Customs SRO 450(1)/2001: Business community urges govt to revisit Subrule 664(q)

KARACHI: The business community in Pakistan has expressed its deep concerns over the unintended consequences of Customs SRO 450(1)/2001 Subrule 664(q), which allows shipping companies to collect unsubstantiated/prejudiced charges, contravene shipping laws and contradict existing international agreements, governing maritime cargo transportation.

The business community has requested the Secretary Revenue Division FBR and Chief Collector of Customs (Enforcement) Port to immediately initiate a review process for Rule 664(q) and convene a meeting with stakeholder, including business representatives to discuss the concerns and recommend revisions to address the issue.

According to the business community, there is a lack of transparency in customs shipping rules, alleged rule is claimed to have been created without consulting the business community, a major stakeholder.

These objections raise concerns about the fairness and transparency of the customs rule. Business communities are seeking a review of the rule to ensure it aligns with international standards and protects their interests.

That’s a good explanation of the Carriage of Goods by Sea Act, 1925 (COGSA) and its connection to the Hague Rules, how it relates to the concerns about Customs Rule SRO 450(1)/2001 sub rule 664(q).

The Hague Rules established a framework and set a baseline for the responsibilities of carriers (shipping companies) and the rights of shippers (businesses). This framework includes provisions for carriers to collect “freight” which covers charges related to the transport goods.

However, business community argues the potential conflict with Customs Sub Rule 664(q) that allows shipping companies to collect charges beyond what’s outlined in The Hague Rules and potentially the Bill of Lading (which incorporates the terms of the COGSA). This raises concerns about the legality and fairness of these additional charges.

If access and compare the Customs Rules, the specific wording of Sub Rule 664(q), compare it with the applicable articles of the Hague Rules (particularly Articles III) there’s a clear contradiction and irregularity.

When business communities raising concerns about the customs rule, emphasizes that The Hague Rules are an international standard and that Sub Rule 664(q) should not undermine or weaken the established framework for carrier charges.

Pakistan’s obligation by signing the UN Convention on the Carriage of Goods by Sea (Hamburg Rules) in 1978, Pakistan has committed to upholding its provisions. This includes the clause mentioned, which nullifies any provision in a contract or document (like the so-called customs sub rule 664(q) that challenge/damage or undermines the Hamburg Rules. If Sub Rule 664(q) allows shipping companies to levy charges that are not permitted under the Hamburg Rules, it could be considered null and void under the dispute of the convention.

Business advocating against Sub Rule 664(q) emphasize that Pakistan’s commitment to the Hamburg Rules takes precedence over any conflicting domestic regulations. Businesses further argue that Sub Rule 664(q) needs to be reviewed to ensure it complies with the Hamburg Rules and protects the rights of businesses under the international convention.

Sub Rule 664(q) sets a condition and allows shipping agents or carriers to collect additional charges beyond freight, but only if those charges are mentioned in a published tariff of explicitly written on the Bill of Lading (B/L). International rules classify Bill of Lading, international conventions like The Hague Rules state that the B/L takes dominance in case of discrepancies with a carrier’s tariff.

There is huge Ambiguity in Sub Rule 664(q) the “notified or published tariff” in Sub Rule 664(q) creates ambiguity. Business conflict that published tariff alone is sufficient for collecting additional charges, even if not mentioned on the B/L. This contradicts the international principle of the B/L prevailing. There’s a danger that shipping companies might rely on their published tariffs to justify charges not explicitly mentioned on the B/L, leading to unexpected costs for businesses.

Further, businesses claim that Sub Rule 664(q) is meant for FOB or for exports shipments, not for C&F, CY/CY bills of ladings, where importers in fact pay all charges at POL upto Karachi port CY. Unexpected charges due to Sub Rule 664(q) can strain importers’ budgets and disrupt their operations.

Businesses suspect shipping agents are exploiting the ambiguity in Sub Rule 664(q) to impose illegitimate charges on importers under the guise of “notified / published tariffs.” These charges lack transparency and justification. Importers seek clear regulations that prevent shipping agents from withholding security deposits and ensure the return of bank payment orders in full and intact.

Business Communities are deeply concerned about the practice of untruthfully “dirty, oily & damaged container charges” brutally unethical, solely based on made-up reports at the port of discharge (POD). This system is inclined to unfairness as container damage can occur during transit or at the port of loading (POL). To promote transparency and accountability in container handling, businesses propose the legal framework,

Mandate the requirement for Examination of Insured Risks (EIR) reports from both the POL and POD. These reports must be accompanied by dated photographs that clearly depict the container’s condition at each location, including photographs from both ports will help establish a clear timeline and pinpoint where the damage (if any) might have occurred. This will prevent business from being unfairly charged and increased transparency in container handling.

Business Communities are deeply concerned about the unintended consequences of Customs Rule 664(q). To address these issues, recommend the Secretary Revenue Division FBR and Chief Collector of Customs (Enforcement) Port to immediately initiate a review process for Rule 664(q), convene a meeting with stakeholder, including business representatives to discuss the concerns and recommend revisions. The goal is to formulate clear, well-organized customs regulations that facilitate trade while upholding security standards.

Copyright Business Recorder, 2024