TITLE: EFFECTS OF ADOPTION OF ELECTRONIC CUSTOM PROCEDURE ON

PERFOMNCE OF CLEARING AND FOWARDING FIRMS IN KENYA, A CASE STUDY

OF MID AFRICA SERVICE, NAIROBI.

PRESENTED BY: KITSAO PURITY KADZO

INDEX NO: 7410110087

COURSE CODE: 2815

CENTRE CODE: 741011

COURSE: DIPLOMA IN INTERNATIONAL FREIGHT MANAGEMENT

SUPERVISOR: RANGILI ELIJAH ALOGO

A PROJECT SUBMITTED TO THE KENYA NATIONAL EXAMINATIONS COUNCIL

(KNEC) IN PARTIAL FULFILLMENT OF THE REQUREMENT FOR THE AWARD OF

DIPLOMA IN INTERNATIONAL FREIGHT MANAGEMENT

SERIES: JULY 202

1
DECLARATION AND RECOMMENDATION

Declaration

I hereby declare that the project entitled is an outcome of my own efforts under the guidance of

Mr. Elijah Rangili and it has not been previously submitted to any other institution.

KITSAO PURITY KADZO Sign…………………Date…………………

RTI/KSM/19/00033

Recommendations

The work has been presented for examination with my recommendation as a Railways Training

ELIJAH RANGILI, Sign…………………Date…………………

RAIWAYS TRAINING INSTITUTE

©2022

KITSAO PURITY KADZO

ii
DEDICATION

I would like to dedicate this work to my beloved parents for their financial support and also my

friends who helped me accomplish this research project

iii
ACKNOWLEDGMENT

First I would like to give thanks to the Almighty God for keeping me healthy all time during this

project. Secondly I would like to give thanks to my supervisor Mr. Elijah Rangili for his guidance.

I would like to give thanks Mr. Odhiambo who helped me a lot. Lastly to all my dear friends like

Joan Onjoma and Laura Mikka for their support and inspiration.

iv
ABSTRACT

The public has for long a time complained about the performance of customs procedure due to its

numerous complex procedure for clearance of goods both imported and exported. This study

examines how clearing and forwarding firms have adopted customs procedure for clearance of

goods both imported and exported. Study also examines how clearing and forwarding firms have

adopted the electronic custom procedure and how the use of Information Technology in custom

procedure has brought effectiveness in performance. The use of IT in customs has led to efficiency

and effectiveness in customs system. It has also played a significant role in simplifying and

harmonizing procedures. The study also identifies the challenges of adopting electronic custom

procedure in clearing and forwarding. The specific objectives were to establish the effect of

adoption of electronic custom procedure, secondly, to establish the challenges of IT on

performance of clearing and forwarding firms and lastly to analyze the relationship between

information technology and performance of clearing and forwarding firms. This study used

descriptive survey method in finding out the impact of adoption of electronic custom procedure in

clearing and forwarding firms. A case study was done at MID AFRICA Service, one of the clearing

and forwarding firms in Kenya, located at Nairobi Embakasi. Target population of this research

consisted of 50 staff from MID AFRICA Services. This study used stratified sampling technique

since it was simple and the population studied was heterogeneous. Researcher also used stratified

random technique since the employees came from different departments, making it unique and

giving it different views. The researcher also obtained information from both primary and

secondary sources of information to collect data. The primary data was obtained from the

questionnaires comprising of both open ended and closed ended questions and the secondary data

was obtained from company’s profile and records from custom departments. The data collected

v
was both qualitative and quantitative. Quantitative data was analyzed using descriptive statics. For

qualitative data, the researcher used content analysis to classify, summarize and tabulate data. The

data was then checked for consistency, completeness and usefulness, through reliability, validity

and piloting. The study revealed that electronic custom procedure has a great impact on the

organization making it efficient and effective in the clearing sector, since electronic procedure was

found to reduce corruption clearance and lodgment time was also reduced, improving customer

services. The main challenges experienced was financial constraints and inadequate skills,

therefore improvement needs to be done in such areas.

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TABLE OF CONTENTS

TITLE

PAGE…………………………………………………………………………………………........

DECLARATION AND RECOMMENDATION ....................................................................... ii

DEDICATION.............................................................................................................................. iii

ACKNOWLEDGMENT ............................................................................................................. iv

ABSTRACT ................................................................................................................................... v

LIST OF ACRONYMS ............................................................................................................... xi

CHAPTER 1 .................................................................................................................................. 1

1.0 INTRODUCTION................................................................................................................... 1

1.1 BACKGROUND OF THE STUDY ....................................................................................... 1

1.2 STATEMENT OF THE PROBLEM .................................................................................... 3

1.3 PURPOSE OF THE STUDY ................................................................................................. 4

1.4 OBJECTIVES OF THE STUDY. .......................................................................................... 4

1.4.1 GENERAL OBJECTIVES OF THE STUDY .................................................................... 4

1.4.2 SPECIFIC OBJECTIVES................................................................................................... 4

1.5 RESEARCH QUESTIONS .................................................................................................... 5

1.6 SCOPE OF THE STUDY. ...................................................................................................... 5

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1.7 IMPORTANCE OF THE STUDY. ....................................................................................... 5

1.8 LIMITATION OF THE STUDY. .......................................................................................... 6

1.9 CONCEPTUAL FRAMEWORK .......................................................................................... 6

1.10 DEFINATION OF TERMS ................................................................................................. 7

CHAPTER 2 .................................................................................................................................. 9

2.0 LITERATURE REVIEW ...................................................................................................... 9

2.1 INTRODUCTION................................................................................................................... 9

2.1.1 THEOROTICAL FRAMEWORK..................................................................................... 9

2.2 EMPERICAL REVIEW. ..................................................................................................... 10

