The impact of shipping surcharges including terminal handling charges have been battering the Import and Export industry from 1991 to 2004. Import-Export trade knowing the effects on their respective business and keeping the end consumer in mind lobbied with every government from the inception, highlighting the unfair trading practices that were taking place without any control. However, due to various pressures and wrong interpretations by some parties, the past regimes were unable to make a clear policy decision on this.
Identifying all the issues in depth, Sri Lankan government in 2014 during the budget proposals, proposed to set up a fully-fledged Merchant Shipping Authority by introducing timely amendments to the Merchant Shipping Act, in order to prevent the monopoly in pricing in the shipping trade stating the no shipping line will be permitted to levy terminal handling and other charges in addition to freight.
This bold and pragmatic policy decision to incorporate all surcharges to Freight establishing an all-inclusive freight rate addressed a very long- standing grievance in the industry which suffered due to unfair trade practices being used by various service providers. This also especially resolved the Terminal Handling Charges issue going back to 1990s where the shipping lines arbitrarily and unilaterally introduced a separate Terminal Handling Charge (THC) which was, in fact, part of the freight until 1997.
Also this virtually stopped large amounts of surcharges billed in UDS collected locally. Subsequently these collected large sums would have drained out of the country even violating against the exchange control laws as only Freight can be remitted out of the country. Obviously with this correction it was a major hit for the parties who were continuously involved in unfair or wrong trade practices who collected large amounts of monies.
These unrealistic and unethical surcharges including THC amounts were mounting up without any control and importer’s business operations became so unpredictable due to ruthless surcharges levied on import consignees especially on LCL imports. Zero freight was another trick that the service providers used on the import community to rip them off by way of additional surcharges after the shipments landed in Colombo. All complaints/disputes were never heard by the service providers and majority of the CIF shipments landed in Colombo was a disaster for the consignees. Many service providers demanded only cash payments to release the “Delivery orders”.
Until all unrealistic charges were paid, the goods were held for ransom incurring demurrage. Accordingly, Importers absolutely did not have any option but to pay the absurd surcharges including arbitrary amounts of THCs. As a result, all these additional costs had to be passed to the end consumer or had to add to the re-export price. Both these actions gave adverse effects to the country as either it affected the cost of living of the country or the re- exporter lost the competitiveness in the export market. Finally from an era of agony, with the regularization of the all-inclusive freight rates, the import community got revived and were able to return back to competitive business which created ease of doing business with confidence within the business community.
Currently the government is at the top gear to improve the ease of doing business and to improve trade facilitation in this country. They have clearly identified the importance in removing the trade barriers, unethical trade practices which enable to keep the cost at the most competitive levels to complete at international levels while minimizing the operational times. Needless to say Sri Lanka is at a critical juncture to promote trade and FTAs etc. In a situation like this, a good governance regime will never allow unethical and unfair trading practices to rise. Due to this surcharges issue, the Import and Export trade was adversely affected while the additional cost was passed to every citizen of Sri Lanka. So in this context, the trade is very confident that no one will attempt to open a can of worms again within the import/export community as this was like a badly infected trade wound that got healed in 2014 with an invaluable policy decision which received international recognition as well.
However, closely observing the recent media articles, the trade feels, that some interested groups are trying to paint the picture with different colours by giving unrealistic facts. In our view the respective businesses should be innovative and should create proper pricing mechanisms without jeopardizing the Import Export community again when the government is fully focusing on improving the country’s GDP with the support of International Trade.
(Dinesh De Silva, functions as the Chairman of the Import Section of the Ceylon Chamber of Commerce. He was also the Immediate Past Chairman of the Sri Lanka Shippers’ Council)