. The costs are the same, they haven’t changed. Do you see the difference? And do you want to give up this profit, this increase in earnings? Do you want to end this situation at once? Of course, you don’t want to end it. Therefore, in the short term, ending the container crisis is a dream.

So, do we understand that some people want this crisis to continue somehow, using it as an excuse because they are satisfied with high profits?

YE: Yes. So, what happened that caused this crisis? Is it solely because of the pandemic? No, it’s not. If you go back 5 years and do some research, you will see that there were many big players and carriers worldwide. China Shipping was a big player, but it went bankrupt. Hamburg Süd was bought by Maersk. CMA acquired Cosco. They either bought each other or merged. There used to be many players, and it was very challenging for them to come to an agreement and unite. However, now that the number of major players has decreased, it is normal for them to come together and make a decision.

So, in a way, did they create a monopoly?

YE: Yes, a monopoly has been created now. That’s the real reason. The cost of a container is between $1500-2000. Steel production never decreased. There is no shortage of steel and sheet metal to make containers. But for some reason, there are no empty containers. The carriers, i.e., the big players, used to earn $2,000, but now they earn $10,000.

Will the Global Container Crisis End?

So, how can this problem be solved?

It doesn’t seem likely to end with the current carriers and the current system. It also seems challenging to find the old numbers again. Even if the numbers aren’t $10,000, they can be $5,000 or $6,000 in the future. I think it’s a short-term dream to see $2,000 or $3,000 again.

So, when can we see these numbers again?

If country unions, large country groups like the European Union, and new players enter the field, then competition can be created again, and old numbers can be achieved.

What did they say, the container crisis would ease at the end of 2020 or in April 2021, but it didn’t happen. Now there are containers, and there are more containers, but prices are not dropping. One reason for the high commodity prices today is this. If you buy products from China to Turkey, the freight for 10 containers was $20,000, but now it’s $200,000. Your costs have increased. What will you do? You have to add it to your costs and sell. They’ve put the world to sleep well. What’s the reason? Everyone’s talking about the pandemic now. If the pandemic ends, this will end too, they say. But it will only end if people wake up and new players enter the field, but by then, it will be a bit late.

Carriers are also doing this. Previously, everyone would lift their ships. For example, 10,000 containers would be loaded from Mersin Port. Each carrier had 2-3 thousand or 5,000 containers, and the ship was half-full. They don’t do it like that now; they send them on the same ship. They merged, and the competitive environment disappeared. There is opportunism now because of the lack of a competitive environment. They did this by using the pandemic as an excuse. During this process, containers piled up there between China and the United States because of the high volume of trade, and they cannot come here due to the pandemic. They present it as ‘prices increased because containers could not be found.’ This is entirely unrealistic. Even if there is some truth to it, it is minimal.

So, if we say we do not know exactly when these conditions will change, we can also say that we do not know when this container crisis will end, right?

YE: They can tell us that this crisis will end or decrease in 5 months. It’s not realistic. Due to the increases experienced in the last year, they achieved the gains they could have made in 10 years in 1 year. Who would want to give up such high profits? This also creates other opportunities. While the transportation freight cost of carrying 100 containers was $200,000, now the transportation cost of carrying 100 containers is one million dollars. And this situation is causing a continuous increase in commodity prices.

So what can be done to overcome this crisis?

New production lines can be put into operation. Instead of importing from China, there may be a situation of importing from neighboring countries to Turkey. Perhaps trade can be conducted from closer countries rather than distant countries. This could create a production opportunity. New producers and investors can emerge. This also means an opportunity. This can also end the container problem. In other words, if production is done in this geography instead of bringing from the Far East, you can market it in your own country or neighboring country, and there will be relief after a while.

After the pandemic, like many other sectors, we had to conduct foreign trade more over digital channels in the new normal. What was the status of digitization at customs before the pandemic?

