**Executive Summary**
This is a notification from the Ministry of Shipping, dated May 21, 2018, regarding the relaxation of Section 406 of the Merchant Shipping Act, 1958, for the coastal movement of EXIM transshipment containers and empty containers. The notification aims to reduce transshipment of Indian cargo through foreign ports and to cut repositioning costs of empty containers. This notification comes into force with immediate effect.
**Key Points / Main Content**
* **Relaxation of Merchant Shipping Act, 1958:**
* Section 406(1) of the Merchant Shipping Act does not apply to specific categories of ships engaged in the coasting trade of India.
* This relaxation applies to ships chartered by Indian citizens, companies, or cooperative societies engaged in transporting EXIM laden containers for transshipment or empty containers from one Indian port to another, provided they meet Section 21(b) of the Act.
* **Conditions for Relaxation:**
* The relaxation applies to laden containers consigned on a through Bill of Lading to or from a port outside India for transshipment at an Indian port.
* It also applies to laden containers loaded or unloaded at a port in India for transshipment only.
* The laden containers must be covered by the arrival or departure manifest for transshipment.
* **Reporting Requirements:**
* The charterer must submit chartered vessel information to the Directorate General of Shipping (DGS) within 24 hours of the charter via email at sd2-dgs@nic.in, using the format in Annexure I, signed digitally or by an authorized signatory.
* **Enforcement:**
* Indian law enforcement agencies can board ships at any time to verify credentials.
* **Purpose:**
* To reduce or eliminate transshipment of Indian EXIM container/empty cargo through foreign ports.
* To reduce the cost for repositioning of empty containers.
**Impact Analysis**
**Stakeholders Impacted**
* **Shipping Companies and Operators**
* **Impact:** Reduced restrictions on chartered ships for coastal movement of containers.
* **Action Required:** Comply with the reporting requirements to the Directorate General of Shipping (DGS) within 24 hours of chartering a vessel.
* **Indian Ports**
* **Impact:** Potential increase in container traffic and revenue due to reduced reliance on foreign ports for transshipment.
* **Action Required:** Adapt to handle increased transshipment volume.
* **Exporters/Importers**
* **Impact:** Potentially lower freight rates and reduced transshipment costs.
* **Action Required:** Monitor changes in shipping costs and logistics.
* **Directorate General of Shipping (DGS)**
* **Impact:** Increased oversight and data collection requirements for chartered vessels.
* **Action Required:** Receive and process information on chartered vessels within 24 hours.
* **Indian Law Enforcement Agencies**
* **Impact:** Responsibility to verify the credentials of ships engaged in coastal movement.
* **Action Required:** Board and inspect ships to ensure compliance.
Key Entities Referenced
Merchant Shipping Act, 1958: The primary law being referenced and amended in this notification, relating to coastal shipping regulations.
Ministry of Shipping: The issuing authority for this notification.
EXIM Transhipment Containers: Containers being used for import/export transshipment
Directorate General of Shipping: Entity that receives information about chartered vessels according to the notification.
[To be published in part II section 3- sub-section(ii) the Gazette of lndia Ordinary]
MINISTRY OF SHIPPING
NOTIFICATION
New Delhi, the 21"'May 2018
Subject: Relaxation under Section 406 of the Merchant Shipping Act, 1958, for
coastal movement of (a)EXIM Transhipment Containers and (b)Empty
Containers
l. Whereas the Merchant Shipping Act was enacted in 195g at a Ime when
container cargo was in a nascent stage (lSO standards for containers
were flxed in 1956). ln lndia, container shipping sta(ed onty in the year
1980 and thus the Act prdates the business of containers in lndia.
Transshipment of cargo was not a major issue at lhe time of enactment, in
fact the Act did not envisage such an eventuality.
2. Whereas the movement of cargo by containers has been lsing
continuously and is presently more than 2Oo/. ol lndta,s total EXIM trade
volumes, and whereas in a dynamic international business siluation 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 al a transshipmenl port
from where they are loaded in a bigger container liner for anoiher
transshipment or mainline port. Such a model has not fully evolved in lndia
and this has resulted inalmost 33% of lndian container cargo getting
transshipped at foreign ports. The extent of transshipment is increasing
year on year and has increased lrom 26lo in 2007-08 to 33o/o in 2016-11
(lndian Ports Association).
3. Whereas the business model for conlainer shipping has lirmly stabilized
for the hub and spoke model and has resulted in the formation of
transshipment hubs worldwide.
