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Monday Jul 08, 2024
Tuesday, 24 December 2013 00:02 - - {{hitsCtrl.values.hits}}
Attempts are continuing to indirectly threaten the Government of Sri Lanka to stop it establishing of a transparent mechanism for shipping and logistics that will be driven by market forces. Stating that Sri Lanka is banning various charges by intervention is completely an erroneous and a mischievous statement. The fact remains that no one has banned any charges or surcharges, provided they are within the market driven demand-supply mechanism of pricing.
“The article appeared under Asian ship-owners urge Sri Lanka to reconsider action on surcharges” clearly indicates the mis-norm of the organisation as it talks in a way which indicates that they are completely uneducated of the proposed upcoming law and tries to highlight a wrong interpretation of the Supreme Court action. The attempts to undermine the government of Sri Lanka’s action and understanding of the subject by saying that the Government has largely taken action on erroneous information is an attempt to ridicule the authorities of this country and the President who is the Minster in charge of both Finance and Shipping at a time even the opposition MPs too have supported this action.
It is quite surprising that the ASF comes out with such a statement on instructing the Government to stay off regulations under the disguise of free market and comment on national laws. The US Federal Maritime Commission (FMC) has just convened a global regulatory summit, in Washington on 17 December 2013. This included Europe and China to discuss different regulatory measures in each other’s regions in order to further strengthen transportation regulations due to the changes taking place in the supply chain.
The Far Eastern Maritime recently reported on the Sri Lanka reforms: “There is a host of surcharges carriers levy on their customers outside the bill for transporting the freight, and the shippers have been irritated about it ever since the practice began back in the 1990s
You can understand the shipper frustration. What they want is an all-in rate without all the extras. It’s like buying a TV for the listed price then being hit with a delivery fee, a package handling fee, a fuel levy, a carrying-up-stairs charge, an installation fee, packaging removal fee and a currency adjustment for the exchange rate that rose between the time the retailer acquired the TV and you paid for it.”
On the contrary to many local articles in the media who tried to distort the facts by saying that the Government has taken steps to ban and prohibit THC which was probably sent to ASF to issue a statement, Indian media has reported President Mahinda Rajapaksa’s move in a correct manner
The UK-based Loadstar last week reported the Indian view of President Mahinda Rajapksa government’s reforms as: “Rajapaksa looked at anti-competitive practices pragmatically without intervening in pricing (shipping rates are not regulated globally) but proposed a mechanism to ensure fair trading practices from which all stake-holders of the supply chain and consumers in particular would benefit. The reforms proposed in the Sri Lankan budget will ensure transparency and eliminate unethical and unfair trade practices followed by service providers in the container shipping trade. India can take a cue from Lanka’s decision.”
As correctly pointed out the policy makers have had no intervention in pricing and is only trying to eliminate anticompetitive pricing methods adapted by some international transport service providers and to bring in a regulatory framework like in the United States for fair trade and transparency without interfering in the price or the number of components.
In his speech on 21 November the President said the following which considered as a broad statement: “In order to prevent monopoly pricing in the shipping trade, no shipping line will be permitted to levy terminal handling and other charges in addition to freight and specified international charges for container cargo.”
This clearly calls for a market driven freight rate which can have any charges in its composition as a consolidated cost, including THC and services provided by freight forwards, as long as it is quoted to the party paying and contracting for the freight as an inclusive price, just as any other service a consumer would pay for as exampled by the Far Eastern Maritime example on televisions. There can’t be any special treatment in pricing to one service/product sector of the economy to enjoy monopolistic non market responsive components.
If one takes a cue from the airline ticketing pricing, you can see that a passenger pays a full fare including the Government taxes, no passenger is called to pay separate airport terminal cost, baggage handling etc.,
SLFFA role in surcharges
The Sri Lankan Logistics and Freight Forwarders body (SLFFA) sought the support of the Sri Lanka Shippers’ Council (SLSC) and has been recently constantly lobbing that airlines should have all-inclusive air freight rates for cargo, where some of its members are requesting to the extent that that the fuel adjustment factor too has to be incorporated in that rate per kilo sighting that methodology applied is becoming irrational.
