As adhocism threatens to sap a trade system, policy makers plan a legislation to weed out irrational practices allowed to thrive for years. But lack of unison on the proposed regulation is what again ails the system. And so the bill gathers dust even as the trade goes about its practices unmindful. As deliberations further delay the draft in seeing the light of the day, Radhika Rani G finds out why the bill is still not an Act.
The Mission: The Shipping Trade Practices Bill, 2008
Made Impossible: By lack of concord in the community, and loads of comments on the clarity in the draft
A Bill to provide for bringing transparency in trade practices adopted by maritime transport logistics service providers in respect of services rendered by them for arranging transportation of containerised cargo; registration of such service providers and their obligations; mode and manner of fixing tariff by the service providers; EXIM (Export Import) and for matters connected therewith or incidental thereto.
The preamble trumpets transparency in trade practices. But that seems to be the last thing happening, going by the pace of the powers that be in setting things right, or rather rules for good. Fallout of a fragmented industry!
The Shipping Trade Practices (STP) Bill, being heard and read in reams for months and years now, was after all drafted upon consulting various stakeholders like the intermediaries and logistics service providers in the export and import of cargo – specially containerised.
But in the first place, and as the senior maritime lawyer S Venkiteswaran rightly asks, is there a need for a legislative interference in the form of the proposed STP Bill or could it have been left to the market forces to regulate itself.
The plunge
Competitors and regulation perhaps make a contradicting combination, so there should be some authority, the legal one being the government, to monitor the deeds and misdeeds in the service segment. And thus gestates a legislation to be born a law. In fact, as the Directorate General of Shipping (DGS) says, “the demand for such regulation came from exporters and shippers.”
For instance, customs house agents (CHAs) are an aggrieved lot as they believe that agencies involved in providing different types of services to cargo interests, as Venkiteswaran points out, “merrily charge” whatever they want and so very often, shippers and consignees are taken for a ride. “Unfortunately, container operations were not looked into by the Government from the point of view of regulation, at the appropriate time,” he notes. And this has led to a certain amount of adhocism in the manner in which the services were being provided and charges being imposed.
Shippers’ associations say they want fair trade practices, transparency, competitive, reasonable rates and, to ensure these standards, a monitoring and regulatory mechanism. They prefer an STP mechanism that can keep tabs on freight forwarders, shipping agents, NVOCCs, consolidators, container freight stations (CFSs), inland container terminals (ICDs) and in-transit warehouses – all who provide services to transport cargo by air, sea, road or rail.
However, as the DGS itself admits, strong views are being expressed by various segments of service providers, as also industry associations, with regard to the proposed bill. Some oppose the bill “in toto” while others feel some safeguards could be built in by appropriate amendments in it and also the allied Multimodal Transportation of Goods Act. In view of the ambiguity regarding the terms and provisions in the bill, the ministry constituted a working group, headed by the Director General of Shipping, to get a perspective of the views held by different representative groups. “The discussions at the working group (were aimed) to provide a platform for greater clarity on the specific provisions in the STP Bill that need to be amended and the approach to be adopted,” the ministry says.
Maritime Gateway’s quick scan of the minutes of the working group’s first meeting shows that of the 16 different representative groups, eight have given thumbs down, five a thumping yes and three remained noncommittal.
The pinpointing
The primary contention of the representatives is with regard to who a service provider is – a category described in the stipulated clause as “providing services in relation to carriage or transportation by sea or in combination with air, road or rail or any other mode.” But the bill has not specified further, they contend. Various intermediaries mentioned earlier come under the clause and tacitly, so do shipping lines and shipping agents too, despite their work profile not matching that in the preamble. The government has reportedly rejected their plea to be excluded from the legislation but this is yet another issue for discussion.
The argument of various organisations is that the bill, in its present form, fails to identify and detail the specific practices and services which fall within its purview, including the manner in which they are regulated. The Container Shipping Lines Association (CSLA) rallies that the bill has omitted exporters and importers who also fall within the ambit of trade practices. The Ministry of Commerce too says “import goods” should also be covered under the bill.
