Financial Times

The Sri Lanka Shippers' Council (SLSC) wants the government to create a regulatory body to curb "arbitrary surcharges" imposed by shipping lines, NVO's (non vessel operators) and freight forwarders.

SLSC chairman Jayanath Perera at a press conference last week expressed concern over these charges which tally up to a staggering additional cost of Rs 3 billion a year, to be borne by Sri Lankan consumers.

"We would expect the freight rate to be determined by market forces, that is demand and supply," Perera said. He explained that the extraneous charges levied by shipping lines, NVO's and freight forwarders are above and beyond the freight charges. "There should be one all inclusive fee."

A breakdown of some of the added costs shows that carriers add a surcharge of $20–25 per bill of lading (there can be several per container), $25 for manual document processing fees (if an exporter does not have access to web facilities), $115 per 20-foot container (increase from $62) and $184 per 40-foot container. Noel Priyatilleke, SLSC Vice Chairman said there is a regulatory body which is proposed in “our National Shipping Policy Document which has been gathering dust for so many years and we need to put this into practice."

During the recent ports strike, Perera noted that shipping lines cited a "congestion surcharge" and charged importers an extra $40. Even after the congestion had been eased, the surcharge continues. "It is killing the sector which is bringing the most important foreign exchange into the country." On the issue of exports, Perera added that the costs to exporters will result in making Sri Lankan products uncompetitive in the overseas market, therefore having a negative effect on the balance payment of the Sri Lankan economy. He said the Council feels that in order for Colombo to establish itself as a viable and competitive port in the region, it must modernise the technology that is currently in use.

Perera also stressed that no shipping lines from Colombo will withdraw due to the establishment of a regulatory body, given that the productivity in the ports continues to be competitive. "If productivity goes down or if there are regular strikes like we have experienced, then some lines might withdraw because they won't be able to do business here," he added.

However, the SLSC maintained that passing down costs to customers through arbitrary surcharges is against the norm of fair trade. Will the current political situation in the country affect the shipping industry? So far, Perera noted that the international rating insurance committee had not categorized Colombo as high risk although the port is under health cover. He explained that this is akin to a state of emergency. If a crisis takes place after the zone is placed under health cover, insurance premiums will increase. For now, the SLSC has not seen any freight rate increases.

Perera added that as far as investors are concerned, he believes they will adopt a "wait and see strategy" although their sentiments will be indicated by the function of the stock market.

Currently, the SLSC has not seen a significant drop in the export business but feels that if ports and airports are affected, large scale problems will develop.