June 2, 2020: The Karachi Chamber of Commerce & Industry (KCCI) has expressed its dismay and concern at the helplessness of the importers and exporters who are being exploited by shipping lines operating to Pakistani ports by taking advantage of lockdowns of over two months and charging hefty amounts of container detention charges and penalties from consignees.
Due to the long period of lockdown and closure of industries as well as transport, importers were unable to obtain clearance from Customs and take delivery of their imported cargo well beyond the allowed free time. Consequently, the agents of shipping lines are recovering penal charges which may range from $150 to $250 per container per day, in addition to other charges and penalties at their discretion. Moreover, in total disregard of the foreign exchange regulations, the conversion rate of Rupee to Dollar is taken as Rs.167 to Rs.168 during April and early May 2020 against the official rate of Rs.159 to Rs.161 to a dollar.
It is noteworthy that Pakistani ports are the most unregulated in the region with lax rules having no clear guidelines, regulatory framework or specified tariffs for container detention, Terminal Handling Charges (THC) and other miscellaneous charges outside the THC which are unjust and illegal. Ministry of Maritime Affairs has hardly paid any attention in the last two years of present government to regulate the activities of shipping lines and their agents.
To some extent Statutory provisions in the Customs Act 1969 and relevant Rules, confer powers to the customs authorities to regulate the functions of shipping lines and monitor their charges. But in the present unprecedented crisis of COVID-19, FBR and Customs Preventive have also failed to come to the rescue of importers and protect Pakistan’s economic interests in the face of immense clout and ability of the shipping lines to circumvent any such leverage by Customs.
Importers and clearing agents are forced to pay these discretionary charges without contest because the delay of each single day increases the cost of imported cargo and there have been instances where detention charges have accumulated to a level where the entire value of cargo was wiped out and customs authorities had to auction the cargo to recover their dues.
Miseries of importers and industries who import raw materials, were compounded by heavy demurrage incurred on these consignments which is payable to Private Terminal Operators. They have strongly resisted the orders by Ministry of Maritime Affairs and KPT to give any concession to importers despite clear directives from Ministry of Maritime Affairs and KPT.
However subsequently with the intervention by Chairman KPT Rear Admiral Jamil Akhtar and the efforts of Siraj Kassam Teli, Chairman-Businessmen Group and Vice Chairman-KPT Board of Trustees, a compromise formula has been worked out between KPT, Terminal Operators and the consignees represented by the KCCI whereby additional free storage days will be allowed by the Terminal Operators. It has also been agreed that the consignees who have taken the delivery of their containers or LCL cargo will also be given refunds of demurrage charges already paid by them for extra days allowed. Notification to this effect is expected within the next two or three day.
It seems that the Ports of Karachi and Port Qasim have been taken over by foreign shipping lines and foreign based terminal operators. Pakistan’s foreign trade and local industry are held hostage by these shipping lines, agents and terminal operators, resulting in higher cost of doing business. No other port authorities and ministries of shipping in the region including those in India, allow such kind of free hand to the shipping lines or terminal operators to blackmail importers and exporters at their whims.
Karachi Chamber of Commerce & Industry has been pleading with Ministry of Maritime Affairs, Federal Board of Revenue, Customs Authorities, Private Terminal Operators and Shipping lines to take a rational and ethical approach and waive the detention and demurrage charges which have accumulated during lockdown due to Covid-19 pandemic, but all these appeals and requests have been in vain and no concession was given by either the shipping lines or the terminal operators. Ironically these very shipping lines have given generous concessions to the consignees in India without much delay, on the orders of Ministry of Shipping, India. In some cases the licenses of shipping lines were cancelled who refused to waive the detention charges during the lockdowns.
Ministry of Maritime Affairs and FBR appear to be helpless in enforcing the relevant provisions of law and constitution which may be invoked under such emergency circumstances and provide much needed relief to the entire trade and industry of Pakistan. KCCI has time and again emphasized that shipping lines and Private terminal operators have made billions of rupees and repatriated it in foreign currency for last many years, but in the time of an unprecedented crisis they not only refused to help and rescue Pakistan’s trade and Industry, rather they exploited this situation inhumanly and made a windfall profit at the cost of country’s economy.
An attempt was made in the year 2015 to bring an end to the exploitative tactics of Shipping Lines and agents, by the KCCI and other trade bodies through the Federal Board of Revenue, and a draft SRO was issued dated 04 December’2015 which was to insert a new chapter entitled “SHIPPING AGENTS RULES” (Chapter XXVI) the necessary provisions in Customs Rules 2001 whereby the shipping agents were to be restrained from imposing any charges other than those specified in the Bills of Lading. The lines were also restricted from encashment of Security Deposits received from consignees.
The SRO provided new provisions under clauses (p), (q) and (r) under Rule 592, which stated that:
-In case of violation in case of any additional charges other than freight, not mutually agreed by shipper and shipping line and not specifically written of the Bill of Lading, punitive action will be taken against the agent.
-In the case of violation in terms of detention charges not agreed between shipper and shipping agents after specified free days, the agents could not demand charges at their will and punitive action will be taken.
-The licensee (agent) will have to refund security deposit within seven working days after settlement of accounts. In case of violation punitive action was to be taken.
These provisions were sufficient to protect the trade and interests of Pakistan’s economy by way of curtailing cost of doing business. Somehow, the said draft SRO did not see the light of the day and the fate of it is unknown. The KCCI has therefore demanded the Federal Board of Revenue, Ministry of Finance and Ministry of Commerce to restore the said SRO and insert the new chapter and rules as specified in the draft, in order to bring an end to the exploitation of trade and industry in Pakistan, save foreign exchange and punish the culprits who have for years repatriated hundreds of millions of dollars at the cost of our economy.