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Third Meeting
on
HARMONIZATION OF SCALES OF CHARGES
Ministry of Commerce
June 11, 2010
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Background Recap of Events
Secretary Ports & Shipping requested Secretary Commerce vide
letter dated 16th December, 2009 to look into the issues ofovercharging and other malpractices by various service providers.
Subsequently Secretary Commerce chaired 2 meetings on
Harmonization of Scale of Charges (HSC).
In the 1st meeting held on January 18, 2010, in which all stakeholders
from public and private sector were invited. Following decisionswere taken:-
1) The issue of in-action of SRAB was discussed and M/o Ports &
Shipping were requested to find out the reasons.
2) MoC will issue a directive that Ship Agents must refundsecurity deposit within 7 days
3) PIFFA should hold a meeting of Freight Forwarders and traders
to redress the grievances of the traders.
4) FPCCI to deliberate and analyze the issue of overcharging by
various service providers and give recommendations 2
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2nd meeting on the subject was held on February 26, 2010, in which
following decisions were taken:-
1) Since there was no evidence regarding existence of a Stay
Order, M/o Ports & Shipping will be requested to re-activate
SRAB.
2) Amendments in the licensing provisions may be made by FBR
to enable Collector Customs (Preventive) to take punitive actionagainst those Ship Agents who are involved in excessive
charging and other malpractices.
3) PSAA will fold a meeting with the representatives of the trade to
resolve the issues relating to shipping charges amicably.
Beside the above two meetings, 2 meetings in FPCCI, one meeting
in PSAA and one meeting in SBP were held. Mr. Babar Badat, Vice
Chairman FIATA held a meeting with Secretary Commerce in
Islamabad on 17th May.3
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Latest progress after the above-mentioned meetings
Issue No. 1: Re-activation of SRAB
Since it was abundantly clear that there was no evidence
regarding existence of Stay Order, Ministry of Ports & Shipping
was requested through a d.o. letter from Secretary Commerce on
3rd
March 2919 to re-activate SRAB.However, Ministry of Ports & Shipping vide letter dated 30th
April replied that SRAB cannot be re-activated at this stage as
issue is subjudice in the Sindh High Court. After examining the
issue thoroughly the Rules of Business of Ministry of Ports &
Shipping and the functions of DG, Ports & Shipping, the
Ministry of Commerce is of the view that it is the responsibility
of the Ministry of Ports & Shipping to re-activate SRAB and it
may be done as soon as possible.
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However the following point may also be considered by Ministry
of Ports & Shipping:-
79A is placed in Part III dealing with Coastal Shipping,
whereas Shipping Agents deal with International Shipping.
Therefore a new chapter dealing with Regulation of
International Shipping Practices may be introduced in
Merchant Shipping Ordinance through Merchant Shipping(Second Amendment) Ordinance, 2010 introducing
Licensing , Financial Responsibility, Suspension or
Revocation provisions in the same manner as has been done
in US Shipping Act of 1984.
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Issue No.2: Amendments in licensing provision to enable Collector
of Customs (Preventive) to take punitive action against those Ship
Agents who are involved in excessive chargingSecretary Commerce sent a d.o. letter to Chairman FBR on 4th April
2010 requesting to direct the concerned Officer to expedite
amendments on the relevant sections of the Customs Act 1969 on the
above lines. FBR responded on 8th April that proposed legal changes
in the Customs Rules will be considered during the finalization of
budgetary and fiscal changes in the year 2010-11.
It may be mentioned here that the Federal Tax Ombudsman on a
complaint No.462-K/2009, dated 6th July 2009 by M/s. Malik Paper
Mart, Karachi vs Secretary Revenue Board has already recommendedon 12-01-2010 that FBR may actively consider proposing effective
remedial measures in the Finance Bill 2010-11.
F BR may apprise the meeting of the latest position regarding
proposed amendments in the Customs Rules 1969.
