14-05-2016

Weighing containers before loading on ships: Indian exporters seek exemption

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India’s beleaguered exporters, reeling under a prolonged global downturn, are seeking exemption from a new global regulation that makes it mandatory for shippers to verify the gross mass of a container before they are loaded onto ships just days before it takes effect.

In November 2014, the International Maritime organization (IMO), the agency of the United Nations tasked with regulating international seaborne trade, approved amendments to the Safety of Life at Sea Convention (SOLAS) 1974 which will require verification and documentation of loaded containers (verified gross mass, or VGM) before they can be loaded onto vessels. This can be done by either weighing the loaded container with calibrated and certified equipment, or weighing the cargo prior to loading and adding it to the weight of the empty container. The purpose of the VGM regulations is to assure safety of the vessel, as well as dockworkers and other cargo handlers by preventing overweight or otherwise misrepresented containers from jeopardizing shipments or container movements.

The new regulation will come into force from 1 July.

On 11 May, India’s maritime regulator, the directorate general of shipping (DGS), issued guidelines for implementing the regulation in India that seeks to check wrong declaration of the weight of a container, a practice that has led to shipping mishaps globally.

The DGS has finalized two methods for shippers to choose from to verify the gross mass of a container. In both cases calibrated and certified equipment has to be used to verify the weight of containers.

India’s exporters are sceptical about the plan, joining shippers in western countries that have raised concerns over the new rule.

“It will add to the transaction costs and the liability will be fixed on the shippers. Therefore, it will be a major challenge to comply (with the regulation). We would like the government to intervene so as to postpone or drop the proposal,” said Ajay Sahai, director general and chief executive officer of the Federation of Indian Export Organizations (Fieo).

“For countries which have a very high level of automation, it becomes relatively easier to implement. The IMO can provide exemptions to countries or to the segments which are facing difficulties. You carve out an exemption clause to provide certain countries or certain segment of industry exemption from the new rule where the compliance cost is too much for them,” Sahai said.

“When we are competing with the globe’s best, each extra cost affects our exports. Secondly, we have to see what is prompting this change and whether this change is worth the price we are going to pay..,” added Sahai.

The weight that was being declared was not reflecting the actual weights due to which some ships had broken up and a lot of casualties occurred. That is why the new regulation had to be brought in by the IMO globally, said a spokesman for the shipping ministry.

The environmental and economic costs incurred due to deviation in container gross mass declaration are passed down the supply chain leading to greater costs for all concerned. All these issues, including the prime issue of safety at sea and pollution prevention, necessitated a re-look at the existing provisions, leading to the current amendments to Regulation 2 of Chapter VI of SOLAS Convention.

Fieo’s call to drop the new rules has come a little late in the day.

The guideline issued by the DGS took substantial time in the making, said the shipping ministry spokesman. “It is not that it was framed overnight. The DGS have been in discussion with stakeholders since September last year. The initial draft was modified several times till it was acceptable to all. We had to agree to substantial changes to ensure that all interests are taken care of,” the spokesman added.

The two methods finalized by the DGS involve getting the container weighed away from the ports to avoid clutter and congestion at the facilities.

However, global container terminal operators such as DP World Ltd and APM Terminals Management B V, which have large presence in India, have announced plans to offer weighing services at their facilities as part of a worldwide roll-out.

But, as Fieo’s Sahai said, a key issue will be the cost of compliance.

DP World has said that it will provide container weighing solutions—for a fee—at all of its locations worldwide, except where it is prohibited by local regulation.

This could mean that terminal operators at India’s state-owned ports can charge a fee from shippers using their weighing services only with the approval of the rate regulator for these 12 ports. A spokesman for the Tariff Authority for Major Ports (TAMP) said that it was yet to receive any proposal from terminal operators to set rates for weighing services.

“Our first priority remains to ensure safe and efficient operations for the supply chain,” Jack Craig, head of global operations at APM Terminals, said in a 11 May statement. “It is crucial that these regulations are met in a way which does not create congestion bottlenecks that ultimately impose additional risk and cost for all stakeholders”.

Export containers which are received at APM Terminals’ facilities with a valid VGM will be accepted as per current local operational procedures. Those export containers which arrive at APM Terminal facilities without a valid VGM will be generally accepted, but as they are ineligible to load on a vessel, may be segregated and subject to additional re-handling and storage requirements, Craig said.

“We have not prevented terminal operators from setting up such facilities so long as they don’t create congestion at ports while offering weighing services,” the ministry spokesman added.

Source: Livemint

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