‘Prioritise clearance of cargo in long standing containers to ease exporters pain’

P Manoj Mumbai | Updated on October 27, 2020

Sunil Vaswani, Executive Director, Container Shipping Lines Association (India)

Sunil Vaswani, Executive Director, Container Shipping Lines Association (India), explains about distortion in demand and supply situation

The empty container shortage and therise in ocean freight for shipping cargo containers in the wake of a sudden surge in exports has led to a hue and cry from exporters with the trade bodies calling for an agency to regulate the liners.

Sunil Vaswani, Executive Director, Container Shipping Lines Association (India), explains what led to this situation and what needs to be done. Excerpts:

Why are exporters angry?

This year the pandemic has created unprecedented circumstances for the trade globally. The shipping lines on their part have kept servicing the trade with vessel calls despite exports having been practically non-existent during the lockdown. Besides, the lines also independently offered extended free time on import containers and did all that they could to keep the supply chains functioning.

The pandemic has distorted the demand and supply situation globally. From India's perspective, the trade which was dominated by imports has now seen a sudden surge in exports and a drastic reduction in imports, something that no one really anticipated.

The reduction in India's imports from China has had a major impact on the availability of containers for exports. This has created a major imbalance in the equipment (containers) situation.

During July-Sept 2020, India's exports in terms of volumes grew by 24 per cent while its imports reduced by 28 per cent compared to the same period in 2019. As a result, the shipping lines which until July 2020 used to ship out empty containers from India, had to start repositioning empty containers into the country and move them inland to demand locations at a huge cost for the shipping lines.

This distortion in demand and supply, with its resultant impact on costs and rates, has not happened just in the case of India but in the case of the rest of the world too.

Besides, this is not just unique to container shipping but applies to airfreight as well.

Congestion at transshipment ports like Colombo, for instance, only adds to the lead time. The rail-road system in the United States is now congested causing delays of up to two days per container, adversely impacting the availability of empty boxes in other countries, including India.

Under the circumstances, does the CSLA have any suggestions to help improve the situation?

Currently, there are about 50,000 long standing containers waiting to be cleared across the country, some of them for years together. These need to be cleared by the Customs on priority so that they can be made available to the shipping lines for exports. This drive needs to be a consistent one and not just a one-off knee-jerk reaction.

How can the initial struggles with the roll-out of the Carotar Rules and face assessment of cargo be addressed?

The implementation of the "Carotar Rules", which allow Customs to check the antecedents of the importers have caused delays of 7-10 days in the assessment of the Bills of Entry, resulting in slow clearance and return of empty containers to the lines. Added to this is the delay caused by the faceless clearance introduced by Customs which takes up to 6/7 days to clear a Bill of Entry. This aggravates the shortage of containers for exports.

Associations like FIEO have suggested that the shipping lines reduce the free time on import containers so that empty containers could be made available for exports faster.

The 14-day quarantine imposed on vessels arriving from Chinese ports has resulted in ships having to wait for up to 3-4 days before berthing at Indian ports. This not only delays the discharge and the destuffing of import loads but also delays the availability of containers for export shipments.

This delays the whole cycle of several sailings put together and eventually results in a reduction in the number of sailings over a period of time, thereby causing a significant reduction in the number of export shipments.

The quarantine period for vessels arriving from Chinese ports needs to be reduced to 7 days as in the case of vessels arriving from other countries.

What about inland haulage issues?

It would also help if the Railways moved empty containers from ports to inland container depots free of cost to help reduce the empty repositioning cost for the exporters in the hinterland.

Besides, the benefit of the 5 per cent reduction in the freight for loaded containers announced by the Railways should be passed on to the shipping lines or end users.

There are suggestions that India should start manufacturing containers..

Manufacturing marine containers within the country would assist in the security of supply chains for exports. The government could consider making containers at state-run shipyards which already have the expertise in this. The government, though, would have to make this business viable through the lifting of fiscal hurdles.

What can the exporters do from their side to ease the situation?

It would help if the trade bodies/export promotion councils collected data from their respective members and furnished realistic advance projections of exports, origin/destination-wise, along with the type of equipment required, for at least an 8-12 week period, to the shipping lines, to enable themarrange for empty containers.

The current situation is not expected to last permanently but is unlikely to change overnight either.

Published on October 27, 2020

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