Raja Simhan T.E.
Nina Varghese

The draft of the proposed Shipping Trade Practices Act says the legislation aims at bringing about transparency in the trade practices of logistics service providers, and setting up a dispute settlement mechanism for matters connected to the trade. But quite a few in the industry fear that the "harsh clauses" in the Act could put several players out of business.

THE proposed Shipping Trade Practices (STP) Act, 2005, aimed at tightening the regulation of shipping intermediaries, is a bit of a mixed bag. A majority in the industry agree that it would make for transparency in the business. However, in its present form, the Act — a draft of which is being circulated among the trade — is not quite acceptable to many. It will do more harm than good, was the general view of a section of the shipping community.

The draft says the Act aims at bringing about transparency in and regulation of trade practices adopted by maritime transport logistics service providers, for setting up a dispute settlement and grievance redress mechanism and for matters connected to the trade.

The Act will bring transparency among thousands of intermediaries, such as consolidators or console agents, NVOCCs (non vessel operating common carriers) and Custom House Agents (CHAs), said a source.

The Act is likely to put a number of people out of business. It stipulates a bank guarantee of Rs 5 lakh and a registration with a Competent Authority (Director General of Shipping) for a fee of Rs 50,000. In addition, an insurance surety should be obtained. "These are very harsh clauses," said a source.

Any person who contravenes the provisions of this Act by carrying on business without registration and in contravention of the provisions of the Act may be punishable with a fine by a commissioner (a person appointed by the Central Government to adjudicate disputes).

The fine may not exceed Rs 2.5 lakh unless it was wilfully and knowingly committed, in which case the amount of the civil penalty may not exceed Rs 12.5 lakh for each violation, the draft says.

"Only the fittest and mightiest will survive once the Act is in place," said a CHA.

There are discrepancies in the draft of the Act. For instance, the application of the Act is for maritime logistics service providers in relation to carriage or transportation by air, sea, road, rail and/or a combination thereof. But, according to the definition provided in the draft, maritime services means carriage of cargo in the course of export-import trade, involving a sea leg. What if a company uses a combination of road and air, or road and rail, but with no sea traffic, an agent asked.

Another discrepancy is the definition of common carrier, which talks about transportation on domestic routes, while the introduction to the Act states that it governs export import trade.

Further, CHAs feel that as they have already been licensed by a government agency (the Customs Department) they should be excluded from the purview of Act. "We should not be part of this Act," he said.

The Act says that a company needs to file periodical statement with the Competent Authority. Every logistics service provider has to inform the authority of the charges levied for all services.

"All commercial transactions have to be filed with the Authority, and what is the security of this data," asked a source. Service providers also asked what they are going to do with the large volumes of data. These things need to be clarified, the source said.

The Central Government shall appoint a multi-member Commission — the Shipping Trade Practices (Dispute Settlement/Grievance Redressal) Commission — to settle disputes between the consignor and the consignee, or among the maritime transportation logistics service providers or among such persons registered under the Act.

Further, the Commission will review tariff publications by maritime transportation logistics service providers.

Another stringent norm is the investigations by the Commissioner, who may order, disapprove, cancel or modify any agreement filed under relevant provision of the Act. "It looks like the Government would run the maritime sector," said a source.

The crisis created a few years ago at the private Chennai Container Terminal, and later at the NSICT, Navi Mumbai, had highlighted the need for such a mechanism.

The Commerce Ministry and other departments have also been stressing the need for the same for some time now in the light of these developments.

The Association of Multimodal Transport Operators of India (AMTOI) observed that the new Act would overlap those governing major ports, including the Major Port Trust, Bills of Lading and Competition Act.

Considering the Act covers all providers of services of the exim trade, such as transporters, forwarders, NVOCC operators, ports, warehouse-keepers, freight-forwarders, shipping agents and stevedoring agents, over a 100,000 entities are required to be registered under the Act. This would be impossible to achieve in a short duration and would lead to disruption of trade.

Further, the Act does not cover or protect the interests of the service providers.The Association feels the Act will lead to an increase in the number of cases flooding the already overloaded judicial system. Considering that no other country has such an Act, it would also discourage newcomers to this fraternity which, in turn, is detrimental to the interest of user of services, the association said.

© Copyright 2000 - 2009 The Hindu Business Line