We’re testing a fresh model for bonded zones in Egypt. Earlier this month, we heard that Transcargo International (TCI) will set up Egypt’s first customs-licensed, port-based distribution center in the Suez Canal Economic Zone’s (SCZone) Adabiya Port. EnterpriseAM sat down with TCI and sister company Transmar Deputy CEO Mohamed Mahgoub to discuss how the new facility stands out from other existing privately managed bonded warehouses in Egypt, and what Egypt stands to gain if the model picks up pace.

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The new facility is fundamentally different from traditional bonded warehouses, which normally serve importers inside Egypt, Mahgoub explained. “Instead, our new zone acts as a distribution center for foreign exporters, removing the need for them to set up shop in Egypt, with Transcargo serving as the custodian of their goods within the country,” Mahgoub explained.

SOUND SMART- A bonded warehouse refers to a government-authorized storage facility, where imported goods are held without facing customs duties until they are ready for distribution or export. This allows for the deferral of import taxes and duties on the stored goods, offering businesses the flexibility to manage inventory in a strategic and cost-efficient manner.

Who is the client? Mahgoub did not tell us. “The project was specifically designed for one of our biggest foreign clients…and has been in the works for the last two years.”

How does this work? Under the terms of the new development, Transcargo will manage the designated warehouse, acting as a custodian that receives the products and ensures their integrity during transit time in storage, all the while the product remains under the ownership of the client. Transcargo is also responsible for all related customs procedures in Egypt, such as issuing the needed declarations for the Advance Cargo Information system.

The model is especially well-suited for clients with extensive global operations. “The client did not want to go through the process of setting up a company in Egypt, as it would be a drain on its resources to do so in the large variety of countries it trades with,” Mahgoub said. It also allows foreign companies to set up a base in Egypt by proxy, without the need for a consignee name or dedicating the cargo to a specific entity, Mahgoub said.

If this new concept of bonded warehouses picks up pace, re-exports from Egypt could go up as much as 20%, Transcargo believes. At present, the zone is still in a trial period. “We collaborated with the Finance Ministry and Customs Authority on the project,” Mahgoub explained. “Both departments were very helpful and accepted the idea of having a trial, starting with our facility, ensuring the process went forward without snags.”

“We are already working on the expansion of this model,” remaining confident in its promise, Mahgoub told us. The firm is now looking into options for expansion on the Red Sea, as well as the Mediterranean.

REMEMBER- Egypt’s local warehousing market is forecast to grow at 7% y-o-y over the next five years amid rising demand driven by new industrial zones and expanding e-commerce operations. On a larger scale, the global bonded warehouse market is forecast to grow at a compound annual growth rate of 8%, projected to hit a valuation of USD 50 bn by 2028. The market’s rapid growth is being driven by expanding e-commerce and manufacturing sectors and rising complexity within global supply chains.

One reason Transcargo’s client chose Egypt is its strategic location. The new facility looks to act as a bridge between its clients and their markets. “Shipping a cargo from the UAE to the Mediterranean could take up to 50 days, versus shipping cargo from Egypt to, let’s say, Turkey in one to two days,” Mahgoub said.

Growing global trade instability is expected to bolster the demand for bonded zones in Egypt beyond GCC players. Major global trade players — including India and China — are looking to shorten their time-to-market due to the fluctuation of prices and the turbulent global trade environment. More North American players are also eyeing the GCC, which is set to increase the demand for bonded zones across Mediterranean ports. This marks an opening that could allow Egypt to act as a pillar for intercontinental trade, expanding its role beyond the region to service the broader flow of East-West trade.

Your top infrastructure stories for the week:

  • The Oil Ministry and the Suez Canal Authority signed an MoU to develop a liquefied natural gas station in Port Said. The station will liquefy, store, and supply LNG to canal tugboats and ferries, replacing conventional fuels.
  • Hassan Allam Holding and Saudi Arabia’s Tilal Real Estate will develop a SAR3.3 bn integrated real estate project in Riyadh under a strategic partnership inked with the National Housing Company.
  • Telecom Egypt completed work on the 45k km 2Africa subsea cable, the first of its kind connecting East and West Africa and the longest in the world.
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