2.2.1 CLEARING AND FORWARDING FIRMS ................................................................... 11

2.2.2 NEED FOR TRADE FACILITATION. .......................................................................... 12

2.2.3 ELECTRONIC CUSTOM PROCEDURES.................................................................... 13

2.2.4 RESEARCH GAP. ............................................................................................................. 14

CHAPTER 3 ................................................................................................................................ 15

3.0 RESEARCH METHODOLOGY ........................................................................................ 15

3.1 INTRODUCTION................................................................................................................. 15

3.2 RESEARCH DESIGN .......................................................................................................... 15

3.3 TARGET POPULATION .................................................................................................... 16

viii
TABLE 3.1; TARGET POPULATION .................................................................................... 16

3.4 SAMPLING AND SAMPLING SIZE ................................................................................. 16

3.5 DATA COLLECTION PROCEDURE ............................................................................... 17

3.6 DATA COLLECTION INSTRUMENTS ........................................................................... 17

3.6.1 PILOTING.......................................................................................................................... 17

3.6.2 VALIDITY.......................................................................................................................... 18

3.6.3 RELIABILITY ................................................................................................................... 18

3.7 DATA ANALYSIS ................................................................................................................ 19

3.8 ETHICAL CONSIDERATION ........................................................................................... 19

CHAPTER 4 ................................................................................................................................ 20

4.0 RESULTS AND DISCUSSION ........................................................................................... 20

4.1 RESPONSE RATE ............................................................................................................... 20

4.1.1 LEVEL OF EDUCATION ................................................................................................ 20

4.1.2 DURATION IN THE ORGANIZATION ........................................................................ 21

4.2 IMPACT OF ADOPTING CUSTOMS ELECTRONIC PROCEDURE ........................ 22

4.3 Challenges of Information Technology on clearing and forwarding ............................... 23

4.4 POSITIVE RELATIONSHIP BETWEEN TECHNOLOGY IN CUSTOM

PROCEDURE AND PERFOMANCE OF CLEARING AND FOWARDING .................... 25

4.5 SUMMARY OF MAJOR FINDINGS ................................................................................ 26

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4.5.1RELATIONSHIP BETWEEN ELECTRONIC CUSTOM PROCEDURE AND

CLEARING AND FOWARDING PERFOMNCE .................................................................. 26

4.5.2 IMPACT OF ADOPTING ELECTRONIC CUSTOM PROCEDURES ..................... 27

4.5.3 CHALLENGES OF INFORMATION TECHNOLOGY ON PERFOMANCE OF

CLEARING AND FOWARDING............................................................................................. 27

4.6 DISCUSSION OF THE FINDINGS .................................................................................... 28

4.7 CONCLUSIONS ................................................................................................................... 29

4.8 RECOMMENDATIONS...................................................................................................... 29

4.9 SUGGESTIONS OF FURTHER STUDIES ....................................................................... 30

REFERENCES ............................................................................................................................ 31

QUESTIONNAIRE..................................................................................................................... 32

Appendix II: Work Plan ............................................................................................................. 35

Appendix III: Budget .................................................................................................................. 36

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LIST OF ACRONYMS

IT: Information Technology

BOFFIN: Bishopgates Office Freight Forwarders Integrated Networks

KRA: Kenya Revenue Authority

ICMS: Indirect Cost Management System

UNCTAD: United Nations Conference On Trade and Development

ASYCUDA: Automated System for Custom Data

CIF: Cost Insurance and Freight

WCD: World Customs Organization

IDF: Import Declaration Form

KIFWA: Kenya International Freight and Warehouse

NTB: Non-Tariff Code

ECC: Excise Control code

EDI: Electronic Data Interchange

WTO: World Trade Organization

SEED: Systematic Exchange of Electronic Data

xi
CHAPTER 1

1.0 INTRODUCTION

This chapter consists of the following subsections, background of the study, statement of the

problem, research questions, significance of the study and limitation of the study.

1.1 BACKGROUND OF THE STUDY

Custom procedures are set of managements and operations that are carried out related to a specific

custom destination, that is used when you want to import or export a certain merchandise.

The automated system for custom data (ASYCUDA) was developed by UNCTAD in 1981 to

computerize custom management. It was initiated at the request of the economic community of

west Africa, as part of assistance program to support improved complication of trade statistics for

its member states. In (2003) Abenica and Tecson notes particular discussed on e-lodgment, allows

agent to learn the outcome of the selection process, enabling them to take measures to ensure that

cargo is processed and released with no delays.

Information technology (IT) has played an outstanding role in customs that facilitates trade. It has

made all custom procedures computerized that is Data validation, declaration process, cargo

inventory control, revenue accounting, notification of release and custom enforcement.

Information technology (IT) acts as a catalyst for improving organizational and operational

efficiency and effectiveness, as a result many modernization programs in the custom sector over

the last decades have incorporated significant computerization components. The use of

information technology has reduced corruption by minimizing direct contact between agents and

custom officers. It has simplified custom formalities hence reducing time delays in ports and

1
borders. IT has also reduced the transaction cost, enhanced supply capacities and global access

among logistic sectors. The use of IT has improved safety in logistics by introducing track system

hence reducing theft by ensuring stolen goods are tracked around the country and returned in the

quickest amount of time.

Electronic custom procedure meets the objectives set by management; performance measurement

needs to be established for the system can be evaluated against the old ones. The main performance

measures are:

Improvements in statistical data and management information, Monitoring of exemption programs

based on such items as CIF import values per types of exemptions and revenue fore gone, More

effective enforcement through faster processing of data the matching of information, improvement

in the consistency of enforcement of tariff law, improvement in the quality of record keeping

,improvement in verification of trader-supplied data and control of labor cost by improving the

rate of declaration proceed per staff members.

