Shipping Terms Agreement (Kenya)

A Shipping Terms Agreement in Kenya records the obligations the parties accept and the terms governing their arrangement.

The Kenya Maritime Authority (KMA), established under the Kenya Maritime Authority Act No. 5 of 2006, is the principal regulatory body overseeing maritime safety, vessel registration, port operations, and the licensing of shipping agents and freight forwarders in Kenya. KMA enforces the Merchant Shipping Act No. 12 of 2009, which incorporates the Hague-Visby Rules governing the carriage of goods by sea in bills of lading issued in Kenya. The Hague-Visby Rules establish the carrier's minimum obligations — to provide a seaworthy vessel, to properly load and care for cargo, and to deliver at the agreed destination — and set the carrier's monetary liability limit per package or per kilogram of cargo.

The Kenya Ports Authority (KPA), established under the Kenya Ports Authority Act Cap. 391, manages the Port of Mombasa — East Africa's largest seaport — the Port of Kisumu on Lake Victoria, and inland container depots (ICDs) at Nairobi, Kisumu, Eldoret, and other inland points. KPA operates under a landlord port model and licenses private terminal operators. The Standard Gauge Railway (SGR) operated by Kenya Railways Corporation (KRC) under the Kenya Railways Act Cap. 397 connects Mombasa to Nairobi and onward to Naivasha, providing an integrated freight corridor that a Shipping Terms Agreement may reference for inland transport from the port.

A Shipping Terms Agreement in the Kenyan context must address the international trade terms (Incoterms) applicable to the shipment. Incoterms 2020 — published by the International Chamber of Commerce — define the point at which risk and cost transfer from seller to buyer: Free on Board (FOB) Mombasa, Cost Insurance and Freight (CIF) Mombasa, Cost and Freight (CFR), Delivered Duty Paid (DDP), and Ex Works (EXW) are the most common terms in Kenyan trade. The Incoterm determines which party is responsible for marine insurance, freight payment, customs clearance, and import duties under the East African Community Customs Management Act 2004, and should be stated clearly in the Shipping Terms Agreement.

The East African Community Customs Management Act 2004 and the Kenya Revenue Authority's Customs and Border Control Department regulate import and export clearance at the Port of Mombasa. Import duties, Value Added Tax under the VAT Act No. 35 of 2013, and the Import Declaration Fee are assessed on the customs value of the cargo. A Shipping Terms Agreement should identify which party bears these costs and establish a process for providing the documentation — commercial invoice, packing list, certificate of origin, phytosanitary certificate — required for customs clearance.

For road freight from Mombasa to destinations within Kenya, Uganda, Tanzania, Rwanda, Burundi, South Sudan, and the Democratic Republic of Congo, the Northern Corridor Transport Agreement and the COMESA carrier framework apply. Road freight carriers operating in Kenya must be licensed under the National Transport and Safety Authority Act No. 33 of 2012. A Shipping Terms Agreement covering combined sea and road freight — known as multimodal transport — should incorporate the UNCTAD Multimodal Transport Convention principles even though Kenya has not formally ratified the 1980 Convention.

A Shipping Terms Agreement in Kenya is required whenever cargo is moved between parties under a commercial arrangement that goes beyond a simple carriage booking, particularly where the parties want contractual certainty over freight rates, liability, insurance, and documentation over a recurring or significant shipment.

A Shipping Terms Agreement is needed when a Kenyan exporter enters a freight rate agreement with a shipping line or freight forwarder for regular container shipments from the Port of Mombasa to international destinations. Rather than negotiating terms shipment by shipment, the agreement establishes a framework — volume commitments, freight rates, container allocation, and service levels — for a defined period, typically 12 months.

A Shipping Terms Agreement is required when an importer receives goods at the Port of Mombasa under a CIF or CFR Incoterm and needs to arrange onward inland transport from the port to Nairobi or upcountry destinations. The agreement with the clearing and forwarding agent or inland transporter records demurrage liability, transit times, and the point at which risk transfers from the vessel to the inland carrier.

A Shipping Terms Agreement is needed when a freight forwarder licensed under the KMA Freight Forwarding Regulations consolidates cargo from multiple Kenyan shippers into a Less than Container Load (LCL) container. The House Bill of Lading issued by the freight forwarder is governed by the terms in the Shipping Terms Agreement between the forwarder and each individual shipper.

