Shipping industry divided over maximum caps on local service charges

• Sri Lanka Shippers Council welcomes move saying it would curtail high cost of import goods 
• However, CASA, SLANA and CEYFFA oppose and point out that move could hinder competitiveness among service providers

The shipping industry is divided over the recent guidelines issued by the Director General of Merchant Shipping (DGMS), imposing caps on maximum charges payable by importers to service providers in recovering their import consignments, which was lobbied by some exporters who rely on imported raw materials. 

On June 17 this year, the DGMS issued guidelines under Section 7 of the Licensing of Shipping Agents Act, setting out maximum amounts that could be charged as delivery order (DO) fees from an importer, based on the cargo load types.

Accordingly, for a full container load (FCL), the maximum DO fee that should be paid by a consignee/importer (except freight forwarder/consolidator) was set at Rs.11,000. 

Meanwhile, from shipping lines to freight forwarders, the maximum liner DO fee was capped at Rs.9,000 and the maximum liner DO fee from shipping lines to consolidator was capped at Rs.9,000. 

For LCL import shipments, the maximum DO fee, which is to be charged from a consignee/importer, was set at Rs.12,500. The maximum DO fee from consolidators to freight forwarders was set at Rs.10,000.

Issuing a statement, the Sri Lanka Shippers Council (SLSC) this week welcomed the move, citing these guidelines would curtail the high cost of import goods into the country and competitiveness of the country’s value-added exports that depend on imported raw materials. 

However, the Ceylon Association of Shipping Agents (CASA), Sri Lanka Association of Non- Vessel Operating Common Carriers (SLANA) and Ceylon Freight Forwarders Association (CEYFFA) opposed the move formally in writing to the authorities. 

The CASA in particular has voiced concerns over these guidelines that could disrupt the competitiveness of the service providers while bringing down the service quality over the period. “If someone is overcharged, they cannot survive in the market, as there’s healthy competition in the market offering a variety of options for importers. If you regulate, the small players go under and this would become oligopoly,” a shipping industry expert told Mirror Business.

Further, the CASA had pointed out that the DGMS hadn’t been given the authority to set maximum caps on such charges as stipulated in Extraordinary Gazette number 2041/10, dated 17.10.2017 and the service providers are only required to notify their charges to the DGMS. Hence, the association claims that these guidelines to be illegal.
In addition, the key industry association also noted that these local service charges only have a significant impact on the prices of imported goods and raw materials for re-exports.

“Even if you have 100 containers or one container in one shipment, the local service charge is the same. So, these charges only have a very insignificant impact on the prices of imported goods and raw materials,” an industry expert noted.  (NF)