Trade facilitation is one of the key driving factors for economic development of nations and is

closely tied into national agendas on social wellbeing, poverty reduction and economic

development. IT in trade facilitation according to WCO context has brought significant roles by

improving quality of controls in an internationally harmonized manner. It has also enhanced the

efficiency and effectiveness of custom administration by harmonizing and simplifying custom

procedures.

Mid Africa Service is an established company in the freight industry and the entire personnel. Have

a wealth of experience in the logistic services. They are responsive to the varied needs of all their

clients. they handle time sensitive cargo from all parts of the world. Mid Africa Service offer the

2
following services air freight, sea freight, imports and exports, customs brokerage, transportation,

distribution, logistics management activities include processing of IDF, offer advice on freight,

custom clearance and packaging, warehousing and removal service. Use of IT, Mid Africa Service

has provided efficient rates and services, in that their tariffs are made to suit the specific needs of

each individual’s customer after mutual agreement.

1.2 STATEMENT OF THE PROBLEM

Electronic custom procedure has contributed to economic competitiveness of goods, relationship

among people, and how government is connected to people. And since electronic custom

procedure is one of the major trends in the global network in clearing and forwarding company.

Mid Africa service one of the clearing and forwarding uses electronic custom procedure in clearing

goods. Like other clearing and forwarding company Mid Africa has also suffered from manual

operations of custom procedures, arbitrary decisions, corruptions, and delays in clearance. Despite

simplification of custom procedure in the past years, custom formalities in Kenya were lengthy

and less than efficient, leading to delays in release of goods.

Several research has been conducted on the challenges that encountered custom procedure by

clearing and forwarding firms and custom reforms and modernization become critical.

The study of the research gave out some remedies of the challenges in clearing and forwarding

firms that are contracting the foreign custom office, tracking of goods to avoid theft, improvement

in statistical data and management information, providing a faster processing of data and

management information.

3
1.3 PURPOSE OF THE STUDY

The research works and aims at finding out how effective it has in adoption of electronic custom

procedure in clearing and forwarding firms. The study will also give knowledge and highlight the

areas that require further research the fact that only few researchers have done this area. It will

also highlight the importance of IT in custom procedure and how beneficial it has to both the global

at large.

Through the study the government will also have knowledge in electronic custom procedures this

will enhance efficient and transparency in their control of flow of goods and collection of tax

duties. Clearing and forwarding firms such as Mid Africa will benefit a lot of from this study since

they will be able to know how effective is the IT in electronic custom procedures.

1.4 OBJECTIVES OF THE STUDY.

1.4.1 GENERAL OBJECTIVES OF THE STUDY.

The general objectives of the study were to establish the beneficial the to which Mid Africa as a

clearing and forwarding company has adopted electronic custom procedures.

1.4.2 SPECIFIC OBJECTIVES

i. To establish the impact of adoption of electronic custom procedures

ii. To establish challenges of IT on performance of clearing and forwarding firms.

iii. To analyze the relationship between IT and performance of clearing and forwarding firms.

4
1.5 RESEARCH QUESTIONS

In order to achieve objectives, the research used the following questions

1. What are the effects of adoption of electronic custom procedure?

2. What are the challenges of IT on performance of clearing and forwarding firms?

3. What is the relationship between information technology in custom and performance of

clearing and forwarding firms?

1.6 SCOPE OF THE STUDY.

The study will focus mainly on the custom procedures and the IT applied in clearing and

forwarding firm a case study of MID AFRICA SERVICE. It will also focus on the effects of

electronic custom and procedure in clearing and forwarding firms.

The study will take a period of 3 months. And it will take a period of 1month for the questionnaire

to be collected from the area of the study. Mid Africa is located at Embakasi in Inland Container

Depot along Mombasa Road Nairobi, Kenya. The study will mainly target the workers in Mid

Africa. I will offer a sample of 50 printed questionnaires and it will be both qualitative and

quantitative in data collection.

1.7 IMPORTANCE OF THE STUDY.

The study provided will be beneficial to clearing and forwarding firms since they will be able to

have more knowledge on how effective to adapt the technology in custom procedure and increase

5
their performance. The study will provide information to potential and current scholars, wishing

to undertake research on the adoption of custom electronic procedure. It will also give the

differences between the manual system and the new electronic system in custom.

The Government will also acquire some knowledge on the electronic custom procedure and this

will lead the improvement performance of custom procedure. The study will act as a blue print

since it provides a conceptual framework adopted by KRA and its implementation of international

trade procedures and standards.

The stakeholders in the clearance of goods industry will also benefit from the study. The main

stakeholders are clearing and forwarding firms that engage in international trade. They will be able

to gauge the electronic custom operation on their business operations.

1.8 LIMITATION OF THE STUDY.

The challenges faced when collecting data included non-responsiveness of some of the targeted

respondents. The halo effect in responses and the limited time available to carry out the research.

Out of 50 questionnaires sent to targeted respondent only 45 were returned. The time available to

carry out the research, analyze the data collected and present the findings was less than a month.

1.9 CONCEPTUAL FRAMEWORK.

The conceptual framework talks mainly on the interdependent relationship between the

independent and dependent variable.

6
 INDEPENDENT VARIABLE
Adoption of electronic custom
procedures

 Automated processes and data Dependent variables

capture for incoming goods. Performance of clearing and

forwarding firms
 Automated capturing of
1. Trade Facilitation
shipments for parcel logistics.
read codes and characters,
measure volume and weights.

 Data archiving and evaluation.

1.10 DEFINATION OF TERMS.

1. CLEARING AND FORWARDING.

They are agents that links between the owners of goods and owners of means of transport they

help in efficient movement of goods by completing a number of procedure and documentary

formalities.

2. CUSTOM PROCEDURE

They are set of management and operation applied by custom administration of a party to goods

which are subjected to the party`s custom law.