A Shipping Terms Agreement is required when a Kenyan manufacturer or trader enters a contract with a logistics company for supply chain management covering sea, rail (SGR), and road transport from factory gate to buyer. Such multimodal arrangements require a single contractual framework allocating liability at each stage of the transport chain.

A Shipping Terms Agreement is needed when a ship owner or operator charters vessel space to a cargo owner on a voyage or time charter basis under the Merchant Shipping Act No. 12 of 2009. While a formal charter party (governed by standard forms such as GENCON or NYPE) governs vessel charters, a Shipping Terms Agreement may supplement the charter party with specific terms for Kenyan port operations, including KPA berth allocation, KMA vessel clearance, and port health inspection requirements.

A Kenya Shipping Terms Agreement under the Merchant Shipping Act No. 12 of 2009 and the Law of Contract Act Cap. 23 must contain the following key elements to be commercially effective and legally enforceable.

Parties: Full legal names, addresses, and registration numbers of the shipper (cargo owner or consignor), the carrier (shipping line, freight forwarder, or road carrier), and — where applicable — the consignee and the notify party. For companies, the Business Registration Service (BRS) number and KRA PIN under the Income Tax Act Cap. 470 should be stated. The carrier's KMA licence number and, where applicable, the National Transport and Safety Authority (NTSA) operator licence number should also be recorded.

Cargo Description: A precise description of the goods to be shipped — commodity type, HS code under the EAC Common External Tariff, packing type (bulk, palletised, containerised), estimated weight and volume, and any special handling requirements (hazardous materials, refrigerated cargo, livestock, or oversized equipment). Hazardous cargo must comply with the International Maritime Dangerous Goods (IMDG) Code under the Merchant Shipping Act No. 12 of 2009 and KMA Merchant Shipping (Prevention of Pollution) Regulations.

Freight Rate and Payment: The agreed freight rate per container (20-foot or 40-foot), per tonne, or per unit; the currency (USD is standard for sea freight in Kenya); the party responsible for payment; the payment due date (freight pre-paid or freight collect); and applicable surcharges including the Bunker Adjustment Factor (BAF), Currency Adjustment Factor (CAF), port congestion surcharge, and the Port of Mombasa Terminal Handling Charge (THC) set by KPA.

Incoterms and Risk Transfer: The Incoterm 2020 applicable to the shipment (FOB Mombasa, CIF Mombasa, CFR, DDP, EXW, etc.) and the precise point at which risk and cost transfer from the seller/shipper to the buyer/consignee. The Incoterm determines which party is responsible for marine insurance, customs clearance, import duties under the EAC Customs Management Act 2004, and the Import Declaration Fee charged by Kenya Revenue Authority.

Bill of Lading and Documentation: The obligation to issue a clean on-board Bill of Lading or, for non-negotiable transport, a Sea Waybill; the required shipping documents (commercial invoice, packing list, certificate of origin, phytosanitary or health certificate where applicable); and the timeline for document presentation. Under the Merchant Shipping Act No. 12 of 2009 and the Hague-Visby Rules, the carrier is bound by the particulars in the Bill of Lading as against a third-party holder.

Liability and Limitations: The carrier's liability for loss or damage to cargo under the Hague-Visby Rules (SDR 666.67 per package or SDR 2 per kilogram, whichever is higher); exclusions from liability (act of God, inherent vice, insufficient packing by the shipper); the period within which cargo claims must be notified (three days for visible damage, one year for filing suit under Article III Rule 6 of the Hague-Visby Rules); and any enhanced liability agreed between the parties above the Hague-Visby Rules limit.

Dispute Resolution and Governing Law: Governing law of Kenya, with disputes resolved before the High Court of Kenya Admiralty Division or by arbitration at the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995. Many international shipping contracts also reference English law and London arbitration — the parties should specify which regime applies. Forms-legal.com provides a Kenya Shipping Terms Agreement template covering the Merchant Shipping Act No. 12 of 2009, KMA requirements, Hague-Visby liability rules, and Port of Mombasa operational obligations. Under Kenya law, Section 3 of the Companies Act 2015 (No. 17 of 2015) and Section 15 of the Employment Act 2007 (No. 11 of 2007) govern the core requirements for this type of document.