4. Whereas the advancement in shipping and container handling technology
is leading Io the deployment of ever inseasing saze of vessels (in excess
of '18,000 TEUS) as mother vessels and development of deeper draft
transshipment ports.5- . Whereas the currenlly established transshipment ports acrosslhe globe are
inr""ting futttt"r in d;veloping themselves as modern ports of lhe future to
retain their pre-€minence as transshipment ports'
6. Whereas lndia is yet to develop a robust eco-system of large' modern
' inteinationat kans;hipment ports/hubs with policy slructures and cost
advantages to compete with regional hub ports'
7. Whereas transshipment of lndaan cargo at foreign transhipment ports leads
to tr"m" gtorrtt ai foreign ports and hence, job crealion other countrtes'
loss of ,elrenre tto. lnJian shippers/ consignees or expo'nrt ers/importers to
foreign ports in terms of port and logistics charges' and loss. ol JoreEn
exchinge to foreign ports as the transshipment revenues and clrarges are
collecte-d from lndian exporters/imporlers by foreign ports'
8- . Whereas promoting transshipmeflt ports in lndia wouldlead to (a) higher
compet ion amongit shipping lines and a level playing fi€ld ti'ould reduce
ireitht rares makiig lndian lrade more competitive (b) time and dislance
etfriient togistics Gtween lndian porls versus foreign ports.would also
contribute i-o lowering in feedering cost (c) shifling of lndian containe-r.cargo
from foreign ports t;lndian pordwould lead to higher port profitability and
.rnprovrJm iol upon estabiishment of transhipment ecosyslem including
pois ind logistics sector. eoablirE small and medium enterprEes'.seryrce
ir*io"r" toit ports and lhe ship{ling s€ctol, lndian porls can potentially
Ittiact cargo or" i ginating ftom and destined lo forergn ports addrng to further
groftf, tnrlorindian ports and (e) retention of foteign exchange in
""igo "t
lndia.
9. Whereas the supply cfiain lag iime and transshipment at a foreign port
rnireaies cost to itri: exru traoe aaversely impacting lhe competitiveness
of lndian traders and manutaciurers in the global market'
1- 0- . Whereas there is a requirernent to enhance feeder capacity lo suppo(
rllor.."nt ot fXlM containers by sea between lndian porls and the lndian
transhipment Ports.
I I. Whereas availability, time-bound porl opetations and ease of access to
mntainer vessels for feeders and transhipment of containers within India is
a prerequisite for developmenl of transhipment ports in lndia'
12. Whereas providing for two-wa -y im c pa rorg vo in gm ovement has the potenllal of
reducing tire costlf transport. cargo volumes and facllltating
investrnent in shipping feet.ll. Whereas sea borne transportation has the potential of simultaneously
reOucing the per tonne-km cost of transporting goods as well as reducing
itr.!i"Jnttori" g." emission per tonne-km of transporting the goods over
tongii"t"n*s of one-third, compared to railand road based transportation
14. Whereas as per Section 406 of Merchant Shipping Act, 1958' no lndian ship
and no other ship chartered by a citizen of lndia or a company incorporated
in fnOi" ot a cooperative society registered lndia shall be taken to sea
iio* port or. put" within or ouiside lndia ex'nce pt under a licens€ granted
by the" Director General, Shipping under lhis section'
15. Whereas to deal with the business model of transshipment of containers'
various countries have taken steps to allow vessels from foreign flags to
lrade on thelr coastal water for transshipment cargoes by relaxlng
pL"Li"".,rlt"it aomestic law(s) to boosi international trade volume and
reduce transportalion cost
1- 6- . W ,nh de r ie rbas ",
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g imra pd ou rta sl i an nc dre ea xs pe
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cc uo ln at ra pin oe rr ti 'z te hd
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rc ea ir sg o
a
oerennial problem of empty containers ac'rcoumm ulating at some ports and
!nort"g" ot al otilels ln lerms ol srze and type' Thus tllete is a
Lqrir,i"."r" o on I t man o" vr es m ent of empty containers th: lql sz€ €nd-type'
.of
iroin one port to another along the l;dian coast withoul addrng subslant'ally
to the cost of repositionrng of the empty containers'
to
l?. Whereas persistence of unidirectional demand leads insufficient
investment in the fleel and, as a result. there is a requirement of movement
otempty containers from one porl to another along the lndian coast without
iaoing luostantiatty to the cost for repositioning of the empty containers
1'" 8. Where-ailst "a s per Notification No. 38 / 2018 - Customs (N T.) dated '11s May
ioia C.nttat Board of lndireci Taxes and Customs has allowed
,rtnotirao sea carriers for carrying lmported goods, expon goods coastal
gooOs o, gooO" ,.ant for foreign tiansit or forergn transshipment subject to
ierlr"w oi rn integrated departure and arrival manifest to the proper officer
electronicallY.