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Issue No. 4: Freight Forwarder Charges Meeting held in SBP,
Karachi
A meeting was held in the Exchange Policy Department, State Bankof Pakistan on 8th March, 2010 to resolve the issues relating to
freight forwarding charges. No consensus could be reached,
therefore all stakeholders were requested to send comments in
writing. After obtaining written comments from all stakeholders,
SBP has issued FE Circular No.02 on April 14, replacing FE
Circular No. 6 of 2006.
However the issuance of new circular has not resolved the issue.
Rather it has become more complicated. SBP in a letter to MoC onApril 26 has informed that PHMA, PAF etc have rejected the FE
Circular No: 2 of 2010 and are agitating against SBP, through
electronic & print media. SBP has proposed MoC to review the
matter in Consultation with concerned stakeholders. Besides, some
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stakeholders have filed a writ petition in Sindh High Court against
FE Circular 2 of 2010, making MoC, SBP & FIA as Respondent.
First hearing was held on 12th
May 2010, Mr. Jawaid Mansoor,Executive Secretary NTTFC who attended the proceedings has
informed that he has been asked to submit comments on para 14
(concerning MoC letter to FIA dated 13th Feb 2010 ). The
comments have been submitted to Sindh High Court.
Legal Position
On the request of Freight Forwarders, SBP had issued FE Circular
No. 06 of 2006. Traders agitated against this Circular, which was
replaced by Circular 02 of 2010. The new Circular is not
acceptable to PHMA and PAF. SBP should resolve the issue as perrules & procedure governing the issuance of FE Circulars.
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Way Forward
The purpose of holding meeting in SBP has not been served. The
issue regarding freight forwarding charges was not considered.The issue concerning overcharging and other malpractices by
Freight Forwarders cannot be resolved in the absence of a
Regulatory Mechanism for Freight Forwarders.
Therefore the issue regarding Regulatory Mechanism of Freight
Forwarders needs to be resolved.
Regulatory Mechanism for Freight Forwarders
Functions of Freight Forwarders
The freight forwarder is the entity which moves goods from pointof origin to overseas point of destination and ensures that
internationally traded merchandise arrives in good time, safe
condition and at the most economical cost. Specifically, freight
forwarding firms arrange transportation from shippers factories or
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wharehouse to ports, packing or consolidation of cargo if
necessary according to the customers needs, documentation,
customs clearance, shipping (land, sea and air or combinationthereof), unpacking or deconsolidation if required and delivery at
customer designated location(s).
Licensing Authority
Freight Forwarders were licensed by Collector of Customs.However, through Finance Bill, 2007-8, following amendments
were made in Section 207 of the Customs Act 1969.
Presently all the Freight Forwarders are licensed by the Customs
which is unnecessary in certain cases. The scope of licensing in
case of Freight Forwarders is, therefore, proposed to be restrictedto the Freight Forwarders who actually transact customs related
business.
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Even the above amendments do not take Freight Forwarders out of
the purview of Customs, because Freight Forwarders still perform
their duties inter-alia as Customs Clearance Agents. The decision
taken in the meeting at FBR on 17th May 2007 that MoC is the
most appropriate Ministry to regulate the business of Freight
Forwarding Industry does not have any rationale because of
following reasons:-
a) It was a unilateral decision taken by FBR in a meeting in which
MoC was not invited.
b) The Rules of Business of MoC do not have any provision for
regulating Freight Forwarders.
Committee constituted to regulate Freight Forwarders performanceDirector General of Trade Organization, notified the Committee
under the chairmanship of Additional Secretary Commerce II on
23rd October, 2008 to regulate freight forwarders performance in
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pursuance of the approved Certification Rules and Code of
Conduct for Certified Members of Pakistan International Freight
Forwarders Association (PIFFA). Only one meeting of theCommittee was held on 29thNovember, 2008 at Karachi. In this
meeting PIFFAs Legal Counsel raised the issue that the
Committee does not have any legal validity to regulate the
Freight Forwarders. Therefore the meeting remained
inconclusive and no minutes of the meeting were issued.
