Bitter row brews over sugar

A group of sugar importers have demanded from some international suppliers that the terms of the original contracts be altered after the sugar shipments had already left the country of origin and the shipments were en route to Sri Lanka, fuelling concern that such action could harm the country’s reputation internationally, sugar trade sources said.

The sources said this group of importers had warned that they would disclaim liabilities for any demurrage at the port if their international suppliers failed to alter the original contracts.

In a letter written to sugar suppliers abroad these importers consisting of seven companies have asked the former to alter their original contracts which are known as D/P terms (Documents on Payment) to D/A terms (Documents on Acceptance).

According D/P terms importers are bound to settle payments to their suppliers as soon as they receive the shipments whereas D/A terms mean that payments are made when the shipment is disposed of.

The letter has stated that 114,000 metric tonnes of sugar are being booked by the seven members to arrive by end of this month in the harbour and that it is an oversupply which ‘will be more than sufficient to trade for at least three months’.

Citing this situation they have asked for a 90 day D/A facility which would mean they will settle payments for the cargo 90 days after they receive the consignment.

The letter said that if the suppliers failed to meet their request they will disown the demurrage that should be paid to the Ports Authority.

“We are compelled to disclaim liabilities of SLPA demurrage, shipping line demurrage and consequent auction by SLPA in the event of you and your principals failing to accommodate our request,” the letter sent to suppliers abroad said.

“Any legal action you would institute will be of no use as an amicable settlement would be viable under the present circumstances” the letter added.An expert in the industry said the move has created a bad reputation about Sri Lanka internationally and sugar importers could even face the risk of being blacklisted in the future.

“This has led to Sri Lanka’s image being tarnished internationally”, he said

He said that though the consumers will not be affected immediately, in the long term they may have to face problems in the event of international sugar suppliers treating Sri Lanka harshly given the present situation.

He said that though the sugar importers had asked for a relief, any benefits will not be passed on to the consumers.

He said the absence of a state monitoring system like the CWE has led to such a situation.

“Government should look into this to prevent Sri Lanka being blacklisted by international bodies”, he said.

Mr. Hemantha Lokumannage of Wilson Trading Company - one of the sugar importers who signed the joint letter - said what was being asked for was only a relaxation in the contract and it does not pose any risk of Sri Lanka being blacklisted in the international sugar market.

He said that recently there has been an oversupply of sugar to Sri Lanka and as importers it was not easy for them to handle the situation.

He said the main cause for the oversupply was due to local companies importing sugar from Thailand which sold sugar at a lower price than other countries. According to him Thailand was supplying sugar at about US $ 425 per metric tonne whereas others sold it at about US $ 25 to $ 30 more per metric tonne.

He said the reason to request 90 days D/A facility was because the goods could not be disposed of in less than the 90 day period.

Mr. Lokumannage said that if the sugar suppliers failed to alter the contract from D/P terms to D/A terms the importers would be compelled to pay much money as demurrage.

“There is no way that we can sell a huge consignment of sugar like 114,000 metric tonnes immediately while keeping it in the port involves paying lot of money as demurrage. They have to give us some relief”, he said.

A managing director of another sugar importing company who didn’t want to be identified said what was being asked was only to extend the credit facilities given and that it will not do any harm to Sri Lanka’s reputation internationally.