Shippers’ Council expresses concern on Govt.’s intention to withdraw key legislation supporting competitive edge for exporters, importers

Sri Lanka Shippers’ Council (SLSC) in a statement has expressed grave concern on the Government’s intention to withdraw key legislation supporting the competitive edge for exporters and importers. Following is the full text of SLSC’s statement.

At a recent discussion held by the Minister of Ports and Shipping, the Sri Lanka Shippers’ Council was informed that the Gazette No. 2041/10 dated 17 October, 2017 regarding the Licensing of Shipping Agents, Freight Forwarders, Non-Vessel Operating Common Carriers and Container Operators (Act No. 10 of 1972), which protects importers and exporters from anti-competitive practices which were carried out by service providers for several years, should be revoked.

The revoking of the Gazette will create a ripple effect which will make Sri Lanka’s exports becoming uncompetitive, which in turn will lead to a further increase in the rate of inflation in the country. The proposed revoking of the Gazette will also result in additional import costs being incurred, which will be passed down to the consumers and the public in general. More importantly, it will impact negatively on the Government’s efforts to reduce the cost of living.

By revoking the Gazette, the Minister of Ports and Shipping will remove the protection of free market competition, while at the same time, eliminating the international good practices where price-fixing is not permitted.  

The Sri Lanka Shippers’ Council believes that the Minister should not have the power to decide on charges on transactions between private parties. It is a common understanding in the Council that the Ministry/Minister should be the regulator and be impartial in all dealings in this regard, in order to protect the weaker party in the absence of equal bargaining power.

Gazette No. 2041/10 which is the amended Gazette No. 1842/16 of October 27, 2013, re-confirmed four cardinal principles to protect both importers and exporters from service providers who may charge exorbitant fees, in addition to freight for the carriage of goods.

The four principles of the Gazette that upheld free market values are:

•    Principle 1 – the cost of carriage of containers from origin to destination must be identified as all-inclusive freight without dividing them into land costs and freight components there by all charges being negotiated commercially.

•    Principle 2 – the service provider can only recover costs incurred from the use of the service to whom the service was provided, and not from a third party, with no such contractual liability safeguarding recipients of goods where freight is already arranged.

•    Principle 3 – goods that landed at port could only indicate “Freight Pre-Paid” or “Freight Collect”. The concept of zero freight was not allowed.

•    Principle 4 – in the case of imports to Sri Lanka the only charge permissible outside the freight was the Delivery Order (DO) fee. All other costs had to be calculated in the all-inclusive freight clearly defining who pays which charges in international trade.

Gazette No. 1842/16 dated October 27, 2013 was further augmented by succeeding governments introducing Gazette No. 2041/10 dated 17 October, 2017 to strengthen the role of the Director General of Merchant Shipping (DGMS), for the effective implementation of setting only a Delivery Order fee outside the freight cost and take stringent action against perpetrators.

Subsequently, the Council proposed to DGMS on 19 August 2022, a reasonable increase to the Delivery Order fee based on inflation which was also in alignment with the services performed by service providers. To the dismay of all importers and exporters of the country, the Ports Minister issued the new Gazette No. 2302/24 of 20 October 2022, introducing a maximum Delivery Order Fee over and above what was proposed by the Council, and which was not in alignment with services performed by service providers. A new additional charge of $ 8 per Cubic Meter, under a broader category of a “cost recovery charge”, was also introduced, which has contravening the cardinal principles and protection guaranteed to Sri Lankan importers and exporters by the aforementioned gazette, adversely impacting on economic activity, by driving up costs of all imports and adversely impacting expansion plans of industries.

The import and export sector of Si Lank along with the Sri Lanka Shippers’ Council unconditionally objected to the regulations introduced under Gazette No. 2302/24 of 20 October 2022. The Sri Lanka Shippers’ Council’s opposition to Gazette No. 2302/24 of 20 October 2022 is based on the following principles:

a)    The Gazette violates the core principle of all-inclusive freight costs that requires the contracting party to bear the full cost of such freight.

b)    The Gazette permits freight forwarders and shipping agents to levy fees third parties who are not a party to the original contract.

c)    New additional charges will unquestionably increase the cost of freight for both imports and exports, which will lead to higher costs of living for the general public and reduce the competitiveness of exports, at a time when an export led growth is crucial to the recovery of the country’s economy.

Furthermore, to the dismay of importers and exporters, on 5th January 2023, the Minister tabled a supplement in Parliament to amend the Licensing of Shipping Agents Act No. 10 of 1972, to vest in himself, the authority to set Delivery Order and other fees, whereas the previous Gazette required the service providers to obtain the approval of the DGMS to increase fees, protecting free market forces deciding fees. Many Joint Ventures are now reconsidering their business partnerships in the country, which has also accelerated the idea of near-shoring due to supply chain bottlenecks experienced during the pandemic.

While Sri Lanka Shippers’ Council recognises the Minister’s undertaking given at a meeting with stakeholders on 13 January 2023 to withdraw Gazette No. 2302/24 of 20 October 2022, the industry is alarmed to learn that the Ministry Secretariat is planning to withdraw Gazette No. 2041/10 of 17 October 2017 instead without being aware that it supports in generating new FDIs, partnerships, and the improvement in the ease of doing business index of the country.

Sri Lanka Shippers’ Council wishes to reiterate that globally accepted market-friendly legislation should not be overlooked or withdrawn without adequate reason, solely based on the urging and requests of a few interested parties connected to forwarding and ship agencies with the motive of profiteering through unethical surcharging at any cost, at the expense of all the positives mentioned above, and in particular when our country is facing an economic crisis, the impact of which is critical for the revival and sustenance of the country’s GDP, economy and improving foreign exchange earnings.

The Sri Lanka Shippers’ Council requests the President of Sri Lanka and the Government to critically consider its representations, to protect and uphold the continuation unchanged, of the Gazette No. 2041/10 dated 17 October 2017 of the Licensing of Shipping Agents, Freight Forwarders, Non-Vessel Operating Common Carriers and Container Operators Act No. 10 of 1972, in the interest of importers, exporters, and the general public of Sri Lanka.

The Product Associations of the Sri Lanka Shippers’ Council are: Ceylon Chamber of Commerce, Ceylon Coir Fiber Exporters Association, Colombo Rubber Traders’ Association, Exporters’ Association of Sri Lanka, Free Trade Zone Manufacturers Association, Hub Operators Association of Sri Lanka, Import Section of Ceylon Chamber of Commerce, Joint Apparel Association Forum,  

Lanka Fruit and Vegetable Producers, Processors and Exporters Association, Logistics Providers Association Sri Lanka, National Chamber of Commerce, National Chamber of Exporters of Sri Lanka, Sri Lanka Apparel Exporters Association, Sri Lanka Freight Forwarders Association, Sri Lanka Association of Air Express Companies, Tea Exporters Association of Sri Lanka and The Ceylon National Chamber of Industries.