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Sean Van Dort is the incumbent Chairman of the Sri Lanka Shippers’ Council and the only Asian to be serving on the Board of Directors of the London based of Global Shippers’ Forum. He has over 30 years of service experience in the liners, shipping and agency business and import and export and logistics services. He is currently employed as the Director Logistics at MAS Holdings, which is one the world’s top design to delivery apparel manufacturers which employs over 86,000 personnel as a Sri Lankan multinational. Following are excerpts from an interview with Van Dort:
Q: Can you tell us your shipping background?
A: On completing my education at St. Benedict’s College, I joined the private sector, specifically in the shipping sector. I served at McLarens Shipping, Pership Group and Deldem Group among others and joined the export industry in 2006 by joining MAS Holdings. I started out as a trainee in shipping and gained knowledge at all levels in shipping, ports and logistics. I first went through the hard training; as a result I am operationally very conversant on what is going on with the shipping industry and ports.
Q: Why did you decide to join the export industry?
A: I decided to join the export industry as the shipping industry in Sri Lanka was stagnant and we only have an agency dominated shipping network and the scope is very limited, and restricted. It plays mostly as a middleman between the ship owner and the cargo owners. The current shipping industry model only befits a few and creates few low paying jobs to the economy. I doubt if we ever can be a maritime hub without the technology, skill and knowledge with the much-needed capital without ship owners taking the country seriously to position their regional offices to Colombo. Whereas the export industry is an open and a competitive industry which allows us to be innovative, and be world class as the apparel industry is.
Q: What is this continuous issue that is spoken about by a section of the service providers on prohibiting ‘THC’ Collection?
A: Let me be me very clear, first there is no terminology called THC in the port of Colombo or any other international container terminal in the world; this was invented by shipping lines and agents to collect extra revenue on top of freight. Trust me the SLPA tariff very clearly says, that ships agents must make payment in US$ for all costs related to unloading and loading of a said vessel seven days prior to ships arrival by ways of foreign currency remittance from its principals for what is globally known as the stevedoring service provided by various parties.
In the port of Colombo there are three companies doing this SLPA, SAGT and CICT. To a layman the meaning of this is the cost of loading, stacking and unloading of either bulk cargo or container cargo. If you look at the general tariff guides of the SLPA it comes under the stevedoring cost payable by the ship to terminal. Let me explain further, in today’s modern container terminals, exporters and importers are not in a potion to take the responsibility of loading /unloading from a ship as technology has changed and the ships extended gear is the container box.
Long years back before containerisation we use to take our export alongside ship and load the bulk cargo to the ship and we paid the loading cost to the port. With containerisation this has changed as a shipping line now book the space in the port for scheduled callers and they interact with the terminal on how many boxes they have for exports, imports and transshipment, hence the role of unloading/loading has become the responsibility of shipping lines in modern container terminals.
In the charted ship broker language port of Colombo is a liner in/liner out terminal for container cargo, hence all three terminals have contracts with shipping lines and bills the shipping lines for services rendered on a ship by ship basis which can include discounts and rebates.
So, you acknowledge there is cost, why has the government prohibited according to some service providers to collect this cost from shippers?
Not only that I acknowledge that there is a cost, but globally all shippers acknowledge that in the supply chain at various points when freight is moved either by ocean, land, rail or through transshipment, costs are there. We only request the service provider to quote an all-inclusive rate.
What our law simply says is, if a party (buyer or a seller) is responsible of booking freight from a line or a freight forwarder, that party as the contracting party with service provider can be charged any component of the logistics chain as an all-inclusive freight from the pickup point to delivery point which has to be shown on the bill of lading for clarity.
This ensures that the seller or the buyer who books freight has a choice to go to service providers and get the best rate or service of choice at a market driven rate which is created on the economic reality of supply and demand, some time the all in freight goes up and some time it comes down and this is fine with shippers. So if someone says anything is prohibited, they are in no other words unscrupulous service providers who are held bent on manipulating the freight to pocket out more money from consumers and exporters by fixing cost which are not transparent at times, as we all know terminal operators worldwide give discounts to lines on volumes on published tariffs through service contracts.
I will resign from my shipping career if anyone can show that the government regulation 1842/16 which eliminates anti-competitive practices have prohibited the collection of any cost, including stevedoring cost from a contracting party.
Q: Last week a NVOCC agent said that, Sri Lanka is violating international best practices and that the former government was misled by vested interest. What are international best practices? Just because it’s practiced in ignorance is it correct? Is it the best? Prostitution is also practiced legally in countries; does that mean we have to recognise same here and call it as international best practices?
A: Yes , I saw that article, first of all I must enlighten the readers that there are about three new mushroom associations formed over the last few years to show the policy makers that they are been unfairly treated due the competition gazette. They are the same faces in different names and the bigger lobby is hiding behind them. I want you to look at their speeches, all they talk about is THC, they do not talk about any national maritime policies or why ship owners never came and established in Sri Lanka, even though when the THC was forcefully collected from non-contracting parties for 17 long years, they were not worried about national interest, these few agents are only worried about pocketing extra dollars from shippers and shipping lines, one must understand their role which is a brokers role that does not add value and we do not expect love for the country from such people.
Q: What is the contribution of shipping agency networks to the national GDP? What innovation, modernisation have they brought into this country?
A: Nothing but they are known for collecting extra costs from our importers who are not contractually obliged to make such payments and remit these costs as profit sharing as kickbacks to the principals or agency networks.
They have called the exporters and importers as parties with vested parties, I represent 14 product associations of this country which employs millions of workers and accounts for over $ 30 billion import/export trade, if they think we have vested interest, let them think so, we do have a vested interest to be globally competitive as exporters and to reduce import costs which will help manufacturers and the ordinary consumers. However we will certainly expose these small groups who are not satisfied with freight commission they get and mislead, attack and ridicule Government officials.
