GENERAL ORDER NO. 01 of 2018 - Relaxation for coastal movement of EXIM Transshipment Containers and Empty Containers.

NO. SW-1 501 1 1212016-MG Government of lndia Ministry of ShiPPing Transport Bhawan New Delhi, Dated 21st MaY 2018 Subject: Relaxation under Section 407 of the Merchant Shipping Act, 1958, for coastal movement of (a)EXIM Transhipment Containers and (b)Empty Containers . Whereas the Merchant Shipping Act was enacted in 1958 at a time when container I cargo was in a nascent stage (lSO standards for containers were fixed in 1956). ln lndia, conlainer shipping started only in the year 1980 and thus the Act predates the business of containers in lndia. Trans'hipment of cargo was not a major issue at the time of enactment, in fact the Act did not envisage such an eventuality' 2. Whereas the movement of cargo by containers has been rising continuously and is presenily more than 2Oo/oof lndia's totat EXIM trade volumes, and whereas in a dynamic international business situation where international shipping tariff is highly competitive, in order to achieve better economies of scale, container business has rapidly evolved from point-to-point to hub-and-spoke model. Thus the containers from smaller ports are shipped via feeder vessels and then aggregated at a transshipment port from where they are loaded in a bigger container liner ior tiansshipment or mainline port Such a model has not fully evotved in lndia and this has resulted in almost 33% of lndian container cargo getting transshipped at foreign ports. The extent of transhipment is increasing year on !"r, lnd has increased from 26% in 2007-08 to 33% in 2016-17 (lndian Ports Association). 3. Whereas the business model for container shipping has firmly stabilized for the hub and spoke model and has resulted in the formation of transhipment hubs worldwide' 4. Whereas the advancement in shipping and container handling technology is leading to the deployment of ever increasing sze of vessels (in excess of 18,000 TEUs) as mother vessels and development of deeper draft transhipment ports. 5. Whereas the currenfly established transhipment ports across the globe are investing further rn developinb themselves as modern ports of the future to retain their pre-eminence as transhipment ports. 6. Whereas lndia is yet to develop a robust eco-system of large, modern international transshipment ports/hubs with policy structures and cost advantages to compete with regional hub Ports. 7. Whereas transhipment of lndian cargo at foreign transhipment ports leads to traffic growth at foreign ports and hence, job creition in other countries, loss of revenue from pg.1lndian shippers/ consignees or exporters/importers to foreign ports in terms of port and logistics charges, and loss of foreign exchange to foreign ports as the transshipment revenues and charges are collected from lndian exporters/importers by foreign ports' g. Whereas promoting transshipment ports in lndia would lead to (a)higher competition amongst ship[ing lines jnd a level playing field would reduce freight rates making lndian trade more co"mpetitive (b) time and distance efficient logistics between lndian ports versus foreign porir would'aiso contribute to lowering in feedering cost (c) shifting of lndia container cargo from foreign ports t9 lndian ports would lead to higher port profitability and employrient (d) upon establishment of transhipment ecosystem including ports and logisticl sector, enabling small and medium enterprises, service providers to the ports and the shipping sector, lndian ports can potentially attract cargo originating from and destined to forelgn ports, adding to further cargo growth at major Indian ports and (e) retention of foreign exchange in lndia' g. whereas the supply chain lag time and transshipment at a foreign port increases cost to the ExlM trade adversely impacting the competitiveness of lndian traders and manufacturers in the global market. 10. whereas there is a requirement to enhance feeder capacity to support movement of EXIM containers by sea between Indian ports and the lndian transhipment ports' cI ol. n tainw eh re vre ea ss s ea lv sa fil oa rb il fi ety e da end rs r e al nia db il tit ry a no sf st him ipe m-b eo nu tn d o fs e cr ov nic te as in a en rsd wea its he i no f l na dcc iae s is s to a prerequisite for development of transhipment ports in lndia' lz. Whereas providing for two-way cargo movement has the potential of reducing the cost of transport, improving cargo volumei and facilitating investment in shipping fleet' 13. Whereas sea borne transportation has the potential of simultaneously reducing the per tonne-km cost of transporting goods as well as reducing the greenhouse gas emission per tonne-km of transporting tnJg-oods over long distancei oy one-third, compared to rail and road based transPortation' 14. whereas as per section 407 of Merchant shipping Act, 1958,the foreign flag container lines are not allowed to (a) transship EXIM container and (b) empty containers from a port of lndia to another port in lndia without a license, as a result of which large amount of EXIM container cargo is being transshipped through foreign ports' 15. Whereas to deal with the business model of transshipment of containers, various countries have taken steps to allow vessels from foreign