Outgoing SLFFA Chairman outlines challenges facing freight forwarders

The 34th Sri Lanka Logistics and Freight Forwarders’ Association Annual General Meeting was held on 3 July at the Hilton Residences. Following is the 

speech delivered by Outgoing Chairman Dushmantha Karannagoda at the event:

The Chief Guest this evening, Minister of Finance Ravi Karunanayake, Guest of Honour Sri Lanka Shippers Council Chairman Sean Van Dort, members at the head table, distinguished invitees, executive committee members and past chairmen, members of SLFFA, ladies and gentlemen, it is a great honour to have Minister of Finance Ravi Karunanayake as the Chief Guest at the 34th Annual General Meeting of Sri Lanka Logistics and Freight Forwarders Association. Your presence this evening adds value to the event and gives recognition to the association. Thank you sir for your presence. Sean Van Dort, Chairman Sri Lanka Shippers Council and our industry colleague; thank you Sean for gracing this occasion as the guest of honour and sharing the evening with us.

SLFFA has come a long way

SLFFA has come a long way, having been in existence for almost three-and-a-half decades. It has worked closely with Government agencies and the industry stakeholders in improving and streamlining the affairs of the industry. 

SLFFA stands with over 110 members of leading logistics and freight forwarding companies in Sri Lanka, which includes representations of global forwarders. SLFFA membership is about a third of the licensed forwarders in the country, while being responsible for a major part of logistics business in Sri Lanka.

Evolving role of freight forwarders

The role of the freight forwarder continues to evolve with the increasing demands of the industry. Innovation and value addition are the key ingredients that move the forwarder to take up the future challenges with confidence. Multi-model transportation, multi-country consolidation, door-to-door services, supply chain management, third party logistics, etc are some of the unique services that forwarders offer, apart from simple freight handling. In order for the Sri Lankan forwarding industry to grow and move forward, it needs the assistance and cooperation of the Government, who plays the role of both regulator and the facilitator.

In the year 2011, we saw the licensing regulation being introduced, which we welcomed. In fact, SLFFA assisted the authorities in the formulation and introduction of the licensing regulation. We also assisted the Director General of Merchant Sipping, who is the licensing authority, to effectively implement the regulation and make the license mandatory for any forwarder to operate. We appreciate the discussions held by the Government with forwarders and shipping agents prior to introduction of the licensing regulation and we expect such a discussion by the Government on any important issue of that nature in future as well, so that the issues could be addressed and resolved in the best interest of all concerned.

Rules and regulations

During the last two years, however, we observed some instances where certain rules and regulations were brought in on the shipping and logistics sector, without any advance notice or discussion with shipping agents or freight forwarders, which was disappointing.

One such instance is the Gazette Notification that took all of us by surprise on 23 December 2013 (Gazette Notification 1842/16), whereby the collection of local Terminal Handling Charges was disallowed. We held discussions with the relevant Government authorities at the time, trying to digest the new regulation and adjust our operations and service patterns, as our strong objections for the new regulation were not heeded. We fully understand that changes are necessary when we move forward in developing the industry. However, Sri Lanka being an emerging hub, we need to look at what other developed hub operators do, and take our call accordingly, without jeopardising our image, our position in the region and the growth objectives.

Another instance that took us by surprise is the Gazette Notification in January 2014, whereby the restriction on foreign share holding on freight forwarding was relaxed overnight. We made representations to the Government, and managed to have it reversed. This doesn’t mean that we are against foreign investment in this industry. We are only suggesting that such foreign investment should be for the purpose of developing logistics facilities in the country. We do not want to open floodgates to fly-by-nights from our neighbouring countries to enter the local forwarding market only to handle basic freight forwarding, which will eventually affect our small and medium scale forwarders. 

We hope that we will not get any more surprises of new gazette notifications, and that the current and future Governments would consult all stake holders before introducing any new rules or regulations to the industry.

Tax issues

In the Budget 2013, the Government declared a special tax rate of 12% to the shipping industry, since it deals in the international trade. However, it didn’t filter down to the freight forwarders, though we too are part and parcel of the shipping industry, and are involved in handling international trade of imports and exports. When we held discussions with the then Secretary to the Treasury, we were promised of the same tax percentage. However, as far as we understand, it has not gone through for implementation. We therefore would highly appreciate if the Minister could take it up and do justice to the freight forwarder. 

