Fresh storm brewing in shipping industry over new cost

Fresh storm brewing in shipping industry over new cost
27 October 2022 https://www.ft.lk/top-story/Fresh-storm-brewing-in-shipping-industry-ove...

*Maximum Delivery Order fees revised upwards for full container load and less than container load import shipments
*Ultimate import consignee to be charged $ 8 per 1 cubic metre as cost recovery fee
*Shipping lines and agents justify hike in line with soaring inflation and other costs
*Importers allege impending move as “anti-competitive price fixing” and lacks transparency; exporters imported input cost to ruse
*Cabinet approves publication of new Gazette and submission to Parliament

A fresh storm is brewing within the shipping industry over the impending hike in fees for select services from November, a move justified by lines and their agents but strongly opposed by importers.

The Cabinet Ministers at its meeting on Tuesday approved to publish the amended Licensing of Shipping Agents Bill in the Government Gazette and to submit the same to Parliament for approval.

“The clearance of the Attorney General has been granted for the draft bill prepared by the Legal Draftsman,” Cabinet Co-Spokesman and Minister Bandula Gunawardena said at the post-Cabinet meeting media briefing yesterday.

The tanker operators’ regulations were issued in the year 2005 subject to the provisions in Sections 8 to 10 of the Licensing of Shipping Agents Act No. 10 of 1972. However, following the Judiciary’s decision to revise the 10th regulation of that Act, on 4 July, the Cabinet Ministers approved to introduce amendments required to the Licensing of Shipping Agents Act No. 10 of 1972 including the relevant revisions.

The proposal to this effect tabled by Ports, Shipping and Aviation Minister Nimal Siripala de Silva was approved by the Cabinet Ministers on Tuesday.

However, the Daily FT learns that rumblings within the shipper (exporters and importers) community have prompted the Merchant Shipping Director to convene industry stakeholders to reach an amicable settlement.

As per the Extraordinary Gazette dated 20 October 2022, the revisions are concerning the regulations in the Licensing of Shipping Agents, Freight Forwarders, Non-Vessel Operating Common Carriers and Container Operators Act No. 10 of 1972. Washing charges, De-stuffing charges and Transport cost have been included among cost recovery fees.

It has specified a new maximum Delivery Order (DO) fee for import shipments. For FCL import shipments – maximum DO fee that should be paid by an ultimate consignee/importer (except Freight Forwarder/Consolidator) is Rs. 18,000. Accordingly, from Shipping Lines to freight forwarders and Shipping Lines to Consolidator, the maximum Liner DO Fee should be Rs. 14,800.

For LCL import shipments the maximum DO fee that should be paid by an ultimate consignee/importer is Rs. 20,500. Accordingly, from Consolidators to freight forwarders – the maximum DO fee should be Rs. 16,500. The service provider shall charge from ultimate consignee equalling rupees per maximum of $ 8 per 1 CBM (cubic metre) as a cost recovery fee destination as applicable for the carriage of goods.

Shipping agents said service providers had asked for an increase along with soaring inflation and other cost increases and accordingly representations were made to Minister Nimal Siripala de Silva.

It was pointed out that the legislative changes were necessary to properly recover the actual cost.

However, shippers alleged the move is anti-competitive “price fixing” and manipulative and non-transparent. “Consumer will have to bear the additional cost when it comes to imports whilst exporters’ input cost will increase,” they said.

“The new legislation also takes away the negotiation capability of the private parties as service provider and user. If this happens, then it is completely against open market principles sending negative signals,” they added.

It was alleged that shipping agents were misinterpreting information, whilst higher freight and other costs were being justified without understanding global best practices in commercial transactions and allowing middlemen to thrive at the cost to the consumer, manufacturers and exporters. In that context the new legislation will be a severe blow to the economy.

It was also claimed that new legislation had been drafted without adequate consultation with all stakeholders.

“This Gazette has many illegal recommendations contrary to the Act, hence the Finance Ministry and Parliament oversight committees must look into this,” a shipper opined, adding that the Sri Lanka Export Development Board, the Board of Investment and the Consumer Affairs Authority must intervene, thereby ensure competitive best practices and avoid arbitrary increase in charges.