In this time of distress, shipping like any other industry is finding it difficult to stay afloat. When all others are losing their mind over this, one country’s directive from their shipping ministry is showing the way, reports the Maritime Executive.
What is it?
India’s Ministry of Shipping, through the office of the Directorate General of Shipping, Mumbai, was busy announcing relief and guidelines to combat the COVID-19 pandemic during the initial 21-day lockdown period. While trade and commerce has slumped, Indian seaports, operating under safety regulations, have continued to function, although in a disrupted manner, writes Deepak Kumar Thakur, a partner in L&L Partners, in an article published in the Maritime Executive.
With normalcy slowly resuming, it is essential to analyze the Ministry of Shipping’s actions as an example to other government departments, writes Thakur.
Supply Chain Action
In order to maintain proper supply lines at the Indian seaports, the shipping lines were advised by the Ministry of Shipping order dated March 29, 2020, not to impose any container detention charge on import and export shipments for the period from March 22, 2020 to April 14, 2020 (both days inclusive), over and above free time arrangement that was in place as a part of any negotiated contractual terms.
No Demurrage Recovery
In addition to this, the Ministry of Shipping added to its order dated March 31, 2020, that shipping companies were advised not to charge, levy or recover any demurrage, ground rent beyond allowed free period, storage charge in the port, additional anchorage charges, berth hire charges or vessel demurrage or any performance related penalties on cargo owners and consignees of non-containerized bulk cargo, for the same period. Such relief was granted in addition to an advisory on embargo for imposition of new or additional charges, to facilitate some financial relief during the lockdown period.
However, since the instructions issued in these orders are in the nature of advisory, the mandatory effect and consequence of non-compliance of any such instructions, need to be seen.
The Ministry of Shipping has further shown its inclination to provide monetary relief by granting exemption/ remission of charges, in a notice issued to all major ports on April 21, 2020.
- In this notice, the Ministry has allowed for deferment of receivable annual lease rentals for the months of April, May and June, in addition to the already waived off penalties and other charges.
- It has also allowed for free storage time until the lockdown period ends, with a provision to use the vacant land near port areas for additional storage, on a temporary basis.
The said notice has also shown generosity to PPP concessionaires at major ports, by deferring the payment of revenue share, royalties and equipment hire charges for the months of April, May and June, free of interest, in addition to a proportional waiver of lease rentals and license fees.
- All major ports were directed to pass respective orders in this regard.
- It is very unlikely that the major ports will deviate from any such instruction issued to it, and the industry will be able to enjoy the benefits accordingly.
Ensuring No Misuse of Relaxations
The Ministry of Shipping, however being cautious of the fact that these relaxations could be misused by the defaulter, directed the major ports to ensure that any such relaxations are not misused while ensuring that supply chain is maintained without any break and trade and commerce functions smoothly.
Is this enough to save the shipping industry?
- However, relaxations in major ports alone cannot meet the industry expectations unless connecting infrastructure also support it.
- The lack of clarity on interstate and intrastate cargo has largely impacted downstream services, creating more bottlenecks at the ports in the midst of uncertainties regarding cargo services.
- While the Ministry of Home Affairs has been issuing guidelines regarding cargo and movement of goods, the lack of response and reaction from State Governments has created an air of uncertainty regarding the permits and approvals that may be needed for such transportation.
- Therefore, despite being exempted from the lockdown, the ports have faced blockades and congestion due to some poor foresight and planning.
- The Ministry of Home Affairs has acted swiftly now while clarifying the stand on interstate and intrastate transport and cargo movement, easing the pressure on port storage.
- A close look at the dossier of orders and notifications passed by the Ministry of Shipping is an enviable example for other government departments with regard to detail and clarity provided for the functioning for the sector. For example, regulatory reliefs such as the extension of time granted for the continuous discharge certificates (order dated April 13, 2020) and extension of validity of ship sanitation certificates (order dated April 3, 2020) are an example of the Ministry’s intention to cover all bases which may impact the present functioning of ships.
Acknowledging the difficulty and inability the users of ports were facing in completing the mandatory inspections, audits and surveys, the Ministry issued further relaxations to its order dated March 23, 2020 with addendum dated April 3, 2020.
- Relevant extensions, without any levy of cost, have been granted to the seafarer companies for the mandatory statutory extensions for a period of three months under force majeure.
- In light of this, the Certificate of Competency, Certificate of Equivalency and STCW Certificates, which were due to expire between the period of March 23, 2020 and October 1, 2020, have been granted an extension for six months.
- Such relaxations on mandatory surveys and extensions of certifications is a major shift from the conventional practice from IMO Conventions.
- However, pragmatic solutions to ease the burden on seafarers was a necessity, and this has been well implemented by the Ministry of Shipping.
- The above relaxations were extended via another order dated April 21, 2020 of the Ministry of Shipping.
- The Ministry has been active in issuing guidelines for a standard operating procedure for international cruise ships at major ports in India, as early as March 10, 2020.
- Even for all other vessels arriving in India, the Ministry issued instructions for health safety on March 20, 2020. While such quick action can be attributable to the high propensity of risk of ports considering the direct contact with incoming foreigners (goods and passengers), no credit can be taken away from their speedy action.
Distinction Between Mandatory & Advisory
On a holistic understanding of the orders and notifications, there is a clear distinction between the reliefs and interim safeguard measures which are either “mandatory” or “advisory”.
- All regulatory reliefs which grant extensions and waivers of expiring certification or surveys are applicable in a blanket manner to all ships and companies, and thus are mandatory in nature.
- However, to the contrary, all monetary reliefs regarding non-levy of additional charges and penalties are only advisories issued to ports, which appears to be most likely followed by the major ports.
- Importantly, it has also been left optional for the ports to claim “force majeure” under their relevant contracts, as per the order dated March 24, 2020.
- Most of the private ports have already declared “force majeure” under their respective concession agreements.
We can only expect that other Ministries learn from the pro-active and pro-industry approach taken by the Ministry of Shipping.
Such steps are not only visionary but would also help the industry to come out of this troubled times, in a slightly better manner.
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Source: Maritime Executive