The CSLA goes a step further suggesting that tankers, bulk and break bulk carriers besides ro-ros be included. On a similar note, the Bombay Customs House Agents Association (BCHAA) says the bill could be amended to include even “import-containerised” cargo. It also wants ports, railways and CHAs to come under the axe. The Indian Ports Association (IPA) wonders if major port trusts and other ports too are required to be registered under the bill, since they too are service providers. The Mumbai and Nhava Sheva Ship Agents Assocation simply says, “the draft in its present form suffers from infirmities in the language.” Period.
The pricey affair
Yet another grouse is the arbitrary method of demanding and collecting payment en route shipment of goods. The give-and-take has become more of a norm even as a bill of lading is not a document of title in India, and does no more than identify that a particular individual has a right to possession at the time when delivery is to be made. Non-Vessel Owner Operators, otherwise known as NVOCCs, have been issuing documents purporting to be Bills of Lading, while experts say, there is no legal provision at all for the title of the cargo covered under these Bills of Lading to be transferred by endorsement. Yet, trade has been going on even as payment has become a pain for local consignees and a pleasure for freight forwarding agents.
Only a written law can undo the trials imposed by an unwritten law, the aggrieved parties hope. In this regard, imposing a penalty can act as a deterrent for wrong-doers, believes the Federation of Freight Forwarders’ Association (FFFAI). “Price is contract-driven and there should be transparency in fixation of prices,” it suggests.
While the provisions in the bill, according to the Western India Shippers’ Association, are not sufficiently effective to address the problem, the law should penalise “invisible players because of whom the trade suffers.” Among other voices, the Indian Merchants’ Chamber (IMC) is keen that service providers be made accountable for the “harassment” meted out to users.
But the Federation of Ship Agents’ Association of India (FEDSAI) does not agree. “The bill has failed to take into account instances where the service providers were adversely affected by the acts of service users,” it says. Erroneous declaration of cargo in terms of weight and measurement, hazardous nature of the cargo and abandonment of consignment that add to importers’ liabilities are some of the unethical practices for which the bill does not provide for any penalty, FEDSAI elaborates.
The provision
To overcome pricing malpractices, the bill stipulates that the service provider publish tariffs and also make the tariff available in an automated tariff publication system for public inspection. The details should include charges, classification, conditions and practices, date of expiry of the bank guarantee provided by the service provider and the date of expiry of policy of the insurance obtained. The proposed bill makes it mandatory for all the entities to register themselves with the DGS by paying a fee of Rs 50,000. It also stipulates a bank guarantee of Rs 5 lakh and a penalty of Rs 2.5 lakh for rule violation. Economics is involved here.
But any legislation that addresses costs and tariffs, could further increase cost, fears the Association of Multimodal Transport Operators of India (AMTOI). “It is inconsistent with the idea that free play of market forces will lead to competitiveness and superior service,” AMTOI interjects. Yet another point is that the provisions, though apply to conferences for bunker, currency, container detention and congestion charges, do not apply to freight rates fixed by shipping lines.
Shipping is driven by market forces so there is nothing like tariff for a shipping line beyond the ocean freight, reasons FEDSAI. The Indian National Shipowners’ Association (INSA) too treads the line. “Price publication is not feasible considering unpredictability or dynamism of markets,” it adds.
The prediction
Also, the legislation provides a mechanism for consultation to discuss changes in general tariff and imposition of surcharges, such as a dispute settlement mechanism to investigate unfair or unreasonable rates, charges, classifications, and practices of service providers.
But for INSA, the bill, in its current form, is already excessive and needs no further modifications. “The bill leads to duplication and multiplicity of legislation,” it opines. Almost all the segments, intended to be governed by the bill, are already covered under the governance of an existing statute, INSA adds.
Yes, seconds CSLA. “The bill needs to avoid overlapping with other legislations having similar objectives. It also needs a better balance in protecting the interests of all.” The DGS in fact suggests that the bill be made a part of the Multimodal Transportation of Goods Act to hasten consensus building and enforcement of law without any further delay in time.
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