Thursday, May 30, 2024

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Sri Lanka exports and imports run into another storm   

Already hit by high freight cost and forex shortage, the country’s exports and imports sector is heading for another storm with feeder shipping operators imposing new conditions for carriage from next month.

Feeder ship operators who carry containerised cargo of Non Vessel Operating Common Carriers (NVOCCs) have informed the latter that from 1 March they would not be in a position to carry their cargo to and from Colombo unless they come up with a direct billing facility with the three terminals that operate at the Port of Colombo – SLPA-JCT, SAGT and CICT.

NVOCCs are predominantly regional players owning fleets of containers, and operating mainly on the short sea routes.

Shipping industry sources told the Daily FT that it has been a practice for over 25 years that feeder operators pay the Port Handling Charges (PHC)/Terminal Handling Charges (THC) to the terminals on behalf of the NVOCCs who would subsequently reimburse the feeders. 

Whilst this was not the most prudent and legitimate way of handling the PHC/THC payments to the terminals this practice continued.

However, with the current worsening dollar crisis in the country there are several import containers stuck in the port (uncleared) and as many of them could be abandoned by importers due to lack of funds. This has forced feeder operators to take the liability of port storage and cargo destruction costs due to no fault of theirs. The new business model proposed from 1 March is arising out of this situation.

NVOCCs are willing to open accounts with the three terminals SLPA-JCT, SAGT and CICT. However, the port terminals including the Government run JCT have not yet given the green light to accept NVOCC agents as direct billing customers.

Sources said regional ports and terminals in India, Pakistan, Dubai and Singapore have extended direct billing facilities to NVOCCs and agents. They claimed reluctance by the three terminal operators could endanger Colombo’s hub port status.   

Furthermore, they have approached the Director General of Merchant Shipping to licence them as a separate category of ‘shipping agents’, however this matter too remains pending.

Industry experts warned that failure to resolve these pressing issues within port and shipping stakeholders may force the NVOCCs to pull out of Sri Lanka.

The NVOCC operators have been an integral part of the supply chain in Sri Lanka where they carry almost 300,000 TEUs per annum of import and export cargo, and a substantial volume of transshipment cargo as well. In recent times the NVOCC operators have acted as the saviour to the import-export trade where the main lines were facing space constraints and it was the NVOCCs that came forward by increasing their volumes.

The NVOCCs are also an integral part of carrying perishable cargo such as onions, potatoes in Refrigerated Containers and other essential food stuff being imported to the country. NVOCCs also provide a valuable service to the tea exporters by offering shipping services to many Middle East destinations which are not served by Main Shipping Lines. Bulk liquid imports in specialised ISO Tank Containers are only operated by NVOCCs.  

According to industry experts, there are currently over 60 NVOCC agents in Sri Lanka employing close to 1,000. “These jobs could be at risk if a lifeline is not given to the current NVOCC Agents to smoothly operate their Principal’s containers at the Port of Colombo come 1 March,” a senior NVOCC agency warned.

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