Importers say CFS premium adding to costs, want stay lifted

Importers say CFS premium adding to costs, want stay lifted

Bangalore: Importers weighed down by a so-called nomination premium indirectly collected from them are waiting for the Chennai high court to vacate a stay order on a customs department rule that seeks to end the practice.

Container freight station (CFS) operators near several ports have been routinely paying a nomination premium to shipping lines to get business and then recovering the money from importers, making imports costlier.

In 2006, the customs department in Chennai issued a notice permitting importers or their agents to nominate a CFS of their choice, but the rule has got stuck in court.?The?new rule would have clipped the power of shipping lines to nominate a CFS, trade members said.

“The customs department implemented the new rule for some time before it was stayed by the Chennai high court on a petition filed by the Container Shipping Lines Association (CSLA)," said A.V. Vijayakumar, secretary of the Chennai Custom House Agents Association, a body recognized by the Commissioner of Customs, Chennai.

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The association of container carriers operating from India had petitioned the court in early 2009 arguing the customs department had no authority or jurisdiction to amend the import general manifest (IGM) without their knowledge.

IGM is a document filed by shipping lines with the customs department at least 48 hours before a ship arrives at a particular port for unloading containers. The high court stayed the new rule in April 2009. The court has now completed its hearing in the case, but hasn’t fixed a date yet for delivering its verdict.

“Because of the stay order, the import containers are moving to the CFS according to the choice of the shipping lines and not according to the importers or their custom house agents," Vijayakumar said. His association has filed an appeal for vacation of the stay.

“We are waiting for a verdict from the court," said K.B. Bhat, a joint commissioner of customs in Chennai. CSLA declined to comment on the issue as the matter is before the court.

A CFS is a facility licensed by the customs department to help decongest a port by shifting containerized cargo and carrying out customs-related activities outside the port area.

The customs department’s new rule would have changed how import containers are cleared in India after being unloaded from a ship.

The responsibility of a container shipping company begins at the originating container yard and ends at the destination yard. In most countries, importers take delivery of the containers at the container yard itself after paying customs duty. But in India, due to customs procedures and space constraints at ports, customs clearance happens at the CFS.

Shipping lines, having assumed responsibility for the containers till they reach a CFS, have thus claimed the right to nominate a CFS where the containers would be delivered, in return for a premium fee from the operators.

The premium is passed on by CFS operators to custom house agents who, in turn, get the importers to pay for it.

The 29 CFS operators servicing the Chennai port, India’s second busiest container port, handle around 500,000 standard containers a year.

“Because of the intense competition between CFS operators for containers, the nomination premium paid to shipping lines is currently around Rs3,000 for a container," a trade person close to the matter said on condition of anonymity.