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Santanu Sanyal

A couple of weeks ago, Financial Times published a report from Sri Lanka that the Supreme Court there recently issued an order suggesting appointment of an independent mediator to look into the grievances of the country’s exporters. The Supreme Court issued the order in response to a fundamental rights violation petition filed by exporters complaining of purported terminal handling charges (THCs) on exports from Sri Lanka on FOB (free on board) basis.

Sri Lanka’s Supreme Court’s bench, comprising Chief Justice and two other judges, suggested that the mediator resolve the dispute between the shippers and foreign shipping lines.

It was also suggested that the panel to be constituted in this regard be chaired by the Director of Merchant Shipping and have one representative each from Sri Lanka Association of Vessel Operators and the petitioners.

The petitioners included, among others, the Joint Apparel Association Forum, the Exporters Association of Sri Lanka and the Sri Lankan Shippers Council. The nominee of the Sri Lankan Port Authority will be the observer in the panel. The matter will come up for hearing again on October 18.

The petitioners saidtheir export contracts were mostly on FOB basis, i.e. the shipping freight was paid by the foreign buyers. Yet the shipping lines, instead of treating THCs as part of freight and thus collecting them from those who were paying the freight, would force shippers to pay THCs.

This, according to them, was illegal and untenable. Worse, in many instances, the agents of the foreign shipping lines would hold the Sri Lankan shippers to ransom by not releasing the shipping documents till the THCs had been paid by the shippers.

The order passed by Sri Lanka’s Supreme Court confirms the long-standing grievance of shippers not only in Sri Lanka but also in the entire Indian sub-continent that they are often victims of arbitrary and irrational actions on the part of the shipping lines, particularly foreign shipping lines.

The order has boosted the sagging morale of Indian exporters, setting them to mull if the support of their counterparts in other countries in the region, who are also upset with THCs, could be mobilised to move the court of law to bring in reforms on regulations.

The THC issue, it is learnt, is to come up for discussion at the meeting of the Asia Shippers Council and Global Shippers Forum to be held in Singapore.

The five apex bodies of regional shippers associations in Asia and the Far East, including the Association of Shippers Councils of Bangladesh, Indian, Pakistan and Sri Lanka (ASCOBIPS), the body of shippers’ councils of these countries, are to attend. The chairmanship of ASCOBIPS has now fallen on the chairman of the All India Shippers Council.

It might be noted that some of the countries in the region have already taken a tough stand with regard to THCs, forcing the foreign lines offering services out of those countries to rationalise the charges. Indonesia is a case in point. The same is true about Bangladesh.

Recently, China’s Ministry of Communications not only rejected plans by four shipping conferences, comprising mainly container operators, to raise THCs at South China ports, but also imposed penalties for violating regulations.

In a circular, the Ministry stated that the proposal by the conferences did not provide sufficient information and no reason to justify such hikes, ranging from two to four times the prevailing levels. Earlier, a two-year long investigation by three Chinese Government departments into THCs determined that the charges were inherently part of the freight cost and therefore could not be charged separately.

In India, on the other hand, the dispute over THCs remains sub-judice since 2001. The shipowners, led by the Container Shipping Lines Association and Mumbai/Nhava Sheva Shipping Agents Association, filed a writ petition in Mumbai High Court challenging the jurisdiction of the Tariff Authority for Major Ports, which had urged Mumbai Port Trust to issue an order asking shipowners to reduce THCs. TAMP had felt that there was scope for considerable reduction in stevedoring and transportation charges. The shipping lines and their agents even declined to attend a meeting called by the Additional Commerce Secretary in 2006 to constitute an informal discussion group to have issues in dispute resolved through negotiations between the shippers and the lines.

A recent report suggests the Competition Commission of India has asked the Shipping Ministry to take steps to curb practices by the shipping lines harming the interests of the country’s exporters. The move follows complaints by the shippers that the shipping lines have formed cartels in matter of freight and other charges.

It might be noted that India’s competition law takes a serious view about cartelisation which, it is presumed, is anti-competitive.

The anti-competitive rules of CCI is to cover the shipping industry by the middle of 2008 when the CCI will become fully functional with statutory powers to enforce orders. In such a situation, it is sincerely felt by many, the Shipping Trade Practices Bill should be pushed through Parliament without further delay.

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