7
 3. INFROMATION TECHNOLOGY

The study or use of systems especially computers and telecommunication for storing, retrieving

and sending information.

4. TRADE FACILITATION

Is the simplification, standardization and harmonization of procedures and associated information

flows required to move goods from seller to buyer and to make payment.

8
CHAPTER 2

2.0 LITERATURE REVIEW

2.1 INTRODUCTION

This chapter consists of theoretical framework, introduction of review, empirical review. It will

also discuss on the gaps to be filled by the study and other information obtained from different

scholars.

2.1.1 THEOROTICAL FRAMEWORK.

THEORY OF TECHNOLOGY ADOPTION IN CUSTOM.

Within the framework, in Early years of the twenty first century, aging technology, disorganization

and corruption undermined the effectiveness of Kenyans custom service as highlighted in a 2002

study by the world’s customs organization of port operation at Mombasa growing regional trade

and domestic anti-corruption initiatives created pressure to improve custom operations.

In 2002 the late president Mwai Kibaki put his political support behind an effort to improve

government services, reduce corruption and boost the country financial position. The Kenya

revenue authority used a custom system tracking system that the government had acquired in 1989

and the system was called Bishopsgate Office Freight Forwarders Integrated Network or BOFFIN

it has been developed in UK. BOFFIN became operational in 1996, after sighing of the contract

between Bishopsgate and government, but the system had so many disappointments like

corruption, not efficient, 80pcnt of custom remained manual. And BOFFIN was obsolescent in

2003 before Waweru took over. In May 2004 Waweru and few colleagues made a visit to Maktar

Diop, the world banks Kenya country director to seek advice on system, and they were advised for

9
Senegal system. They were introduced to the Senegal system called GAINDE or lion. It was

developed in Senegal to improve trade and transportation in the country in the 1990s.Waweru and

his reform decided that GAINDE system offered the best overdue to resolve Kenya’s custom

problems, taking a cue from its Senegalese counter parts the Kenyan team named the new system

SIMBA 2005, using the Swahili word for lion and year it would become operational.

Simba system was launched on 1st July 2005, according to (IMF 2003) highlighted how Simba

system is beneficial according to BOFFIN system in terms of cargo tracking, duty and tax

collection and its efficiency. On 22nd October the Kenya revenue authority (KRA) announced full

implementation of the integrated custom management system (ICMS) to replace the Simba system.

The ICMS will improve cargo clearance by enabling the submission of custom documents into a

single-window system. According to (Julius musyoki) KRA commissioner for customs and border

control said that ICMS will be able to perform an automated evaluation of cargo value, electronic

cargo tracking platform which allows trade facilitation within countries.

2.2 EMPERICAL REVIEW.

One of the most significant world trends in the past decades has been the rapid sustained growth

of international business. Markets have become truly global for best, services especially financial

instruments. Trade in the world has grown 50pcnt faster since 1950 (kafeero 2007) trade

facilitation has become more of an international concern and less of an issue of rationalizing a

national custom regime, it has trend to harmonize different regimes or at least establish an element

of mutual recognition between different regimes environments. It is however, not simply the

growth in trade or even in related trade and transfer pricing that is fueling the need for trade

10
facilitation, it has also increase economic integration by an explosion of regional and bilateral free

trade agreements that often feature complex custom requirements.

Technological progress has also introduced faster and cheaper forms of transportation that is use

of electronic lodgment of custom entries. (Wilson 2007) states that there have been significant

changes in the nature of international traded goods from complete or whole foods towards re-

exported, sub- assemblies and intermediate products.

2.2.1 CLEARING AND FORWARDING FIRMS

Custom operation highly affects international trade either negatively or positively. In other words,

the manner in which custom operates can either simplify or complicate international trade in goods

and this introduces us to concept of trade facilitation (kafeero 2007) in Kenya, custom is in the

forefront of the various agencies that intervene in international trade in goods. Custom is for

instance deeply involved in controlling goods which cross borders, determining goods

nomenclature and origin, collecting revenue as well as administering trade policies. The operations

of clearing and forwarding firms are licensed and regulated by the Kenya revenue authority under

the custom services department, there are certain minimum requirements that a firm must comply

with to get approval for licensing or have the existing license renewed. They include membership

to KIFWA, obtaining a good conduct for directors, a recommendation letter by a bank, clearance

by domestic taxes department in relation to income tax and value added tax returns among others.

(www. Kra go.ke). In Kenya the registered firms for clearing and forwarding agents is

approximately 1500.

11
2.2.2 NEED FOR TRADE FACILITATION.

The concept of trade facilitation is receiving unprecedented attention and is at the heart of

numerous initiatives within the custom world. Trade facilitation potentially covers a multitude of

issues that are relevant to the smooth and efficient flow of trade. The term has been used in the

context of a broad range of potential Non tariffs barriers (NTB) such as imports licensing, product

testing and overly-complex customs clearance procedure. Increased facilitation of trade by way of

ensuring optimal use of IT, should result in improved economic growth of countries and improved

competitiveness of their Industry by reducing unnecessary bureaucratic requirements (Wilson

2007) trade facilitation has become a substantive item within WTO round negotiation it is

frequently referred to in supply chain security initiatives and is a feature within many customs

modernization programs.

It is also a significant item within wider aid for trade capacity building initiative. The term trade

facilitation is largely used by institution that seek to improve the regulatory interface between

government bodies and traders of national boarders (Bhattacharya and Hossain 2006). To a large

degree, trade facilitation can be viewed as an extension of the efforts to liberalize international

trade. As history shows, trade facilitation is not a new phenomenon. For instance, many medical

European market towns would publicly display the units and measures used for the sale of goods.

