Blind imposition of import restrictions hits exporters hard

Topics exporters | imports

The task of getting their goods to the buyers in time at reasonable costs is getting more difficult for the exporters.

Due to falling domestic demand and restrictions on imports from China and East Asia, fewer import shipments are coming into India. At the same time, exports have picked up due to rising demand abroad, especially in the developed countries. So, the demand for containers for exports outstrips the supply of containers from imports. Non-availability of containers has hit the exporters hard, especially those using Inland Container Depots in the hinterland. Delays in Customs clearance of import cargo on flimsy pretexts also result in hold up of containers.

Next problem is fewer sailings for some destinations and getting shipping space. Cyberattacks have crippled the operations of CMA-CGM — a major shipping line. The French carrier has not built a robust back-up booking process. So, it takes hardly any bookings. A similar disruption happened some time back at Maersk – another shipping line, when normalcy was restored after many weeks.

The uncertainty and delay in getting bookings for certain destinations has increased considerably. For example, the shipping lines are not willing to book cargo for Australia and New Zealand that have to pass through Singapore. The booking for Africa is available only in November, since almost all cargo, barring exceptions, to that continent is transhipped. Even for destinations like North America and Europe, the booking is available for sailings two weeks later.

Another problem is the delay in transit, especially of containers that need to be transhipped at the transhipment hubs like Singapore and Colombo. Severe congestion at such ports due to falling productivity caused by the Covid-19 outbreak has slowed the movement of cargo through such ports.

Even when cargo is booked, there is no certainty that the goods will actually leave by the scheduled vessel. There are innumerable stories of cargo left behind for want of space. Many shippers and forwarders face significant operational problems reworking or re-booking the shipment – all having significant cost implications.

Many carriers have started offering no-rollover premiums that some exporters desperate to reach the goods to buyers in time have no option but to pay. Some have hiked terminal handling charges and imposed cancellation charges and new surcharges. The freight rates have also gone up significantly, due to lower vessel capacity. On an average the freight rates have gone up by 20 per cent to 25 per cent but there are sectors where such increases are much more than that.

Airlines used to carry commercial cargo in passenger flights at reasonable rates. Now, there are few passenger flights. Export cargo can now move only from few airports from where the freight carriers operate and the airfreight rates have gone up by 50 per cent to 60 per cent for some destinations.

Overall, the exporters are completely at the mercy of the carriers who now dictate the freight rates and other terms. In particular, the exporters who contracted on ‘freight paid’ terms (e.g. CIF, CFR, CIP, CPT) find their profits eroded due to higher costs of transportation.

The situation is unlikely to improve soon unless revival of our economy fuels domestic demand for imported goods and the number of passenger flights increase. The government must realise that blindly restricting imports leads to unintended consequences like shortage of containers, sailings, and vessel capacity for exporters.

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