Changes at Customs

We have seen Sri Lanka Customs going through certain modifications to improve its facilities to the trade, such as the introduction of the Export Facilitation Centre and the 24 x 7 operations on import clearances. These moves are most welcome and are necessary to progress towards a more logistics friendly environment to facilitate imports and exports. The trade should adjust itself and make use of new stretched times, in order to reduce congestions in port, customs and roads, thus justifying the Government’s initiative to provide such facility. 

Meanwhile, we note that the Electronic Data Interchange/EDI, which was initiated by Customs a few years ago, is still on trial run. It is high time that Customs fully implemented the EDI facility, so that we need not make manual submissions in addition to electronic submissions, which is adding more work and cost to the forwarder. We hope the authorities would look at this seriously and decide on a time frame as to when we could commence paperless submissions.

We were informed by the Customs authorities recently about a new rule where the single vessel operator has to submit the import cargo manifest with all details. This, I believe is to overcome a technical problem on the Customs software. We have written to the Minister as well as the DG Customs, responding negatively to this sudden decision, because it would be detrimental to the trade to implement such a system. We have in fact studied the practices of regional hub ports such as Singapore, Malaysia and Dubai, and they all allow individual operators to submit their relevant manifests. We are of the view that it is not a good idea to change current shipping practices, unless it is really necessary, and definitely not in the case of a technical issue with the software. 

We also received a notification just a few days ago, from some of the shipping agents, that the forwarders are expected to submit an export cargo manifest to the vessel operator for all exports with full and final details, 12 hours prior to berthing of the loading vessel, as per the new Custom rules. We only wish that a broader discussion is held with all stake holders prior to implementing such a new procedure. We are seeking a meeting with Customs officials to discuss this issue as soon as possible.

Sri Lanka Ports Authority

As for Sri Lanka Ports Authority, we see more capacity being added with the launch of CICT and eventually the ECT. We also see many improvements in relation to productivity and vessel handling. However, the focus on improving warehouse facilities and lose cargo handling needs attention. 

The lack of warehouse space at a single location to handle both local and multi-country consolidations is one of the major drawbacks in developing MCC traffic. The lack of handling equipment at warehouses, and the lack of advanced warehousing technology are some of the other areas that need attention. The loss of productivity due to long delays in lorries entering and leaving the port is also a serious issue that need attention of authorities.

Local import charges 

The local import charges by forwarders has been a hot topic in the trade for many years, and so much of complaints were being received by SLFFA and the DMS of overcharging situations. When I took over the Chair of SLFFA two years ago, I was determined to resolve this long standing issue in the best interest of all concerned. 

We therefore initiated discussions on this subject with DMS. It was at that time when the new Gazette notification was issued, disallowing the collection of THC as a separate charge. This made a major change in the industry, and led all service providers to re-visit their operational and recovery patterns. We took this up along with the local charges issue, and held many discussions with the service users and other service providers. 

I’m very happy to say that we were able to reach a consensus among the key bodies that represent importers, shipping agents and freight forwarders, as to what the maximum local charges that could be collected from a consignee. This is a major achievement for the trade. I would like to thank CASA, CEYFFA, Sri Lanka Shippers Council and JAAF for sharing their time and effort in reaching a collective decision on this long standing issue on local recovery. I thank the Ex-co for supporting me in finalising this, and not forgetting the efforts of Hanif Yusuf and Diren Hillock, both past Chairmen of SLFFA.

Training and education

SLFFA continued its training and education programs through AITT, jointly with Achievers Lanka, who is partnering us in administering our logistics training programs on Foundation level, Certificate level, and the FIATA Diploma level. We are happy to announce that the first set of students passed out with FIATA Diploma last year, and the second batch is underway.

We also received the IATA Training School or ATS status recently, and we continued to conduct IATA DGR and Refresher course, with IATA trained and qualified lecturer of SLFFA.

Social responsibility

We did not forget our social responsibility towards our community. We carried out yet another project, the second of its kind at the Lady Ridgeway Hospital, by donating important equipment at a cost of over Rs. 1.2 million, from the proceeds of the Dinner Dance last year. I thank all our sponsors and well wishers who contributed to this worthy cause.

Finally, I thank the Executive Committee members, general members and the past chairmen who supported me in carrying out all our activities, and I would like to make a special mention of Tania and Jagath who closely worked with me during the last two years, together with Rohan and Sushani, who gave me the admin support all the way through. Thank you guys.

I’m also very happy to hand over the chair to the first ever lady to take over as Chairperson of SLFFA, and I wish her and the newly elected Executive Committee the very best!

Thank you.