It is recommended that either Customs or M/o Ports &
Shipping may regulate the FreightForwarders.
Issue No.5: Recommendations of the meetings held in
FPCCI:
Report dated 22nd March sent to MoC by FPCCI, contained
following recommendations:-
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1. Since the Bill of Lading (B/L) is an evidence of the title of the
goods and the holder of the same is the owner of the
consignment, the Ship Agents/Shipping Lines should not havethe right to stop the delivery of the consignments.
2. All charges being charged by the Ship Agents, Freight
Forwarders and Terminal Operators should be part of the
freight.
3. For one service of handling containers, the trade is paying thecost thrice i.e. in the name of Terminal Handling Charges (THC)
to the Ship Agents, Terminal Service Charges (TSC) to the
Terminal Operators and Wharfage to the Port Authorities. The
THC which is being paid to Ship Agents should be part of thefreight, TSC being paid to Terminal Operators be paid by the
Shippers/Consignees being full and final payment to handle the
cargo by the Terminal Operators and the cost of Wharfage
should be withdrawn by the Port Authorities.
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4. The various charges being collected by the Ship Agents, should
be part of the freight as Ship Agent represent the Ship Owner
who pay the Agency Fee which covers the remuneration of the
Ship Agents.
5. The charges being collected by the Freight Forwarders should
also be part of the freight as Freight Forwarders represent the
Shipping Lines who pays the Fees which covers the
remuneration of the Freight Forwarders.6. Various Charges collected by Terminal Operators should be
included in the TSC already being paid by the
Shippers/Consignee.
7. Shipping Rates Advisory Board (SRAB) be reactivated.
8. Office of Director General (Ports & Shipping) be strengthenedand given the mandate to ensure transparency.
9. Powers should be given to Customs to regulate the Ship Agents
where they are registered.
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10. Freight Forwarders should be registered with State Bank of
Pakistan to regulate all the remittances like in Sri Lanka.
MoC circulated the report to all stakeholders for comments, on 3rd
April, 2010. The comments received from various stake holders
are summarized below:
Item No. 1 Since the Bill of Lading (BL) is an evidence of the
title of the goods and the holder of the same is the owner of the
consignment, the Ship Agents/Shipping Lines should not have the
right to stop the delivery of the consignments.
Comments:
i) Pakistan Knitwear and Sweater Exporters Association(PAKSEA):
Shipping lines should issue the Bill of Lading as per land law of
Pakistan (Rule 11, Chapter XII of the State Bank of Pakistan F.E.
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Manual 2002) and should have no right to stop delivery of the
consignment.
ii) Pakistan Apparel Forum (PAF)Same as above
iii) NTTFC
In case the freight has been prepaid, the Ship Agents/Shipping
Lines should issue the delivery order for the consignment on
production of the Bill of Lading.iv) PIFFA
If Bill of Lading is claused, freight and destination charges
prepaid then freight forwarder would not charge delivery order
charges to consignee.
v) Pakistan National Shipping Corporation (PNSC)
The recommendations do not take best practices and ground
realities into consideration and are not acceptable.
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vi) Pakistan Stevedores Conference:
Delivery orders are issued against surrender of Original Bill of
Lading only. Delivery order is not withheld if all dues and chargeshave been paid and formalities completed.
vii) Gwadar Port Authority:
Agree with the recommendations.
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Item No.2 All charges being charged by Ship Agents, Freight
Forwarders and Terminal Operators should be part of freight.
i) PAKSEA
Freight should include all charges. No other charges may be
claimed from exporter or importer.
ii) Pakistan Apparel Forum:
Same as by PAKSEA.
iii) Gwadar Port Authority:Amount charged by various agencies should be merged in the
main charges and there should not be duplication or double
charging.
iv) NTTFC
According to the present international shipping practices,
payments for the services provided locally have to be made to
Ship Agents, Freight Forwarders and Terminal Operators and
these are not part of the freight.
