Monday, December 11, 2023

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Foreign exchange crisis cripples shipping trade

The ongoing forex crisis has impacted the shipping trade as well with giant Maersk urging customers to pay in dollars. 

It said due to the current dollar unavailability in the market, it is facing challenges in making the freight collection remittance on time to its principal. It has informed customers that the challenge creates a severe adverse impact on future space availability to local exporters. 

“Hence after careful consideration and in keeping with the law, we are compelled to change the freight collection payments to dollars with immediate effect,” Maersk said.

The volume of trade is expected to drop drastically, exceeding the decline in world trade forecast for this year. This figure confirms that the sector most affected by the global economic crisis in the region is trade, which is suffering an unprecedented contraction. 

Sri Lanka’s Shippers’ Council representing importers and exporters of the country has welcomed a ruling on disputed extra charges imposed on importers by freight service providers, when freight had already been paid.

The order by the Director General of Merchant Shipping (DGMS) has limited fees that can be charged when freight has already been paid to delivery order fee and container deposit.

The apparel sector, which receives revenue in dollars, reserves its dollar account to repay its suppliers in order to import raw materials and manufacture the final product for export.

 “There is no way to convert those dollars into rupees. If you want to buy dollars, you’ll have to pay Rs 245. Those who take it in rupees and convert it to dollars are basically stranded because the Bank does not open LCs to repatriate US dollars. 

Businesses such as importers of food and commodities are unable to make payments in US dollars. People are cutting back on exports as a result of the current crisis, resulting in high commodity prices.”

Sri Lanka’s annual exports of 300,000 containers (20 footers) remain the same while annual imports of 700,000 containers have dropped to around 400,000. 

There are approximately 300,000 exporters in Sri Lanka and many of those who deal in Sri Lankan rupees are unable to complete the US transaction in order to send funds to their primary exporters.

A leading shipping line head   said that converting Rs to USD is impossible because the corresponding bank does not deal in that currency. Even if there are ‘loops,’ the corresponding banks in India do not accept Sri Lanka rupees when dealing with local currency.

The Sri Lankan Government has announced that cargo clearance and freight forwarders will only accept dollars and that they will be able to do business and repay in dollars, but that those who receive only in local currency will be unable to repatriate dollars to the suppliers.

It is also rumored that around 10,000 containers have not been cleared at a private terminal due to the dollar crisis, resulting in a massive demurrage while the Government-run terminals are accepting letters from top politicians and high ranking officials to clear their cargoes without any hindrance. 

Agents will report the crisis to principal parties and the next time there is no space for cargo to Sri Lanka, imports will drop, and they will eventually hit exports as well, as doing business in Sri Lanka will be on high alert. Principal exporters have already turned their backs on Sri Lanka.

 Some of the freight forwarders complain that, from the agents to wharf Clark, customs and the shippers make blunders and they keep passing the buck. 

Moreover, the customs department is forever suspicious of the cargo and delays the clearance.  New workers in the shipping sector have little or no knowledge about what they do and take no responsibility, complained one cargo forwarder. 

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