This issue does not stem from last Government, in fact one time Trade Minister Ravi Karunanayake wanted to bring this in 2003, CBK Government wanted to resolve after fair trading commission direction in 1998, but some politicians were well looked after by big agency houses for a very long time to ignore the exporters and consumers.
Sadly, these few greedy people have not realised that they are in business because of shippers. This is the only industry the customer is harassed by them in order to make money by breaking the market driven freight rate into fixed costs, we all know when we buy an air ticket even the government taxes are included, similarly we get all-inclusive rate when we ship cargo through air. What more to say about this law? It speaks of the same principle and establishes credibility on international transactions on risk, cost and liability.
They talk about international best practices, I work as director to the Global Shippers’ Forum which is the formal body recognised by IMO and UN to represent shippers, we do represent shippers from Americas, EU, Asia, and Africa, if any one of these agents can show one letter that any shippers council has accepted this so called forcefully implemented collection of surcharges as a best practice, I will resign from GSF too. In fact GSF is taking the Sri Lanka law as an example to the rest of the world and are in discussion with the World Bank and UNCTAD to promote the concept.
These anti-competitive practices are not allowed in developed countries such as US or EU, as you know FMC in the US and EU Competition Commission looks after interests of American shippers and EU shippers, and they are our buyers and they mostly book and negotiate freight as they have the bargaining power with volume. Today all our buyers pay all the charges including the so-called THC if they book the freight as an all-inclusive payment. Similarly exporters who negotiate payment in Sri Lanka pay the all-inclusive payment up to delivery. What our agents want is to remove the obligation of the bargaining party and transfer the same to a weaker party who has no contract with them; this is the long story in short.
More interestingly the International Chamber of Commerce which is considered as the world’s business body published a book named transport and incoterms to educate the service provider in 2016. Seems that they have not gone through it as it gives guide lines for container handling in modern ports and what term to be used and how it affects cost, risk and liability and what the transporter should advise the party booking the freight etc. These are good ethical practices they must understand as the world moves forward.
They are trying to interpret old trading pattern which were prevalent 30 years ago to collect their extra dollars doing nothing and charging from non-contracting parties, we call them to be more responsive and creative and introduce new technology such as electronic delivery orders which will lower the transaction costs for shippers like in other countries and help trade grow.
Q: What do you have to tell the new minister and does the port has a role in this?
A: I have few requests from the minister, study this legislation, understand the concept and principal behind it and the 20 year background, talk to the officials at the finance ministry who has been involved in drafting the regulation, and question why the then Executive President, although holding the portfolio of minister of shipping brought it as an executive order in 2013. He must also understand who was behind introducing this break up of freight in the 1990s, he may be shocked!
There was no consultation with any ministry or the council in 1997, but threatened CBK government officials not to intervene that transshipment will drop and ships will not come and Sri Lanka will not be a hub, etc. This was repeated last week and was the same song was given the former government who did not get caught to it. In fact since the legislation Sri Lanka has increased its throughput from 4.3 million TEU to 5.7 TEU and still growing.
It must be also reminded that these attempts were made during late Lalith Athulathmudali’s time and late President Premdasa’s time, current adviser to PM, Pasakaralingam who was there during those periods did not allow the freight to be broken up. Ronnie de Mel too as shipping minister in 2001 was in process of dismantling this anticompetitive practice but due to his short stay the process did not go through.
The port and its terminal operators have no role in this; they are third party service providers who service both ship and shippers. Minister need to strengthen the hand of Director Merchant Shipping to stop any further anticompetitive practices that does take place beyond the movement of cargoes such as washing charges, DO charges, deposits, which are not regulated, and are mounting as a cost to consumers and importers. We will take them up soon with the minister.
Q: Do you think the new port chairman can help in any way?
A: This is not the port chairman’s area to concentrate nor have in the past any chairman to my knowledge or a terminal got involved on this is matter as they always got paid for their service. This was a matter of trade on competition laws that’s why the finance ministry was involved, don’t forget all his life he (new chairman) has been a shipping line man as well.
We are very happy that he has taken over the port again, but I think it will be his duty to bring back the ports failing backward service aspects such warehousing cargo de-stuffing delays and eradicating the corruption that goes with taking delivery of cargo by our importers and facilitating our exporters to speedily carry out its operations in the port with innovative technology, etc.
Q: You mentioned that service providers unlawfully collect and remit cash overseas? Can you explain this more?
A: Yes, they were violating exchange control regulations, by law you can only remit freight when lawfully collected in Sri Lanka back to their principals or agents. However when a shipment is on CIF basis to Colombo they used to wrongfully collect around Rs. 40,000 to Rs. 50,000 per shipment from importers under various charges and share same as profit. By this a huge foreign currency drain from Sri Lanka took place. The importers of this country used to recollect these costs from the consumers, driving the cost of living high as well.
But this stopped due to the law, but we are not sure if the banks are checking freight remittances in details even today, we will take up this matter also with Central Bank soon; as we have proof of meeting minutes of these service providers’ monthly meetings where we find the chair begging them to stop these unlawful acts. That’s what has hurt these few service providers, who do not know how to generate healthy profits but continue to push to get back to the old ways. At the same time, I take this opportunity to thank many service providers who do abide by the law and they too get tarnished because of few bad eggs.
Q: What is your message to the Government?
A: We strongly urge the Government work towards export development as we know they understand the gravity of export competitiveness and also as politicians will be sensitive to cost increases to the consumer. We want them to once and for all stop this irritant of small groups trying to make our exports and imports more costly through unacceptable means and trying to get them legitimised by Government.