President Rajapaksa has probably kept open bunker adjustment and currency adjustment separately for shipping as they fluctuate frequently and have allowed such factors to be negotiated out of the freight as stipulated by the Central Bank of Sri Lanka freight calculating guide lines which the ASF is now trying to meddle with as indicated in the article.
It is important to recognise the contribution of professional logistics companies as recently pointed out by the SLFFA Chairman. As a member of the Sri Lanka Shippers’ Council, SLFFA in many meetings have had acknowledged and supported the need to regulate as there are many forwarders outside of their organisation surviving on surcharges and also acknowledged that some bad eggs are within the association itself.
Indeed an attempt was made together with the Shippers’ Council to get the intervention of the Director Merchant Shipping (DMS) by SLFFA, but the fact remained that DMS at this moment does not have the teeth or the muscle to do so through the shipping act. And as pointed out by SLFFA Chairman, the President has proposed what they requested through the empowerment of DMS through a restructured maritime authority by law. This is a body that can give a fair hearing to the partners of the supply chain to address issues in the future.
In fact SLFFA took effort to bring in the licensing of the freight forwarders gazette in 2011 to eliminate unprofessional and so called unscrupulous players to clean up their industry. Hence they would certainly benefit out of the new piece of legislation proposed by President to eliminate anti-competitive monopolistic behaviour and to establish transparency in shipping.
In fact the opposition MP Ravi Karunanayake who himself is from the logistics industry has given credit to the President for intervention in the 2014 Budget where he stated that he too was keen to do so as minister of trade, when he was in government in 2002.
In line with FMC model
The proposed law also provides for a strengthened merchant shipping authority that can monitor and accept grievances and ensure fair trade practices so that no party will be affected through monopoly or anticompetitive practices.
This is in line with the, U.S Federal Maritime Commission, where it says: “The Federal Maritime Commission is the federal agency responsible for regulating the nation’s international ocean transportation for the benefit of exporters, importers, and the American consumer. The FMC’s mission is to foster a fair, efficient, and reliable international ocean transportation system while protecting the public from unfair and deceptive practices.”
No right minded person would object to the above. As recently as the 2012 presidential election in the United States, Republican presidential candidate Mitt Romney was quoted in the New York Times saying that “free market without regulation will fail”. This is a lesson for the pundits who are trying to manipulate the free market and disrupt transparency in Sri Lanka.
Secretary Treasury Dr. P.B Jayasundara, addressing the exporters last week said that the Government policy was to establish transparency in shipping. He told the exporters that they will have to compete in the global market and will have to face ups and downs in freight rates. He observed that some sections of the service providers were not happy as they want to continue the practice of charging various elements out of freight quotation. His view was as a government that they would not tolerate this market manipulation any more.
Global Response
The International Chamber of Commerce (ICC) has continuously advocated reforms to be adapted to face new challenges in international trade and transport. The ICCSL has commended the President for the attempts to bring in best practices into the domestic law. The Asian Shippers’ Council and China Shippers’ Association has welcomed the elimination of anti-competitive tools in Sri Lanka, Global Shippers Forum (GSF), which comprises of the National Industrial Transport League of the United States, Canadian Industrial Transport Association and the Freight Transport Association of the UK, The African and South American Shippers, along with European and Asian members have welcomed the Sri Lankan Government budget reforms for fair trading and transparency in the shipping economy.
At a time where major shipping lines have already adopted the new system in line respecting the domestic law, it is questionable as to who has been benefiting out of the anti-completive practice and still continuous to lobby for the same.
(The writer is a Member of the Global Shippers’ Forum (GSF), an immediate past Secretary General of the Asian shippers’ Council (ASC), past Chairman of the Sri Lanka Shippers’ Council and the Association of the Shippers’ Councils of Bangladesh, India, Pakistan and Sri Lanka)