YE: Digitization was already present at customs before the pandemic. This step had already been taken. While customs declarations were made manually at the beginning of the 2000s, they were later moved to electronic environment and infrastructure works were completed. By 2019, export declarations were completely transferred to the digital environment and paper was completely eliminated.

After the single window system entered our lives, many applications and documents started to be taken through the system. For example, when you import, you used to bring the foreign exchange transfer letter in a paper environment manually, now you can do it with an ID number. The inward processing document was in paper format before, now it’s in a digital environment. The investment incentive document was in paper format, now it’s in a digital environment. Health certificates for exports were already available in a digital environment before COVID-19.

What changed in customs processes with the pandemic? Did digitization increase during this process?

YE: If you ask how COVID-19 caused a change?

With COVID-19, companies with strong digital and institutional infrastructure were able to work from home during this process. They sent their documents via Cep Gümrük . Those with strong digital infrastructure were able to do these without difficulty. However, companies with poor infrastructure could only work from the office. Thus, it was understood how important electronic infrastructure and institutionalization were. During this process, companies began to strengthen their infrastructure. These steps had already been taken at customs. For example, when origin export documents were prepared, documents such as origin certificate, ATV certificate, Euro 1, and Forma were prepared in the document environment, went to the Chamber of Commerce and Industry, were approved and returned. However, this caused a lot of time loss. It was a heavy burden in terms of back and forth and cost. The process had already started before, and it accelerated with COVID-19, and these were moved to the digital environment. Now, all these documents we have listed are prepared in a digital environment.

There used to be an Exporters’ Association Integration, which eased the transactions. Generally, all institutions and ministries were integrated through the single window system. Of course, it is not limited to customs only. Ministries with good infrastructure, for example, the Tax Office had already started digitization before COVID-19.

Previously, when you exported, you presented your declaration in paper form to get the VAT refund, and you received your VAT in this way. But now, the redox system was integrated digitally with customs. Now, these are seen in the digital environment. Correspondences and notifications are also made via e-mail through the e-archive system.

To reduce contact, this was also possible; when you made a temporary import, the products had to be physically inspected by customs officials at the time of exit. To reduce physical contact, documents are uploaded to electronic platforms. If there is any suspicion or negligence, then a physical examination is performed. Companies that strengthen their digital infrastructure and train their staff easily reap the benefits of this.

The Digitalization Process Continues in Customs

With Covid, other processes have also accelerated. The warehouse declaration is now provided in a digital environment in the pilot zone application in Ankara. After the deficiencies are completed and the necessary infrastructure is provided, the entire warehouse processes will be digital. After the warehouse processes are completed, import declarations will also be digitized. Of course, this infrastructure needs to be strong because there are many documents. The infrastructure must be able to handle this. Country infrastructure is also important in this regard. Integration and infrastructure work of not only customs but also other ministries should be parallel to each other. It has been very successful so far. A significant distance has been covered and it will be better and more successful from now on.

Due to the continuation of the pandemic, what is planned under digitalization in customs since physical travel has not been possible for a while?

YE: I can give an example like this; let’s say I have an agreement in Istanbul. I cannot attend this agreement for a reason, I can postpone it. There are some flexibilities compared to the past. However, if you are doing customs procedures, you need to be there. You need to have your office and advisor there. The customs sector is not like others. But, as I mentioned earlier, steps have already been taken. Warehouse processes have been brought into the digital environment with the pilot zone. With the completion of the deficiencies in the import processes, all processes will be moved to the digital environment.

Is there anything that customs or foreign trade workers say “if this happened, it would meet our needs” during this process?

YE: What is currently expected is that the entire industry has a great expectation for the transition of import processes to digital. We will reach this point because we have made significant progress. Trust is actually very important here. European countries started facilitating and simplifying processes about 20 years ago. Taking them as an example, we have introduced Authorized Economic Operator certificates into our lives. Now, Authorized Economic Operator systems have been put into operation. Which companies are in this phase? Companies that are at a certain level in terms of security, corporate and financial aspects can obtain this. In the future, the number of these companies will also increase. Mutual trust is important here. The state will trust the taxpayer, the taxpayer will be honest and trust the state.