Trade facilitation has become firmly established within the current international regional, and even

at local (Grainger 2008). (UNCTAD 2006) observed that in most counties trade facilitation

involves the ministries of trade, transport and finance as well as the private sector, with a view to

maintain a balance between Operation procedure and stake holders’ requirements, the global

trading community has long been striving to move towards the concept of paperless trade. This

implies a shift towards automation and the virtual abandonment of all paperwork (schware and

12
Kimberley 1995). Trade facilitation is a diversified concept and incorporates a wide range of issues

related to the regulation and conducting of international trade Including supply chain management.

Trade facilitation is a key driving factor in determining export competitiveness of a country and it

should have a right to protect itself from unlawful trade practices (harzing 1999).

2.2.3 ELECTRONIC CUSTOM PROCEDURES

The use of electronic custom procedures has become advantageous among traders and custom

agents. It has provided a positive impact of custom clearance in that it has reduced corruption,

reduction in lodgment clearance time and costs. It has also enabled custom agents to work outside

normal working hours. Custom agents and traders have install new equipment’s such as computers,

tax machines, internet connect to gain access to the services automation process (schware and

Kimberley 1995).

Electronic lodgment allows registered clients to use any computer with internet connectivity,

making it easily accessible compared to manual system where one had to go to the ECC for

lodgment or be EDI enabled electronic lodgment has made work easier for clearing agents.

Automated custom operation system was initiated in 1997 and was sought to automate the entire

cargo clearance chain. (Gulane 2007). IT a major strategy, has advanced custom processes and has

minimize man workers. The use of IT in custom system has reduced transaction costs by lowering

unit operational costs and total cost burdens enough to make them more competitive with their

large counterparts, the manpower required to undertake import procedure is lessened. Financial

outlay is reduced by the shorter wait and uncertainly is eliminated with online information about

the status of entries and bureau of custom announcements (Berida 2008). Apart from the

convenience and speed of electronic submission, IT has increased emphasis in promoting trade

facilitation as reflected in many of the proposed measures in the WTO negotiation group on trade

13
facilitation is therefore not unexpected. Custom supervisors are now able to monitor and distribute

the work flow thereby achieving greater efficiency. Changes to tariff rates and other fees are

quickly and accurately accommodated. Management and activity reports are all easily generated

and made available through the implementation of data warehousing tools. Cashiers only have to

select the entry and collect payment without entering large amount of transaction details (Lorenzo

2007)

The use of IT has become beneficial by easier processing of reliable information, reduction of

costs and delays in supply chain, increased security in trade in addition more productive use of IT

has increased the efficiency and transparency of revenue collection by expediting custom clearance

procedure hence reducing corruption (Bhattacharya and Hossain 2006).

2.2.4 RESEARCH GAP.

A review of several researchers both locally and international supported various variables of the

study. Several researchers have indicated how good electronic custom clearance procedure has

been helpful in clearance of goods but no particular study shows how custom system is doing

prohibition work on clearing and forwarding.

No studies have clearly shown the challenges faced on clearance and custom when using IT in

custom procedure. (Clegg and creg 2010) argued that any system implement should be able to

carry out risk analysis but the argument did not really support how risk analysis magnitude can

have any effects to streamlining of operation. The study factored the research gaps during the

collection process of data to ensure a complete study.

14
CHAPTER 3

3.0 RESEARCH METHODOLOGY

3.1 INTRODUCTION

This chapter focuses on research design, target population, sampling and sample size, data

collection procedure, data collection instruments as well as plotting, validity and reliability, data

analysis and presentation, ethical presentation used during the study.

3.2 RESEARCH DESIGN

This study used descriptive survey method to obtain information concerning the adoption of

electronic custom procedure on performance of clearing and forwarding firms in Kenya. The

descriptive survey method helped in providing answers to questions such like, who, what, when

and where and how associated with a problem. The research design is a very important aspect since

it helps the researcher to make correct decisions in each and every step of the study. It also helps

the major and minor task of the study and also helps the researcher to make correct decisions in

each and every step of the study, it also helps the major and minor tasks of the study and also helps

the researcher to complete the objectives of the study in a given time and facilitates getting the

best solution for the research problems. To achieve the proposed research objective on effects of

adoption of electronic customs procedure on performance of clearing and forwarding firms in

Kenya, a case study of MID AFRICA services descriptive method was used since it’s the most

effective research method.

15
3.3 TARGET POPULATION

The target population of this research consisted of 50 correspondents that includes all workers

from MID AFRICA service in order to give an effective and efficient accomplishment on the

research study of the effects of adoption of electronic customs procedure on performance of

clearing and forwarding firms in a case study of MID AFRICA service. From the 50

correspondents, 10 respondents comprise of management that is, manager, human resource and

others. 30 correspondents are from employees and the 10 respondents are from field workers.

TABLE 3.1; TARGET POPULATION

POPULTION CATEGORY POPULATION SIZE PERCENTAGE

Management 10 20%

Employees 30 60%

Field workers 10 20%

TOTAL 50 100%

Source: Field data 2022

3.4 SAMPLING AND SAMPLING SIZE

Sample is defined as a smaller set of data that a researcher chooses or selects from a larger

population by using pre-defined selection method. This study uses stratifies sampling techniques

in coming up with a sample for the study. Since the population was heterogeneous, stratified

random sampling technique was considered for the employees and management Since each

16
employee came from different departments hence making it unique and giving it different views

from different employees. The researcher also adopted purposive sampling technique due to the

homogeneity of field workers in the yard. Purposive sampling out of 20% giving a sample size of

10 respondents.

3.5 DATA COLLECTION PROCEDURE

The researcher used both primary and secondary sources of information to collect the data. At mid

– Africa service. The primary sources were obtained from questionnaires comprising of both open

ended and closed ended questions that was done by the respondents. The researcher administered

the questionnaire through the company’s email. The secondary data was obtained from company’s

projects and records from custom department.

