03 - 09, 2009

Speaking to a press conference last week, Pakistan Apparel Forum minced no words in accusing freight forwarding companies of blackmailing textile exporters after holding exports proceeds by allegedly becoming shipper and consignee. "We will file FIR against such freight forwarding companies if they continue to hold payments illegally," warned the forum's infuriated chairman, Jawed Bilwani flanked by forum's senior members in a hurriedly called press conference.

A first information report (FIR) has already been filed against a freight forwarding company before Federal Investigation Agency. The common complaint of exporters against freight forwarding companies is that freight forwarders make changes in consignee column in master bill of leading. Changing the consignee of goods exported and thereby releasing of shipment illegally to importers allegedly in collaboration with them, rendered exporters loss of payment. Freight forwarders collude with buyer to force discounts on exported goods. Exporters have no other option than to negotiate once the shipment is out.

Delivery of goods without surrendering endorsed original house bill of leading is illegal. Manipulation in master bill of leading makes it easy for freight forwarder to hold remittances. Many exporters have become bankrupts due to this, Chairman said adding this has also promoted usage of illegal channel of money transfer such as Hawala. 'In case of delayed export proceeds, State bank pressurizes exporters who in turn have no other option to opt for informal channel.'

So far, FIA has recovered such ceased proceeds of $8 to 10 million. The still-to-be-recovered amounts run in to a billion dollar if span between 2002 and to date is considered. During the said period, cases worth $200 million remain unresolved, he said while sharing details. State bank holds about 6,000 such cases. Chairman said the issue was not new and the victims had been clamouring about frauds of freight forwarders for almost a decade.

In latest case, knitwear garment exporter went in to settlement agreement with a shipping agency. The shipping agency agreed to pay 75% of the value of goods to the exporter. The remaining amount was to be paid later on the bank guarantee. But, exporter had not received outstanding payment till the filing of FIR. When this correspondent asked was there any legal cover freight forwarders used to define their action of holding payment or rephrasing master bill of leading, the answer was unanimous 'no'. Rather, it is a sheer violation of State bank's circular no.6, he said while sharing the circular with the reporters.

Foreign Exchange Circular no. 6 of 2006 reads: "As declared under the trade policy 2005-06, freight forwarders were allowed remittances of locally collected freight charges to their principals abroad. However, such remittances would require SBP's prior approval. In order to further facilitate the industry, it has been decided to allow authorized dealers to affect such remittances directly on behalf of concerned fright forwarder/consolidators. Authorized dealers are, therefore, being allowed to remit on monthly basis the surplus freight by the freight forwarder/consolidators after verification of documentary evidence in support of the remittance.

In order to mitigate inherent risks and establish genuineness of the transactions, authorized dealers would require verification at the time of allowing monthly remittances of a) clients' letter indicating purpose of remittance, particulars of the beneficiary and beneficiary's bank b) agency agreement with counterpart abroad (annually) c) NTN and PIFFA membership certificates (annually) d) certificate from participating chartered accountancy firm to the effect that the amount of remittance applied for has been verified with reference to authenticated copies of prepared master airway bill/master bill of leading, cargo manifests and billed invoices from counterparts abroad, and has been found correct e) M-form f) statement of freight collected and/or payable abroad against shipments made during the month g) statement of freight payable against imports on consolidated basis by air/sea during the month h) monthly statement of air/sea cargo consolidation."

State bank further advises in the circular that the shipping companies/airlines or their authorized agents may issue master bill of leading/master airway bill in the name of the freight forwarders only if the same conforms to the following: 1) Name of the freight forwarders/consolidators is mentioned followed by the wording "for and on behalf of beneficial ownership of the actual exporters" along with their names, related house bill of leadings/airway bills' numbers and dates; 2) a clause must appear on the original transport document to the effect that the covered cargo will only be released and delivered to freight forwarder/agent at the port of discharge on presentation of a bank endorsed original house bill of leading; 3) under no circumstances, the freight forwarders/consolidator/their agents or agents of shipping company/airline may surrender master bill of leading/master airway bill to the carrier/agent in Pakistan and must instead be presented along with related house bills of leading/house airway bills to the carrier by the overseas freight forwarder/agents at the destination/port of discharge.

This circular has become basis of complaints that freight forwarder may indulge in holding of payments or illegitimate delivery of shipments to importers. Nevertheless, this is relevant to note that If and what conditions may allow freight forwarder to hold remittances. Apparel exporters accuse freight forwarder of resorting to blackmailing when export proceeds become overdue. This blackmailing is carried forward in collaboration with importers who allegedly grease the palms of freight forwarder for forcing discounts on consignments. This is a serious crime discouraging largest foreign exchange earning group, whined the chairman apparel forum. Combined annual exports of this sector are around $4 billion.