Bangalore: Speedy Multimodes Ltd, the entity that runs India’s biggest container freight station (CFS) by capacity, and a South Korean container shipping firm have been accused of getting together to charge importers four times more than the authorized rate, prompting an investigation by India’s busiest container port.
The freight station services the Union government-owned Jawaharlal Nehru (JN) port, which is located near Mumbai and handles more than half the container cargo passing through India’s ports.
Of the 29 CFSes that service the port, only Speedy’s tariffs are regulated by the Tariff Authority for Major Ports (TAMP) because its 68-acre facility is owned by JN port but was given to Speedy on an operation-and-maintenance contract for 20 years beginning 2006. As a result, it can only charge rates lower than those of the other freight stations.
But a customer group, the Bombay Custom House Agents’ Association (BCHAA), recently filed complaints with TAMP, the customs department and JN port against Speedy for collecting excess charges.
A CFS is licensed by the customs department to help decongest a port by shifting containerized cargo and customs-related activities outside the port area. Due to customs procedures and space constraints at India’s ports, customs clearance takes place at the CFS.
According to BCHAA, India’s biggest association of customs house agents, South Korea’s Hanjin Shipping Co. Ltd began asking some customers from April to collect their imported containers from the Speedy CFS and “to pay all CFS-related charges to ARR Maritime and Allied Services Pvt. Ltd” and not Speedy.
ARR Maritime is a marketing agent of Hanjin Shipping and has been allotted office space inside Speedy CFS.
Mint has reviewed delivery orders issued by Hanjin Shipping to its customers and the bills and receipts issued by ARR Maritime. Mint has also reviewed a copy of the complaint by BCHAA, which is licensed by the commissioner of customs, Mumbai.
The shipping line issued the delivery orders to its agent ARR Maritime and not Speedy. This has allowed ARR Maritime to charge four times what’s authorized though it officially pays Speedy only at the TAMP-prescribed rates.
“After investigating the complaints, we have found that ARR Maritime is not an agent appointed by Speedy, but an agent of Hanjin Shipping. There is nothing wrong in appointing an agent. But the agent is collecting more than what he is paying Speedy CFS. That’s the problem,” said N.N. Kumar, deputy chairman of JN port.
“The agent is paying TAMP rates to Speedy so it should charge only TAMP rates from customers. We have seen the bills raised by ARR Maritime for a higher amount. Hanjin should explain why it’s doing this,” he added.
Those who approach Speedy are being redirected, said Sameer Mehta, a director at SS Clearing and Forwarding Agency Pvt. Ltd and a member of BCHAA.
“When we went to Speedy CFS to clear some of our import containers, Speedy staff declined to accept the payment and directed us to make the payment to ARR Maritime, having an office in warehouse No. 3 in Speedy CFS. We had no choice but to make the payment to ARR Maritime to clear our containers,” Mehta said. “The rates charged by ARR Maritime are four times more than the rates approved by Tamp.”
Speedy has denied the charges. It said it wasn’t violating rules.
“We are in no way in violation of any TAMP order, law or agreement, currently in force,” said Mahendar Puri, managing director of Speedy Multimodes. “It is our company’s policy not to comment on speculation,” he added.
JN port acknowledged that customers are being over-charged.
H.J. Chai, managing director of Hanjin Shipping’s India unit, declined to comment. “I don’t want to answer you officially,” he said.
A spokesman for ARR Maritime said the firm has been appointed by Hanjin Shipping as its agent. “There are certain value assurances and service guarantees we have to provide as per the agreement with Hanjin to avoid complaints from customers. Hence, we are collecting rates on par with other CFS operating near JN port,” he said.
A TAMP spokesman said the regulator has forwarded complaints against Speedy to JN port “with advice to investigate the matter and take appropriate action as per the provisions of the agreement signed between the port and Speedy... We have also asked JN port to ensure that the provisions of the Major Port Trusts Act are duly complied with in this case”.
While JN port says its internal inquiry revealed that ARR Maritime was appointed as an agent by Hanjin Shipping and ARR Maritime confirming this, the Speedy Multimodes annual report for 2009-10 presents a different view.
“The company has appointed ARR Maritime and Allied Services Pvt. Ltd to promote the company’s import business,” it says on page 17 of the 24th Speedy Multimodes annual report.
The issue of overcharging was raised by port users at a meeting called by the port on 17 August.
Speedy has attempted previously to convince TAMP to raise the rates it can charge customers but failed. After taking over operations of the CFS in 2006, Speedy had sought the regulator’s permission to raise charges but TAMP ordered an across-the-board reduction of 15% at the time.
The rate cut was stayed by the Mumbai high court on a petition by Speedy and the firm continues to charge customers at the rate approved by the regulator in 1998—Rs3,750 for a 20ft container and Rs5,500 for a 40ft container.
But “by this novel method (involving Hanjin and ARR), Speedy does not need to go to TAMP ever seeking rate revisions”, said a trade member familiar with developments. “The purpose of setting up a large government-owned CFS at TAMP-approved rates to facilitate export-import trade is totally defeated.”
Users say the firms involved are not in compliance with rules.
“A container originating from the Speedy CFS cannot have a CFS charge that is more than what TAMP has prescribed, no matter who raises the bill—the CFS operator, the shipping line or their agents,” said R. Venkatesh, president of the Western India Shippers Association, a body representing exporters and importers in India’s western region. “ARR Maritime can only charge what Speedy is allowed to charge by TAMP, not a penny more.”
In an order dated 16 February 2010, involving Speedy, TAMP had condemned the “unfair trade practice widely prevalent in CFS operations” of paying a so-called nomination premium to shipping lines to get import containers nominated to their respective CFS to promote their business. This money is then recovered from the importers in addition to the regular container handling charges payable by them to the CFS operators.
The shipping lines benefit out of selectively providing specific business opportunity to CFS operators of their choice in return for the favour of nomination premium.
“The government should examine this issue closely and take necessary remedial measures to protect the interests of Indian importers and exporters,” TAMP chairperson Rani Jadhav wrote in the 16 February 2010 order.
“Since the prevalence of nomination premium is known to JN port, it should, as a responsible statutory body, also move the government to put in place the required system and procedure which will stop such unfair and non-transparent transactions,” she added.