Businesses in demurrage conundrum

Businessmen now have to face greater problems by having to pay extra demurrage charges for vessels that overstay at port with their cargo of raw material and imported products

The limited operation of the customs department and the closure of all government offices due to the coronavirus outbreak have been blamed for this "unprecedented" crisis.

Moreover, businessmen need to pay higher tariffs for shipping cargo to seaports as the ships face an unusual delay. They fear that the increased cost of demurrage and shipping charges will affect their future business operations and production.

Mohammad Belal, owner of a Dhaka-based company named MB Traders, had to keep his two containers of paper and paper boards – imported from China and Korea in the last week of March – at Chattogram port for an extended period because he could not get a release order from the customs office due to the ongoing shutdown.

When the customs department started releasing goods this week, Belal fell into trouble because the port claimed Tk8 lakh extra in demurrage for one month on the raw material, amounting to Tk1.5 crore.

The businessman claimed the imposition of additional charges on their goods is like pouring water on a drowning man as they have already suffered enormous losses caused by the shutdown.

Belal, who is also an executive member of the Bangladesh Paper Merchant Association, told The Business Standard, "We are counting bank interest for not getting delivery of goods due to the coronavirus crisis. Also, we are running out of capital for payment to workers, and on top of that the port charges are cruelty on us."

If this continues, it will not be possible to continue businesses, he said adding, "As unloading of goods was halted because of a natural cause, we want exemption from demurrage and shipping charges to sustain our businesses."

As in the printing industry, businesspeople of all sectors have been facing a big crisis.

Abdul Haque, president of the Bangladesh Reconditioned Vehicles Importers & Dealers Association, said, "Our 6,000 imported vehicles are stuck in Chattogram and Mangla ports. We are paying Tk1000 in demurrage per day for each vehicle."  

Port demurrage is a charge payable on failure to unload imported goods carrying containers within the time agreed upon. The fine is imposed for not being able to take delivery within six days after a container reaches a particular port. 

Holding a 20-foot loaded container is free for the first 4 days after it reaches the port, but after that the Chattogram port charges $6 in demurrage per day for the container. If it crosses 20 days, per day demurrage is $12. 

Furthermore, Tk17 lakh has to be paid in port dues if a ship, having a capacity of 20,000 tonnes, is kept for 30 days at Mangla port. 

Moreover, businessmen have to count shipping charges on their failure to release imported goods. But the charge depends on contracts made between shipping companies and businessmen.

The Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) demands that the businesses be relieved of demurrage charges.

FBCCI President Sheikh Fazle Fahim said businesspeople could not unload their goods because customs clearance was not being given. Since it is a natural crisis, they deserve exemption on demurrage.  

The government should give this privilege to start production, he added

The port authorities said the businessmen had got relief from demurrage for a few days from April 5-21.

But private inland container depots had not withdrawn demurrage during those days as well.

Businesspeople could not take advantage of the opportunity  given by the port authorities because the customs department did not give release orders for general products.  During that time, the customs department ran their activities on a limited scale.

When contacted, the president of the Chittagong Chamber of Commerce and Industry, Mahbubul Alam, said the customs house did not permit the release of commercial items to limit public gatherings owing to the coronavirus crisis. As a result, no one could take delivery in the specified time.

Meanwhile, talking about container congestion at Chattogram port, Chattogram Port Authority Chairman Rear Admiral SM Abul Kalam Azad told The Business Standard, "We have run out of storage capacity and it is hampering our operational activities. Earlier a vessel could offload goods within 24 hours after berthing at a jetty. But that now takes around five days because we cannot offload containers due to a lack of space at the port yard."

"Moreover, the waiting time at the outer anchorage for berthing has been increased up to 11-days, though earlier a vessel could berth within six days," he added.

Since March 26, container delivery has come down to around 1,000 TEUs (Twenty-foot equivalent units) which is usually 4,000-4500 TEUs in normal times. Severe container congestion has been created at the port which has also delayed the berthing of vessels.

Chittagong port has a storage capacity of 49,019 TEUs while on Friday there were 47,439 TEUs occupying  97 percent of its storage spaces. Some 15 percent empty spaces are needed for carrying out smooth operational activities.

The National Board of Revenue decided to open customs activities for limited taxation of goods such as commodities, emergency medicine and service-related material.  However, on March 30, the revenue board permitted delivery of industrial raw material for the export processing zones.

But the delivery of goods has decreased because of a lack of coordination with other departments, resulting in gridlock at the port. On April 22, the NBR again decided to run the customs activities on full scale.