With Digitalization, Many Illegal Situations Will Be Eliminated

Everything will be completely legal because it will work in full integration with all institutions. There will no longer be any need for physical documents, only digital documents will be required. In this way, there will be no such thing as fake documents. Everything will be recorded digitally. This will not only be valid nationally but also internationally. Some countries have started this, but it is progressing slowly.

For example, if you submit a certificate of origin to customs, it may be a fake. There will be an institution that will query this. Currently, ICC is doing this. After countries become integrated into the system, it will be possible to see if the document is genuine or not.

As examples like these increase in customs, trade will become easier, a trust environment will be established, and costs will be reduced.

What is the perspective of those working in the customs sector on digitalization?

YE: Customs workers have a very positive perspective on digitalization. It used to be very difficult to find trained personnel in this sector. There were very few people who knew how to use computers. But it is not like that now. Our young people use computers and technology very well. They develop themselves.

Although there are still some who are not ready for digitization, they are preparing themselves and renewing themselves. Because when you become outdated, you are out of the game. You have to constantly update yourself. Everyone is aware of this, and therefore everyone is updating and trying to improve themselves.

If you look at it from the perspective of customs consultants, they use legislation and software programs. They train and develop their personnel. They develop their infrastructure because if they do not do this, they cannot stand on their own feet.

In the foreign trade sector, what is your perspective on digitalization? What do you think about this?

YE: I also have a positive view. The sector also thinks in this direction. For example, in the past, you used to write a declaration of 100 items for 100 items of goods. Writing this would take an average of 1.5 days for your staff. Now, through programs such as uveal, you send the declaration digitally to the customs consultant’s office. Writing that declaration now takes 10-14 minutes digitally.

There is a significant time difference. You are both practical and saving time.

YE: Of course, who wouldn’t be pleased with this? You save time. There is no loss of workforce. The error rate is very low. Thus, productivity increases. Digitalization is perceived positively by both the industrialist and the customs consultant.

Many foreign trade fairs and events are being held online in this process. Do you think traditional methods in foreign trade will evolve into more online methods?

YE: We need to consider physical fairs and online fairs, along with their pros and cons. In traditional methods, for example, if you went to a fair, you would also eat the country’s meals and meet people while you were there. This situation socializes people. It brings the people of that country closer together. These are the positive aspects.

The negative aspect is that a little more money comes out of the boss’s pocket. Because there are travel, accommodation, and food and drink costs. These become costly. In other words, on a physical trip, you will meet new people and maybe establish new commercial connections.

As for online fairs; we save time by participating in the event online. We have no travel, accommodation, and food and drink costs, so nothing comes out of the boss’s pocket. Trade can be conducted online. The employee did not go to the office or the fair physically, but connected from where he/she was and made the trade with very little cost online.

The boss also participated in the online fair. At the online fair, he saw the products and the market. When he went physically, he may have noticed something unexpected, saw an opportunity, and another door might have opened for him. From this perspective, the positive aspect of physical fairs is this.

Here, the geographical proximity and distance of the country we are traveling to also becomes important. If you are traveling to a very distant country or even a different continent, your travel and accommodation costs will also increase. Going to Germany will not have the same time and cost as going to a place in Africa or America, right?

YE: Of course it won’t be the same. Today, going to some African countries and returning safely is almost impossible. Especially for such countries, having events online is a completely positive situation. There is no negative side. Going back and forth to Africa involves vital risks. The best way for Africa is online events.

We may not always be able to travel, we may not be able to go to every country, conditions may not allow it, our age, health status, or financial situation may prevent us from traveling. Not everyone’s physical and financial abilities may allow them to travel and attend physical fairs.

Of course, as you said, the financial situation of the company is also effective here. If you are a large company, you may have a budget for your employees to attend fairs, events and business visits, but smaller companies may not have enough budget for these fairs, events and business visits.