flags to trade on their coastal waters for transshipment cargoes by relaxing provisions of their domestic law(s) to boost international trade volume and reduce transportation cost. 16. Whereas, due to the gradual increase in the share of containerized cargo in lndia's EXIM trade and imbalance in the imports and exports from a particular port, there is a perennial problem of empty containers accumulating at some ports and shortage of containers at others, in teims of numbers, size and type. Thus, there is a requirement of movement of empty containers, of the apt numbers, size and type, from one port to pg.2another along the lndian coast without adding substantially to the cost of repositioning of the empty containers. ll . Whereas persistence of unidirectional demand leads to insufficient investment in the fleet and, as a result, there is a requirement of movement of empty containers from one port to another along the Indian coast, without adding substantially to the cost for repositioning of the empty containers. 18. Whereas as per Notification No.38 t2018 - Customs (N T )dated 11tn May 2018, the Central Board of lndirect Taxes and Customs has allowed authorized sea carriers for carrying imported goods, export goods, coastal goods or goods meant for foreign transit or foreign transhipment subject tJdetivery of an integrated departure and arrival manifest to the proper officer electronically. 19. Whereas as per existing regulatory framework a foreign ship can load an empty or laden container from one plaJ" oi port in lndia and discharge at other place or port in lndia, only under a license issued by the Director General of Shipping under Section 407 of the Merchant ShiPPing Act, 1958. 20. Whereas promotion of trade and ease of doing business in lndia is one of the major thrust areas of the Government of lndia, and there is a need to simplify processes for shipping of cargo and operation of vessels' 21. Whereas transportation of the transhipment containers up to the final destination needs to be facilitated to make lndian ports as major transhipment hubs. 22. Whereas considering the above facts, it is necessary to put rn place effective policy measures in public and national interest to reduce/eliminate transshipment of lndian EXIM containers through foreign ports and reduce the cost for repositioning of the empty conta iners. 23. Now, therefore, the central Government, in exercise of the powers conferred upon it under sub-section (3) of Section 407 of the Merchant Shipping Act, 1958, directs as u nder: 23.1 The provisions of sub-section (1) of Section 407 shall not apply to the followirg .ri"gory of ships, which may be engaged for the coasting trade of lndia' a. Foreign flag ships engaged, in full or in part, for transportation of EXIM laden containers for transshipment; and b. Foreign flag ships engaged, in full or in part, for transportation of empty containers 232 This relaxation for ships at Para 23.1 (a) shall be subject to the conditions that: a. the laden container is consigned on a through Bill of Lading to or from a port outside lndia for the purposes of transshipment at an lndian port; b. the taden container is loaded or unloaded at a port in lndia for transhipment only; and pg. 3c. the laden container is covered by the arrival manifest or departure manifest, as the case may be, for transshipment. 23.3 The relaxation for ships at Para 23.1 (a) and (b) shall further be subject to the conditions that the information will be submitted to the Director General of Shipping' The prescribed format for submitting the information is provided in Annexure 1 and must be shared with the Director Gbneral of Shipping by e-mail at s-d1-dgs-@nic'in at least 24 hours prior to sail of ship from the port in lndia. The prescribed format should be either digitally or othenruise signed by an authorized signatory of either the shipping line or the oPerator. 23.4 The relaxation forships at Para 23.1(b) shall only be subjecttothe conditrons under para 23.3, and would qualify for ships carrying empty containers. 23.5 lndian law enforcement agencies including inter alia lndian Navy, Coast Guard, State Maritime police and Customs, shall be allowed to board such ships any time in the sea for ascertaining the bonafide credentials of the said ships/crew' 24. The forgotng relaxation has been put in place in public interest and without prejudice to the right of the Central Government, whatsoever, to alte/modify any of the provisions of this order, going forward. 25. The General Order No. SW-1501 1t}tz}1s-CS, dated 07th March 2016 has been rescinded with immediate effect. 26. This order shall come into force with immediate effect, and continue to be valid till further order, unless otherwise amended or withdrawn' . This issues with the approval of competent authority' 27 Under secretary to the Government of lndia Tel/Fax: 01 1 -23352726 Director General of ShiPPing Directorate General of ShiPPing, Beta Builing, 9th Floor l-Think TechnoCamPus Kanjur Marg, Mumbai 400042 pg.4ANNEXURE 1 Format for information to be shared with Director General of ShiPPing Ship details Name of owner/ oPerator Name of shiP with lMO No' lag of the shiP ontainer wise details ype of the ate of pick- ontainers QuantitY in Load port in Discharge port in lndia estination ischarge pg. 5