1' 9. Wheteas as per existing regulatory framework a foreign ship chartered by
a citizen of lndia or a cdmpiny incorporaled rn lndia or a regislered society
registered in lndia can load an empty or laden container from one place or
po",t in lndi" and discharge at othei place or port in lndia'.only,^under a
iic"n"e is"r.O uV tt e Direitor General of Shrpprng under Seclion 406 of the
Merchant Shipping Act, 1958.t" th"-T:]
2-0". W ilth le ;r ;e La ;s tran ns ep ;o drt sa ti to on bo ef th fae
c
t ir lia tan ts es dh ip tm o e mnt ao kf e c o lnn dta iain ne rs p o',rpls as malor
transshiPment hubs.
2- l.WheleaslndianShipsbyvirtueofthereqistrahonofshlpsatdesEnated
loilicense under Section 406 and
p.,r" are deemed approved
"ri.gi"tty
have transhiPment allowance.
2" 2 . Whereas other ships which may be chartered by c ri etiz se isn ls e Jo *f. 'l ln ^d ':i 9a. : :o r a
;;;;;;,;;;p"oi"d in lndi" o' ' -rporate so^cietv ""'
ilJr. il, u" g;"t"d lic€nse under Section 406 to be taken to sea lrom a
port or place within or outsrde lndia'
23. W theh e mre aa ios
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p thro rum so
t
l aio rn
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ao sf t ora
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d the
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$;i;d;'oJG i;ishtpprng ol carso and operatron or vessels'
2, 4- . Whereas considering the above facts' it is necessary to-put.in place
eff;;;|il;as"ures in pubtic and national rnteresl to redu-ce/eliminate
t-..iii""i"m irf lndran ExlM container/empty cargo th'ough foreign ports
;il;;; ttre -4, for reposilroning ol the emptv mntarners'
2"-5 .Now, therefore' the Central Government in exercise of the^powers
;;;;J;";t; sub-section (1) ;f seciion 406 of the Merchant shippins
Act, '1958, directs as under:
25.1 The provisions of sub-section (1) of Sectron 406 shall.not apply to
ir'," r"rr.*i"i category of shrps' wlrctr may be engaged for the coasting
trade oi lndiai
a- .ship' sl- c" h- ap rt" e, r" er di b'e yc itizenoflndlaoracompanyincorporated.inlndia
in lndia whrch salislies the
oi society regtstered
ieqJ,rements specitred ctauL 1o) ot section 21 in the Acl engaged
iJiion"portrtii,n ot EX' In M laden tontainers for transshipment' and
b" .shipscharleredbycitizenoflndiaoracompanyincorporaled.inlndia
oi"'"- coop",,ti'e society reoistered ln lndra wl]lch satlsfies the
I"quir.."nt" in clau"se (b) of section 21 in the Act engaged
ioilr*"port""tptn."i rioefd e mpty coniainers from one port of India to
another port of lndia
25.2 This relaxation lor ships at Para 25'1 (a) shall be available for:
a* . the bden container consigned on a through Bill of l-ading to or from
;'G-;;d" l"dia for G purposes of transshipment at ao lndian
porl,b. the laden container loaded or unloaded at a port in lndia for
transhipmenl only, and
c. the laden container covered by the arrival manilest or deparlure
manifest, as the case may be. for lransshipment
25 3 The Charterer shall submit anformation of the chadered vessel to
Directorate General of Shipping The prescribed format tor submilting
the information is provided in Annexure I and must be shared with
Directorate Generai of Shipping by e-mail at sd2-dgs@n'c in within 24
hours of the charter ofthe vessel. The prescribed format should be either
digitally signed or othetwise signed by an authorized signatory of either
the shipping line or the operator.
25.4 lndian law enforcement agencies includang 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/c.ew.
26. This notification shall conre into force with immediate effect' and
continue to be vatid till it is amended or withdrawn
IF. No. SW-1501 1/22016-MGl
(P K Sharma)
Under Secretary to the Government of lndia
fellFax 011'23352726
5ANNEXURE
1
Format for information
of chartered_vessel to be shared with Oirector ceneral of
Shipping
(,
of the charterer
(ii) of ship wrth tMO No.
(iii) Flag of the ship
(iv)
Note: the documenl s ilo ; s "h a;re;d; w ith
ass@nic in wi,.,in za :;"?:fl?lil"*H1:f .?r""#; :l;.j;
T:rJlfl
or olherwise signed by an authorised sign"tory or eitte, ttru ip-plrig'ini or tne operaror
"t