3.6 DATA COLLECTION INSTRUMENTS

A questionnaire was used to collect data. It is advantageous to use questionnaires since it is an

economical way of accumulating information. Its response is very fast in comparison with other

methods. The questionnaire was dropped to MID AFRICA through E-mail, since it is fast and

quick and some by drop and pick up method. The questionnaire took one week to be filled and

they were collected.

3.6.1 PILOTING

Piloting refers to the conduct of preliminary research, prior to the main study. It provides a

structured opportunity for informed reflection on, and modification of the research design, the

17
research instrument, costings, timing and researcher techniques. It helps to identify problem areas.

The researcher gave some questionnaires to respondent. The main aim was to get information from

employers and management on the adoption of electronic custom. The researcher found that the

electronic custom procedure has helped in facilitating issues by allowing efficient information

sharing and exchange. Secondly it optimizes interaction with customs offices to decrease trade

costs for business and delivery goods and services faster. Thirdly it has analyzed existing solutions,

and their capability in the custom selecting the SEED (Systematic Exchange of Electronic Data)

It has proven security, Data standards, flexibility in terms of functionalities and data sets exchange

requirements.

3.6.2 VALIDITY

Validity refers to how accurately a method measures what is intended to measure. A research is

seen to be valid when it can be used by a number of different researchers under dame conditions

with same results. In order to enhance validity of the study, the researcher used random questions

from the questionnaire and analyzed them to get valid results.

3.6.3 RELIABILITY

Reliability is a measure of the degree to which a research instrument yields consistent results or

data after a repeated administration (Mugenda and Mugenda 2003) A measuring instrument can

only be reliable if it provides consistent results. In this study the researcher will administer the

questionnaire consistency to the same individuals and correlate the results to ensure they are

similar, making them reliable.

18
3.7 DATA ANALYSIS

The data collected was both quantitative and qualitative. Qualitative data analysis refers to non-

numeric information such as interview transcripts, notes, video and audio recordings, images and

text documents. In this study ill use content analysis, this refers to the process of categorizing

verbal or behavioral data to classify and summarize and tabulate data. The quantitative data will

be analyzed using descriptive statistics. Correlation and regression analysis will be used to test the

hypothesis. The formula will be according to fisher (1983)

𝑁𝐹 = 𝑛

1 + 𝑛⁄𝑁 (𝐹𝑖𝑠ℎ𝑒𝑟′𝑠𝑓𝑜𝑟𝑚𝑢𝑙𝑎 1983)

𝑊ℎ𝑒𝑛 𝑁𝐹 = 𝑡ℎ𝑒 𝑑𝑒𝑠𝑖𝑟𝑒𝑑 𝑠𝑎𝑚𝑝𝑙𝑒 𝑠𝑖𝑧𝑒 (𝑊ℎ𝑒𝑛 𝑡ℎ𝑒 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑖𝑠 𝑙𝑒𝑠𝑠 𝑡ℎ𝑎𝑡 10,000) = 120

𝑁 = 𝑡ℎ𝑒 𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑡𝑎𝑟𝑔𝑒𝑡 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑠𝑖𝑧𝑒

120 120
(100)𝑛 = +( ) = 620
1 240

3.8 ETHICAL CONSIDERATION

The study will mainly be for academic. The researcher is a student at Railways Training Institute

perusing a Diploma in Freight management. The findings of the research were used for academics

only and all information will be kept private and confidential. The research was for no harm in any

way. Either way, the findings of the study will not be followed by anybody frim the organization

or outside.

19
CHAPTER 4

4.0 RESULTS AND DISCUSSION

This chapter reports the findings of data that was collected from MID AFRICA SERVICE, Nairobi

County. It consists of data analysis and presentation of the findings. The sample was done using

questionnaire to the respondents in order to establish the effects of adoption of electronic custom

procedures on performance of clearing and forwarding in mid Africa service.

It also contains discussion of findings, a summary conclusion and recommendation which are in

line with the objectives of the study in case of future research.

4.1 RESPONSE RATE

The section consists of all findings from the respondents.

4.1.1 LEVEL OF EDUCATION

The respondents were asked their level of education. 5% of the respondents were primary sector

lecturers, 10% were secondary school; lecturers, 15% were Diploma levers and 20% were

university graduates. This was shown in the table below;

Category Frequency Percentage

Primary 4 5%

Secondary 6 10%

College 10 15%

University 30 20%

20
The study revealed that the majority of the respondents was university graduates who were 30 out

of the total target population. This group worked so effective with the researcher hence bringing

different options on their questionnaire. This was represented in figure 4.2

Frequency
25%

20%
20%

15%
15%

10%
10%

5%
5%

0%
Primary Secondary College University

Frequency

Figure 4.1 Level of education Source field data (2022)

4.1.2 DURATION IN THE ORGANIZATION

Findings on the duration the different organization has existed that 20(40%) had existed from a

duration of 3 – 4 years, 10(20%), 2-3 years, 9(18%)a duration from 1-2 years and 5(10%) less than

a year. This implies majority of the organization have existed for less than 10years. That is when

the electronic lodgment was introduced.

Category Frequency Percentage

Less than 1 year 5 10%

1 – 2 years 10 10%

21
 2 – 3 years 20 15%

3 – 4 years 6 20%

50 100%

4.2 IMPACT OF ADOPTING CUSTOMS ELECTRONIC PROCEDURE

The researcher wanted to find out how adoption of electronic custom procedure has been beneficial

to them and the researcher also wanted to know how satisfied they were with the electronic custom

procedure. Lastly, the researcher also wanted to know if the organization has its own Information

Technology system on clearing.

