Importance of adapting best practices for international trade
Tuesday, 3 December 2013 00:01
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By Gamini Peiris
The global economy is becoming integrated faster than ever before with technology coming into play and markets expanding to reach consumers around the world. As countries open up economies and borders adapt free markets for development purposes. Therefore governments must ensure to bring in suitable regulatory reforms to protect its citizens against weakness and loopholes in the system.
The debacle of the 2008 financial market collapse was the irresponsible behaviour of financial institutions and unchecked greed of individuals which affected all nations across the world. Irrespective of a country being small or large, there is no reason that a government should keep its eyes closed allowing malpractices under the guise of free market to exploit the smaller and the weaker. Therefore, whether it is banking, financing, transportation, intellectual property the state must intervene and continuously amend the laws to suit the modern day needs to protect the larger interest of the public.
Better late than never
In this context, in his Budget speech 2004, the President has clearly spelled out that certain anticompetitive elements in the transportation and shipping related industry will be checked and laws would be brought in to protect the interests of the weaker and the smaller shipping community of Sri Lanka. In my opinion this is a decision taken in the right direction, and would say, that it is already late, but, at same time it is “better late than never.”
ICC Sri Lanka has seen evidence and actions taken by many developed countries against the transportation sector which has been known to set up monopolistic and price fixing activities. There have been millions of dollars being fined for conducting anticompetitive behaviour using the market economy and prevailing unchecked weaknesses as a front end tool.
The International Chamber of Commerce has continuously worked towards reforming international commercial tools to suit the modern day risks and liabilities.
The President mentioned containerised cargo in his Budget speech. Indeed it is the ICC that has given guidelines that age old terms such as FOB and CIF should not be used in containerised terminals, where goods are handed over to a designated place by shippers. ICC has recommended the usage of DAP and FCA terms for containerised cargo.
At the same time, it is clear that policymakers of Sri Lanka have identified the cost division and the responsibility division and have rightly pointed out that in containerised cargo, any charges other than freight could not be separated out except probably for Currency Adjustment Factor (CAF) and Bunker Adjustment Factor (BAF).
In modern day transportation, freight rate is considered and defined as “cost of moving cargo from point A to B” or “point of acceptance to point of delivery,” which should be stipulated in the bill of lading and all charges should be therefore in that freighting cost. Freight is not a charge derived out of sales contacts or INCOTERMS but from the contact of carriage document.
Merchant shipping authority
As highlighted in the media, it seems that the shippers of Sri Lanka have been at the mercy of terminal handling charges and many surcharges for many long years. Various exporter organisations have been crying foul and finally it seems that President Rajapaksa as the Minister of Shipping has intervened to do the right thing for the country.
His announcement that a properly empowered merchant shipping authority is to be set up is a very good move to ensure good trade practices and to keep checks and balances. This will reflect a good system to the country and both the shippers and the service providers who are doing an honest job will benefit from this piece of legislation.
(The writer is Secretary General, ICC Sri Lanka.)