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v) KPT
Wharfage charge may not be withdrawn.
vi) Karachi Customs Agents Association (KCAA):
All charges being recovered by various service providersshould be part of the freight.
vii) Pakistan Cotton Fashion Apparel Manufacturers
Association:
All charges may be included in the freight and must be
rationalized.viii) KICT
Do not agree with the recommendation.
ix) PNSC
Suggestion is not acceptable.x) PIFFA
As per international shipping and freight forwarding practices
origin and destination local charges are billed separately.
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xi) Port Qasim Authority:
The practice is prevalent the world over and merits careful
deliberations taking all stakeholders on board.xii) KPT
Wharfage charges may not be withdrawn.
xiii) Pakistan Stevedores Conference:
If all charges are paid by the shippers at the Port of loading -
e.g. Destination THC Pre-paid or CY/CFS shown on B/L then no charges would be applicable at destination.
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Item No. 3 For one service of handling containers, the trade is
paying the cost thrice i.e. in the name of Terminal Handling Charges
(THC) to the Ship Agents, Terminal Service Charges (TSC) to theTerminal Operators and Wharfage to the Port Authorities. The THC
which is being paid to Ship Agents should be part of the freight.
TSC being paid to Terminal Operators be paid by the
Shippers/Consignees being full and final payment to handle the
cargo by the Terminal Operators and the cost of Wharfage should be
withdrawn by the Port Authorities.
Comments:
i) PAKSEA
Terminal handling charges (THC) paid to the shipping lineshould be a part of the Freight and it should be charged once.
ii) Pakistan Apparel Forum :
Same as above
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iii) NTTFC
Payment of THC on import can be avoided if it is stated on the
Bill of Lading that THC has been pre-paid. The Terminal ServiceCharge (TSC) is levied by the Terminal Operators for services
provided in their premises of storage, Customs examination and
handling of containers. It is therefore not possible to eliminate these
charges or include them in sea freight. Wharfage is a charge paid to
Port Authorities. As Port Authorities provide no service in acontainer terminal, this charge should be eliminated.
iv) Gwadar Port Authority:
Agree with the recommendations.
v) Port Qasim Authority:
Wharfage is a charge levied by ports for construction and
maintenance of berths and allied services for placing of cargo and
does not relate with freight rates or THC. Additionally wharfage is
fractional charge as compared to freight charges and THC.
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and they paying it back to the Ship Agents in local currency.
Reasonableness of the charges is the issue that needs to be
examined.
iv) All Pakistan Paper Merchants Association (APPMA)
Ship Agents charges on the basis of scales recommended and
approved by PSAA. Ship Agents violate the rules and make
manipulation.
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Item No. 5 The charges being collected by the Freight Forwarders
should also be part of the freight as Freight Forwarders represent
the Shipping Lines who pays the Fees which covers theremuneration of the Freight Forwarders.
Comments:
i) NTTFC
Freight Forwarders are not the agents of Shipping Lines. The
services provided by them are additional to the sea transport,
freight for which is paid to Shipping Lines. Therefore, the freight
forwarding charges cannot be made part of sea freight.
Reasonableness of charges is the issue to be considered.
ii) PIFFAFreight Forwarder does not represent shipping lines and they
perform totally different set of functions and services against which
they charge fees for their remuneration.
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Item No.6 Various charges collected by Terminal Operators should
be included in the TSC already being paid by the
Shippers/consignee.