Table 4.2: Impact of adopting customs clearance procedure

Category Frequency Percentage

Agree 4 8%

Strongly agree 30 70%

Disagree 2 4%

Strongly disagree 3 6%

Neutral 5 10%

Total 100%

The findings showed that 4(8%) of the respondent agreed, 35(70%) of the respondents strongly

agreed, 2(4%) of the respondents disagreed, 5(10%) were neutral as shown in the table above. The

researcher found that the respondents tended to agree the effectiveness in adopting custom

procedures and how beneficial it is to them. It was discovered also the respondents disagree since

22
purchasing the computer is so expensive. The findings were further represented in the figure

below.

Frequency
35

30

25

20

15

10

0
Agree Strongly agree Disagree Strongly disagree Neutral

Frequency

4.3 Challenges of Information Technology on clearing and forwarding

Findings of the challenges faced of Information technology in performance of clearing and

forwarding showed that inadequate skills to sustain the system was the most challenge. This

challenge is due to lack of transparency of procedure, a lot of errors, unclear standards for valuation

of goods, many control entries with difficult policies and procedures. Challenges of financial

constraints and manual system were friendly than the electronized, this is because it is difficult to

access ISPS during peak hours and time to respond to emails.

The respondents also gave some of the challenges they are facing which include inadequate

infrastructure, frequency breakdown,

Table 4.3: Challenges of IT on performance of clearing and forwarding

23
 Category Frequency Percentage

Agree 10 20%

Strongly agree 15 30%

Disagree 5 10%

Strongly disagree 8 16%

Neutral 12 24%

Total 100%

The findings showed that 10(20%) agrees, 15(30%) strongly agree, 5(10%) disagree, 12(24%)

were neutral, 12(24%) since they still suffer from inadequate skill, lack of system to the operation

and financial constraints hence causing inefficiency and insecurity.

Frequency
35%

30%

25%

20%

15%

10%

5%

0%
Strongly agree Agree Disagree Strongly disagree Neutral

Frequency

24
4.4 POSITIVE RELATIONSHIP BETWEEN TECHNOLOGY IN CUSTOM

PROCEDURE AND PERFOMANCE OF CLEARING AND FOWARDING

From the respondents it was discovered that there was a positive relationship between technology

in custom procedure and performance of clearing and forwarding firms in MID AFRICA Service.

Therefore, it was discovered that the firm has benefited from lodgment, freedom to work outside

the working hours, delays and ques in customers and easy access to own declaration data from

system. Due to adoption of electronic lodgment customs supervisors are now better able to monitor

and distribute the work flow hence achieving greater efficiency. The table below shows the

positive relationship between technology in custom procedures and performance of clearing and

forwarding.

Category Frequency Percentage

Agree 10 20%

Strongly agree 25 50%

Disagree 3 6%

Strongly disagree 2 4%

Neutral 10 20%

25
 Chart Title
30

25

20

15

10

0
Agree Strongly agree Disagree Strongly disagree Neutral

Frequency Percentage

50 100%

The finding showed that the 10(20%) agreed, 25(50%) of the respondents strongly agrees, 3(6%)

of the respondents disagree, 2(4%) of the respondents strongly disagree, 10(20%) of the

respondents were neutral. The findings were further represented in the figure below.

4.5 SUMMARY OF MAJOR FINDINGS

4.5.1RELATIONSHIP BETWEEN ELECTRONIC CUSTOM PROCEDURE AND

CLEARING AND FOWARDING PERFOMNCE

The purpose of the study was to explain and understand the relationship between electronic

custom procedure and clearing and forwarding. Findings on the respondents showed that indeed

there is a positive relationship since the electronic custom procedure has brought the benefit

26
including, significant reduction of average lodgment costs, clearance costs, lodgment time and

clearance time with reduction of average lodgment cost, most beneficial as presented by the highest

mean of 30%. The respondent also shared one of the benefit as providing quick services to clients,

freedom to work outside customer working hours, it has also reduced travelling, delays, and ques

in customers and easy access to own declaration data from the system.

4.5.2 IMPACT OF ADOPTING ELECTRONIC CUSTOM PROCEDURES

Electronic lodgment of custom entries was found to have a great impact on the organization, it also

has an IT system with internet connectivity, most respondents were also satisfied with the existing

level of automation of the firms. The researcher also found the benefits of using electronic custom

procedures that include; reduction of average lodgment cost as well as the clearance time. Through

IT in automation of custom services and data sharing helps rein form and simplification of custom

procedures, it has also improved transparency and efficiency of custom services. IT in custom has

also improved governance and reduces corruption by reducing direct interfaces between custom

officers and traders in customs clearance. Adequate IT infrastructure is essential for introducing

modern custom practices such as risk management, post-entry audit, and single widow.

Findings on the respondent clearly shows that indeed there is a high effective impact on using IT

in custom procedure.

4.5.3 CHALLENGES OF INFORMATION TECHNOLOGY ON PERFOMANCE OF

CLEARING AND FOWARDING

From the study, it was discovered that most of the respondents agreed that indeed there were some

factors that were greatly affecting information communication technology in performance of

clearing and forwarding. The researcher found that misclassification was the biggest challenge.

27
The respondents also said that few people have the skills and technical man power to conduct

custom automation, hence giving problems using the automated system. They also said that custom

administration which apply It system, often still requires the subsequent submission of paper work

declaration, because they continue to require a handwritten signature. Instead of providing the

benefits of a paperless environment, these administrations are duplicating, the requirements (and

cost) by asking for paper in in addition to the electronic declaration. The findings also showed that

inadequacy of relevant skills to sustain the system as the mostly faced challenge as indicated with

the highest percentage. Financial constraints as well as manual/DTI system which are more user

friendly compared to electronic custom procedure.

4.6 DISCUSSION OF THE FINDINGS

The principle objective of the study was to investigate effects of adoption of clearing and

forwarding firms in Kenya. A case study of MID AFRICA specifically, the study aimed to

determine how clearing and forwarding agents have adopted electronic custom procedure, identify

the challenges of information technology o performance of clearing and forwarding. Lastly to

understand the positive relationship between electronic custom procedure and performance of

clearing and forwarding firms.

