Regulator sought for ports and shipping services

Garment exporters are calling for a regulatory body to monitor services related to ports and shipping. The country’s biggest export industry says unregulated ports and shipping services are adding to operating costs and making the operating environment unpredictable.

“There is a dire need for a regulatory body to be set up. Exporters have time and again raised this issue but no steps have been taken to set up an authority to regulate the port and allied services.

Hence shipping companies and their sidekicks are making hay in glorious sunshine,” said Noel Priyatilake, Chairman of the Sri Lanka Apparel Exporter’s Association (SLEA). Garment exporters point to the latest price increase in Terminal Handling Charges (THC), by the shipping lines, as an arbitrary price increase.

The shipping lines announced a THC increase, of up to 35%, effective from January 1. The THC for a 20 foot container went from U$ 115 to US$ 155 and charges for a 40-footer went from US$ 185 to US$ 245.

Earlier this week the Joint Apparel Association Forum (JAAF) that represents the US$ 3 billion garment export industry issued a statement asking the government to freeze the THC increase. The JAAF says the garment industry is finding it difficult to absorb such a cost increase.

“We urge the authorities to consider the gravity of the situation and take action to find a lasting solution to the problem and in the interim, to suspend the current increase in the THC,” JAFF said.

Cost recovery, not profit increase
The ships’ agents maintain that the THC increase is part of a cost recovery drive.

“The garment exporters are aware that the recovery has been below cost in the past years and the recent increase, announced by the conference, is a 100% recovery based on current costs,” said N. K. Warusavitharana, Secretary General of the Ceylon Association of Ships’ Agents (CASA). CASA says the THC depends on the port charges.

“The THC announced by the lines is in direct proportion to the tariffs applicable in the Port of Colombo and will vary according to changes in the tariffs,” said Warusavitharana. The ships’ agents say no further increase in the THC is envisaged this year, provided the port charges are unchanged.

Regulate please
Garment exporters however, say the current increase in THC needs to be re-examined.

“In the Philippines when the THC went up to something like US$ 150, the government got involved and it went down to US$ 90. Even in the US, price increases have to be authorized by the Federal Maritime Commission. So there is a need for a regulator to look at how these prices are structured and to decide what should be passed on to exporters. Some of these costs should not be passed on to us,” said Priyatilake.

A regulatory body, say exporters, can increase stability of operating environment by reducing chances of sudden price increases.

“What if tomorrow they decide to increase the THC again? What can exporters do about it? Previously in the garment industry, we could have absorbed costs like this but now we can’t. So there is a need for a regulator to balance the situation,” says Priyatilake.

Priyatilake also points out that a regulator for the ports and shipping sector is long overdue.

“When SAGT came into being, the Port’s Authority, SAGT and the government signed an MOU saying a regulator must come into being within a period of five years of signing the agreement. Now the five year period has expired but there is still no regulator,” said Priyatilake.