US $ 800mn by agents? Subject minister misled by so-called agency monopolists

Once again, the so-called association has lied to the ports and shipping minister. Let us break down the below three points mentioned by the so-called kingpins of shipping from two leading companies in the industry.

1. 500 entrepreneurs in shipping business

2. 12,000 jobs in shipping agency business industry

3. US $ 800 million in revenue to Sri Lanka

Point No 1: 500 entrepreneurs in shipping business

There are no 500 entrepreneurs in the shipping agency business, only less than 200. The membership of the so-called association of agents only consists of 130-145 members. This was stated officially by the so-called association in its reply to a gossip website, which carried an article about it lobbying to higher authorities in the government. 

Now if there are 500 entrepreneurs and the membership of the association is only 145, say then what happened to the other 355 entrepreneurs who are missing?
This is an inflated figure just to safeguard the interests of the people with hidden agendas. The minister should clearly look into these matters before making a false statement in parliament on behalf of these so-called kingpins of the shipping trade.

Point No 2: 12,000 jobs in shipping agency business industry

The structure for a shipping agency is very simple. There are only four departments: sales, operations, documentation and accounts.

For a simple agency house, as the agent for regional carriers and non-vessel operating common carriers (NVOCCs), the absolute maximum number of staff needed would be 24, depending on the scale of the said agency. If the principal has multiple services calling Colombo or is sharing slots with other lines, then the operations and documentation, the staff numbers may increase but not more than 25 to 26 staff.

In the case of large container carriers such as Maersk, MSC, CMA CGM, APL, NYK, MOL, EMC, COSCO, OOCL and Hapag Lloyd, which are the shipping giants, their agencies in Sri Lanka would have an absolute maximum staff of 40 to 50, due to their operational and service patterns calling Colombo.

Then again the top agency house in the industry has cartelised all its agencies and has a shared documentation centre to minimise its cost. If this is the case, all the documentation departments of the individual lines will not be needed and all the shipping documentation will be handled in one centralised documentation centre. 
Therefore, what will happen to the so-called 12,000 employees? This is yet another bogus figure stated by the kingpins of the shipping trade to safeguard their interests.

The top agency houses should realise that they have violated the Federal Maritime Commission (FMC) anti-trust ethics as cargo originating from any destination to the USA cannot be cartelised or monopolised. If it is so, the FMC can impose a fine to the agency house and its principal, not exceeding US $ 100,000,000.00.

All the mega carriers signed an agreement with the FMC anti-trust. This document is also signed by their agents. Therefore, by having a shared documentation centre, the import and export manifests are shared and all details such as rates, shipper and consignee are exposed as the shipping lines shared by the top agency houses are also in competition with each other for export cargo.

Coming back to the point about 12,000 employees, this too is an inflated figure. I believe the ports and shipping minister should look into this matter deeper before making another false statement in parliament; it would compromise his position as the subject minister.

Point No 3: US $ 800 million in revenue to Sri Lanka

Let’s be rational and look at the stats provided by the Sri Lanka Ports Authority (SLPA) Statistics Department for the month of October 2017.

The commission structure for an agency house is as mentioned below:

5 percent of freight on export containers

2.5 percent through freight on import containers

US $ 15 per container, on transhipment containers

US $ 5 per container, container control fee for import containers

US $ 5 per container, container control fee for empty export containers

For an example, if the freight rate to Takamatsu, Japan is US $ 1000 per 4O feet container, then the agent commission on export for that particular container would be LJS $ 50. It is the same case for imports and transshipments.

According to the SLPA statistics, the total amount of import containers in TEUs (twenty equivalent units/two TEUs is a 4O-feet container) is 57,670 TEUs, out of which 2286 are empty and 55,384 are laden.

Let’s assume that the freight for each container coming into Sri Lanka is US $ 2000 per TEU (in truth it is far less or slightly higher but US $ 2000 is a base figure we can base our calculations on).

Therefore, the total commission for agents on import containers for the month of October 2017 through freight would be 55,384 TEU X US $ 2000 X 0.025 = US $ 2,769,200.00.

For import containers for the month of October 2017, the container control fee would be 55,384 TEU X LIS $ 5 = US $ 276,920.00.

For laden export, let’s assume the base rate of US $ 2000 as well. Therefore, the agents’ total commission for the month of October 2017 would be 24,489 TEU X US $ 2000 X 0.05 = US $ 2,448,900.00.

For empty export containers, the figure would be 31,178 TEU X US $ 5 = US $ 155,890.00.

And last, the agency commission for the transhipment containers for the month of October 2017 would be 416,063 TEU X US $ 15 = US $ 6,240,945.00.

The total agency commission for agents for the month of October can be estimated to an amount of US $ 11,891,855.00.

Further, let’s add another honest value (not being pragmatic) – for ship supplies, crew changes and other services provided by agents, US $ 2,000,000.00 (the actual figure is far less but this is for estimation sake).

The total now adds up to US $ 13,891,855.00 for the month of October 2017.

Now, if we consider this figure for a year (not all months are alike) it would be US $ 13,891,855.00 X 12 = US $ 166,702,260.00.

Clearly, the US $ 800 million brought in by the agents to the Sri Lankan economy is false. This is proven in the above calculation.

Furthermore, it also can be the fact that the agent is showing the vessel owner’s vessel working funds under its bank account. This money does not belong to the agent but to the vessel owner and these funds are sent to the agent for the agent to pay the relevant terminals and the SLPA for handling the operations of the owner’s vessel. These funds are sent to the agent’s FCAASA account.

In shipping, the accounts have to be prepared in two ways – one for the shipping principal/vessel owner and the other for the agents. All these top agency houses show the vessel owners’ money and inflate their revenue by five to 10 times. This also can be seen in the top agency houses’ annual reports, if people are to take a closer look.

After looking at all these points, the obvious question is what happened to the remaining US $ 633,297,740.00, which the agents and ports and shipping minister claimed they brought into our economy?

The ports and shipping minister should check the port statistics before making bogus comments in parliament as advised to him by the so-called kingpins of the industry. They have lied to the minister and have put him in a difficult position.

I’m sure the minister is a learned individual and if he reads this article, he should consult the ports chairman and port statistics department and come out with the actual true value. As this US $ 800 million is a joke, if the agents brought in that much, the Government of Sri Lanka has no need to sell the Hambantota port to China but ask the so-called kingpins among the agents to operate and manage the Hambantota port.

Once again, the people of our country should thank President Maithripala Sirisena, Prime Minister Ranil Wickremesinghe, Finance Minister Mangala Samaraweera and Finance State Minister Eran Wickramaratne for the bold step taken towards truly transforming Sri Lanka into a maritime hub.