Electronic custom was found to have a great impact in the organization. Most respondents were

satisfied with the existing level of automation of the firm and this significant agreement between

the traders and clients.

Findings on the challenges faced in implementing the electronic custom procedures system showed

inadequacy of relevant skill to sustain the system as mostly faced challenge followed by the

challenge of financial constraints.

28
The researcher also showed the impact of using electronic custom system as stated: Significance

reduction of average lodgment cost, Clarence cost, lodgment time and clearance time with

reduction of average lodgment cost as most beneficial, providing quick services to client’s freedom

to work outside customer working hours, reduced travelling days and queues in customers and

easy access to declaration data from the system.

4.7 CONCLUSIONS

According to the findings, they reveal that electronic custom procedure has provided a high impact

on clearing and forwarding firms,

Electronic custom procedure has greatly reduced the average lodgment time as well as clearance

time. Lodgment cost and clearance cost has been reduced due to the adoption of electronic custom

procedures. From the findings, the researcher has brought a great impact to the clearing and

forwarding firms hence faster clearance and movement of goods hence increasing trade

facilitations through electronic custom procedure, there is a benefit of providing quick services to

clients.

4.8 RECOMMENDATIONS

From the findings, the researcher recommends that, setting up adequate infrastructure, in order to

reduce time inaccessibility of the system at peak times.

The researcher also recommends that the organization should emphasize on use of IT in order to

promote trade facilitation. That’s because it is used as trade facilitator and trade facilitation is now

recognized as a key driving factor in determining export competitiveness in a country.

29
The researcher also recommends that clearing and forwarding firms should have a great knowledge

and well prepared when using IT system in electronic custom procedure, ensuring adequate

infrastructure, adequate training and harmonization of existing systems.

4.9 SUGGESTIONS OF FURTHER STUDIES

This study was to establish the effects of adopting electronic custom procedures in clearing and

forwarding firms in a case study of MID AFRICA Service, however further research should be

conducted to study the impact of adoption of electronic custom procedure, through this, it will be

able to understand the benefits of adopting electronic custom procedure in comparison with the

manual system.

30
REFERENCES

Abenica and Tescon (2003). E-lodgment outcome and selection process

Mwai Kibaki (2002). Govt services, corruption and boost of country financial position

Waweru (2003). Gainde system Julius Musyoka. Integrated custom management system

Kafeero (2007). Trade facilitation and economic integration

Wilson (2007). Nature of international traded goods

Battacharya and Hossein (2006). Interface between government bodies and traders of national

borders

Grainger (2008). Established within the current international regional and local trade facilitation

Schware and Kimberly (1995). Shift towards automation and the virtual abandonment of all paper

work

Horzing (1999). Export competitiveness of a country

Gulane (2007). Automation of cargo clearance chain

Berida (2008). Online information about the status of entry and bureau of custom nnouncements

Lorenzo (2007). Entry and collection of payment without entering large amount of transaction

details

Clegg and Cregg. Challenges faced on clearance and customs on using IT

31
QUESTIONNAIRE

SECTION A: BACKGROUND INFORMATION

1) Gender Male Female

2) Age 20-24YRS 25-30yrs 31-34yrs

3) Level of Education Primary Secondary Tertiary

4) Duration in the organization

i) Less than 1 year

ii) 1 to 2 years

iii) 2 to 3 years

iv) 3 to 4 years

SECTION B: IMPACT OF ADOPTING ELECTRONIC CUSTOM PROCEDURE

1. Does electronic custom procedure satisfy you in the organization.

i) Agree ii) Strongly agree iii) Disagree iv) Strongly disagree

v) Neutral

2. Does your organization have its own IT system on clearing? Yes No

3. Does the full automation on customs procedures have an impact in the organization?

i) Agree ii) Strongly agree iii) Disagree iv) Strongly disagree

v) Neutral

32
SECTON C: CHALLENGES OF INFORMTION TECHNLOGY ON PERFOMNCE OF

CLEARING AND FOWARDING

1) Do you think financial constraints and inadequate skills may hinder a clearing and forwarding

firm from adopting the electronic custom procedure?

i) Agree ii) Strongly agree iii) Disagree iv) Strongly disagree

v) Neutral

SECTION C: CHALLENGES OF INFORMATION TECHNOLOGY ON PEFOMANCE

OF CLEARING AND FOWARDING

1) Do you think financial constraints and inadequate skills may hinder a clearing and forwarding

firm from adopting the electronic custom procedure.

i) Agree ii) Strongly agree iii) Disagree iv) Strongly disagree

v) Neutral

2) What are the current challenges faces by organization in adopting electronic custom procedure

system

a)

b)

c)

33
d)

e)

SECTION D: RELATIONSHIP BETWEEN INFORMATION TECHNOLOGY IN

CUSTOM PROCEDURE AND PERFOMANCE OF CLEARING AND FOWARDING

i) Agree

ii) Strongly Agree

iv) Disagree

v) Strongly disagree

vi) Neutral

THANK YOU FOR YOUR COOPERATION

34
 Appendix II: Work Plan

Month/ Activity JAN FEB MAR APR MAY JUNE

Project proposal writing

Correction

Data Collection

Data Analysis

Report writing

Submission of report

Final Submission

35
Appendix III: Budget

Stationery

4 pens @25 100

2 rim of foolscap 1000

Binding and cover 500

Library fee in 30 days 1500

Total 3,100

Internet

Browsing fee 2000

Typing and printing 3000

Total 5000

Travel and accommodation 2500

Fare 1500

Telephone charges 2500

Lunch 1000

Total 7,500

Others 5,000

GRAND TOTAL 20,600

36