YE: Of course, the financial structure of the company is also important here. About 80% of food companies are small and medium-sized businesses. To make these visits, there must be employees who have foreign language skills. You need educated staff. If the business owner is going and does not know enough language, someone who knows a foreign language also needs to go with them. Along with you, the people accompanying you will also have travel, accommodation and food expenses. Online events and fairs are much more advantageous for such small and medium-sized businesses.

Going to a place physically and having the possibility of capturing new opportunities there is a 10% chance in the industry. However, it appeals to 10% of the sector. From these perspectives, it appeals more to the 90% of the sector online.

What are the effects of conducting foreign trade methods more online than traditional methods on the foreign trade sector and sector employees, in your opinion?

YE: There are only positive effects in every way. There are no negatives. Nowadays, time is very important. When you do foreign trade and foreign trade activities online, you don’t lose time. When you travel physically, you spend time on the way to get on the plane. You spend time during the trip. You also spend both money and time to go from the airport to the place where the meeting will be held. In this sense, online foreign trade is advantageous for everyone who thinks logically and for the industry.

But we also have people who do not know and cannot use technology, although they are in the minority. There are companies that do not invest in digitalization. These people will have to continue using traditional methods until they complete this digitalization process.

These companies can solve this problem by hiring people who know and can use technology in their team, what do you think?

YE: Of course, they can hire someone who knows and can use digital tools in their team. They can also achieve digitalization through a consulting firm. If they try to do foreign trade through digital B2B platforms like Coimex, they will never give it up.

Finally, is there anything you would like to add, Mr. Yahya?

YE: One thing I would like to add is that during the pandemic, healthcare workers were hailed as heroes. They indeed fought heroically. However, the unseen heroes are the customs workers in the customs sector. Why, you may ask? They worked tirelessly day and night without any interruption and without any prohibitions. They deserve to be recognized as heroes. But do they receive the value they deserve? They do not receive enough recognition. The topic we talked about at the beginning, what was the question you asked me? We talked about the container crisis.

For the past 2-3 years, the issue of ordino fees has been discussed. It has also been covered in the news. The ordino fee is currently around 250 Turkish liras. Now, we are talking about large amounts of money for the container crisis. The container tracking form fee is 70-80 dollars. What is the container tracking form fee? If you want to take the container out of the port, you have to pay a declaration fee that allows it in the system. The cost to the operator is a maximum of 5 dollars. You are selling a product that costs $5 for 80-90 dollars, and importers, exporters, and industrialists do not see this. However, customs consultants are in the middle of the firing line. The Trade Chamber is in the middle of Agricultural Quarantine, Agriculture, Exporters Association, transportation companies, port, industrialist, and in the middle of all of these is the customs consultant.

Customs consultants manage foreign trade. Customs consultant fees increase by 9-11% every year, and this causes an uproar. They focus on small things and small fish but do not see things that increase from $2000 to $10,000, as the shipowners do.

My final advice is that those who deal with small things will never grow. That’s why they need to open their eyes. Industrialists should also open their eyes. By focusing on small things, they miss out on big things. Just like now…

One export declaration costs 180 liras, and the cost of another is 5 dollars, and they buy it for 80 dollars without any objection. There is no cost to the ordino fee. Do you know what ordino is? It’s a sticker. It takes one or two minutes for an employee to write it. It has no liability or penalty. They have no objections to it. But the eyes of customs consultants who manage and prepare documents, correct their own deficiencies, and are in the middle of hell are seen as 170-180 liras. It is still seen as a high figure, but it is not a high figure like $10,000. I say to the whole sector and businesspeople, let’s think big. Let’s think big and grow. Let’s make our investments by thinking big. Let’s expand our horizons, improve our vision, strengthen our infrastructure, and see the big things that escape us. That’s all I have to say.

Thank you very much for your valuable participation and contribution, Mr. Yahya.

Interview: Figen Karaaslan