Comments:
i) PAKSEA
Terminal Operators collect various charges which should be
included in TSC.
ii) Pakistan Apparel ForumSame as above
iii) NTTFC
As different services are provided by Terminal Operators for
different consignments, it is not possible to make one charge
applicable to all.
iv) Port Qasim Authority
Separation of ocean freight rates from terminal charges has
increased the overall shipping charges. The practice
is prevalent the world over and merits careful deliberations 27
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taking all stakeholders on board.
iv) Port Qasim Authority
Separation of ocean freight rates from terminal charges has
increased the overall shipping charges. The practice
is prevalent the world over and merits careful deliberations
taking all stakeholders on board.
v) Pakistan Stevedores Conference:
Terminal Services Charges are charges levied by the terminalon account of R&D fee and other services rendered by the
terminal, therefore the above services cannot be part of freight.
vi) KICT
KICT is working on amalgamating and reducing the number of
chargeable heads to provide reasonable clarity to prospective users
of the terminals.
vii) Security Packers
Terminal Operators are charging tariff in US dollars. They
should charge in Pak Rupees. Similarly Shipping Lines are 28
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charging Container Rent at very high rate in US Dollar. They
should charge in Pak Rupees.
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Item No.7 SRAB be re-activated
Comments:
i) Karachi Customs Agents Association (KCAA)
SRAB may be re-activated.
ii) NTTFC
SRAB is required to be re-activated
iii) M/o Ports & Shipping
SRAB cannot be activated at present as the issue is subjudice inSindh High Court.
iv) Port Qasim Authority
A Regulatory Board under office of DG (P&S) may be
constituted to rationalize charges levied by shipping lines/ship
agents/freight forwarders and terminal operators.
v) KICT
Do not support this proposal.
vi) PNSC
A tariff regulatory authority with no conflict of interest and duly30
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backed by force of law will be only solution to weed out the
unscrupulous operators from supply chain.
vii) SBP
As per section 79 of Chapter 5 Part-III of Merchants Shipping
Ordinance 2001, Federal Govt. may fix the rates.
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Item No.8 Office of DG (Ports & Shipping) be strengthened and
given mandate to ensure transparency.
Comments:
i) NTTFC
Pakistan Merchant Shipping (Amendment) Ordinance 2002
provides necessary mandate to Director General (Ports & Shipping)
to issue license to Non-vessel Operating Carriers and Cargo
Consolidator, which are the Freight Forwarders, and cancel theregistration, forefeit security or impose penalty of fines as may be
prescribed. Only the will is required to implement the mandate.
ii) KCAA
Office of DG (Ports & Shipping) be strengthened and given
mandate to ensure transparency.
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Item No.9 Powers should be given to Customs to regulate Ship
Agents where they are registered.
Comments
i) FBR
Shipping Agents are licensed by Customs. Proposed legal
changes in Customs Rules will be considered during the
finalization of budgetary and fiscal changes for the year 2010-11.
ii) KCAACustoms may be given powers to regulate Ship Agents.
iii) NTTFC
Customs already have the powers to regulate Ship Agents as far
as the Customs matters are concerned. Directorate General of Ports
& Shipping may also register them under Pakistan Merchant
Shipping (Amendment) Ordinance, 2002 to penalize them in case
of any misdemeanor.
iv) Port Qasim Authority
Ship Agents are licensed by Customs. It may be examined 33
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whether FBR has any legal mandate to take action against Ship
Agents, who are involved in excessive charging, delay in refund of
security deposit or other malpractices.
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Item No. 10 Freight Forwarders should be registered with SBP to
regulate all remittances like Sri Lanka.
Comments:i) NTTFC
The proper organization to register Freight Forwarders is the
Directorate General Ports & Shipping. Rules may be prepared and
notified for licensing the freight forwarders. Foreign exchange
remittances are already regulated by State Bank of Pakistan.ii) Port Qasim Authority
PQA endorses the proposal.
iii) PIFFA
The Chairman PIFFA himself and on behalf of Executive
Committee have already recommended in favour of regulatory
authority for freight forwarding industry.
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iv) Pakistan Cotton Fashion Apparel Manufacturers
Association
Performance of Freight Forwarders may be regulated and they
may be asked to furnish security.
v) DTO, Ministry of Commerce
Any dispute of Freight Forwarders has to be settled by FBR or
Customs (Preventive) Department and not by MoC.
vi) SBPFreight Forwarders are not being regulated /monitored by any
agency.
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Thank You
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