INTERVIEW WITH MOHAMMED RAJPAR, MD GENERAL SHIPPING AGENCIES

KHALIL AHMED
(feedback@pgeconomist.com)

June 11 - 17, 20
12

Mohammed Rajpar went to London for education at the age of 10 years and after getting master's degree from Cambridge University, he joined his father's business in 1992. Shipping is his family business, which his father started in 1970. He joined the PSAA as honorary secretary in 1995 and then became the chairman for the first time in 2006-07, again in 2008-09, and then in 2010-11. He is a board member of Port Qasim since 2006, Trustee of KPT since 2009, and Board member of Karachi Dock Labour Board (KDLB) since 1996.

PAGE: THE NATIONAL ASSEMBLY STANDING COMMITTEE ON PORTS AND SHIPPING UNANIMOUSLY PASSED TWO BILLS PERTAINING TO CARRIAGE OF GOODS BY SEA AND SEA CARRIAGE DOCUMENTS IN DECEMBER. YOUR VIEWS ON IT.

RAJPAR: After hectic continuous efforts, advocacy and lobbying for the past six years finally on 9th December 2011 (after two days of hearings), the National Assembly's Standing Committee on Ports and Shipping approved the Carriage of Goods by Sea Bill 2011 and Sea Carriage Shipping Documents Bill 2011 as prepared by the ministry of ports and shipping. The hearings were attended by Capt. Javed Iqbal, Chairman, Asim Saeed Khan, Vice Chairman, Mohammed A. Rajpar, former Chairman, and Ms. Ava A.Cowasjee, former Chairperson PSAA. The prevailing laws, which are the Bill of Lading Act 1856 and the Carriage of Goods by Sea Act of 1925, needed to be replaced and brought in line with modern practices and circumstances. The proposed bills are based on the Hague Visby Rules as amended by the Special Drawing Rights Protocol, which is followed by most maritime nations. The carriage of goods by sea bill is based upon the British legislation and recognizes transport documents such as the 'sea waybill' and the 'ship's delivery order'. The next step is for the bills to be placed before the National Assembly and Senate. One hopes voting and passage by the parliaments will be completed soon.

PAGE: EXPORTERS COMPLAIN THAT AFTER THE CHANGE IN TITLE OF GOODS, THE FREIGHT FORWARDERS IN CONNIVANCE WITH THEIR FOREIGN REPRESENTATIVES CLEAR THE GOODS WITHOUT MAKING PAYMENT. YOUR TAKE ON IT.

RAJPAR: One must first identify the scope of the problem. The issue is quite narrow in its scope both in terms of geography and the type of transactions and types of cargo. For your information, it is restricted in scope to:

1. Only documents against payment (i.e. D/P not L/Cs)
2. Only garments that are readymade
3. Only exports
4. Only to destinations in the USA

It would be interesting to study why the issues being raised by Pakistan Apparel Forum (PAF), Pakistan Hosiery Manufacturers Association (PHMA), etc. pertain only to a small part of Pakistani exports whilst the rest of the country's exports (and imports) have no issues with the prevalent shipping/freight forwarding practices.

As per the established international best practices, the title of ownership of goods is never changed on the issue of carrier's Master Bill of Lading (MBL) against forwarder's House Bill of Lading (HBL). Most of the import cargo into Pakistan (which is almost double of our total exports) is already being executed under the set-procedure of documentation through HBL as per the preference of importers in Pakistan to leverage better freight terms.

The exporter's allegation that a change of title occurs in case of a HBL being issued in presence of a MBL is a gross misunderstanding. In such cases, the MBL is merely a service document evidencing a contract of carriage between the carrier and freight forwarder and not a negotiable document/evidence of title role of which actually stands fulfilled in such cases by the HBL.

Whilst there have been some instances of mis-delivery, these (like any other frauds) need to be resolved through legal recourse. It would not be fair to malign an entire industry (in this case freight forwarding) due to a few such instances. The role of shipping lines as carriers and freight forwarders as cargo consolidators is well-defined and recognized legitimately on international level.

PAGE: YOUR VIEWS ON CHARGES BY CARRIERS.

RAJPAR: In a free market economy, carriers are free to charge whatever they deem fit whilst merchants are free to utilize the services of whomsoever they wish. If any merchant is not satisfied with the services/charges of any carrier in particular, he should simply boycott it. It is also apparent that many importers do not understand that they need to negotiate shipping terms with their suppliers. It is important to remember there is no free lunch. Merchants are often taken in by cheap offers and then pay heavily for having relied on the wrong service provider. In any case, carriers' charges are well known, transparent, and often published on their websites hence merchants can know the applicable charges before transacting.

You will appreciate that the practice in Pakistan with respect to charges is no different to other parts of the world. The ocean freight on liner terms covers sea transport and loading/unloading expenses on hook to hook basis meaning all actions prior to ship's rail (in case of exports) and all actions after ship's rail (in case of imports) are on account of merchants and recovered accordingly under the rubrics of THC, etc. Whether freight is "prepaid" or "to collect" is irrelevant. Hence, merchants' assumption that no local ancillary charges are leviable/payable in case of Freight Prepaid B/L is incorrect/misplaced.

It is also pertinent to add that THC is a pass through cost, which is collected by local shipping line agents on behalf of their foreign principals. Indeed, this amount is subject to eight per cent tax, which accrues to the government treasury.

THC collected is utilized/charged by shipping lines to settle local terminal expenses, which are not covered/included in the freight element as explained above.

Furthermore, Bill of Lading (which is a contractual document) contains various clauses, one of which relate to the application of local charges on account of merchant.

POSSIBLE REMEDIES

Complaints about shipping charges arise due to lack of awareness amongst the traders who don't know nor bother to learn how to negotiate freight terms and other charges payable at destination. In this regard, time and again, PSAA has offered its services to FPCCI, KCCI, etc. to arrange seminars/workshops for traders so they can learn how best to negotiate their shipments. For instance, consignees/importers should bear the following in mind at the time of opening L/C.

(i) Ensure terminal handling charges (THC) and destination delivery charges (DDC) are clearly mentioned by shippers as prepaid on B/L in order to-avoid ambiguity at the time of taking delivery in Pakistan.

(ii) In case THC and DDC are to be payable at destination then ?consignee/importer may ask shippers/exporters how much exactly and under ?what heads they have to pay to shipping agents at the time of taking delivery ?in Pakistan so that all charges are clear ab initio.

(iii) Opt for free on board (FOB) purchase instead of cost & freight (C&F) and negotiate freight, etc. with one of the many reputed local service providers.

PAGE: YOUR COMMENTS ON GWADAR PORT.

RAJPAR: Gwadar port holds tremendous potential. However, one should be patient. As a nation, we always seek short-term results, however, infrastructure projects have long gestation periods and the success or failure of ports can only be judged in 25 to 50 years timeframe. Having said that, there are some real issues in Gwadar. Firstly, there is a trust deficit between federation and the province in terms of control of the port. Secondly, there is a connectivity issue meaning the National highway link via Ratodero needs to be completed on war footing as well as planning for a rail and pipeline to the North, Afghanistan, Central Asia, and North West China needs to be done. In addition, the next phases of the port and industrial zone need to be implemented. One must admit that the performance of PSA International has been disappointing hence, it is probably advisable if PSA International voluntarily exits from Gwadar and instead a more committed investor/operator (perhaps from China) be identified.