Bangladesh flag vessel act deepens difficulties for foreign feeder vessels

The "unstructured" and "inconsistent" implementation of the Bangladesh Flag Vessel Act and subsequent rules are causing severe uncertainties for foreign flag ships plying to and from Chittagong port and regional transhipment ports, stakeholders allege.
They say the "inappropriate" use of some clauses of the rules is forcing many foreign ship operators to leave Bangladesh as they suffer to obtain waiver certificates to load cargo in their ships.
The act requires foreign feeder vessels to get a no-objection certificate from the Mercantile Marine Department (MMD) before they can load any cargo in any port in the world if any Bangladeshi flag vessel has a presence there.
The local agents of the feeder vessels need to submit an online application for a waiver certificate 15 days before a scheduled trip. However, despite submitting the application half a month before, they allegedly often do not get the waiver certificate on time, creating uncertainty over their next trip.
Due to these complications, foreign feeder vessel operators incur huge financial losses in operating ships to and from Bangladeshi ports, shipping agents say.
They also said the flag protection act has caused "complexities" and "controversy" in the context of the global free economy and that the law is impeding free trade and creating barriers to the efforts on ease of doing business.
Muntasir Rubayat, a director of the Bangladesh Shipping Agents Association (BSAA), identified a flaw in Section 3 (D) of the act which stipulates the carriage of cargo to places where no Bangladeshi flag vessel operates for transporting cargoes directly between Bangladesh and its trading partners.
"It implies the limitation shall not be applicable for shipments destined for most places, except for locations like Singapore and Colombo where Bangladeshi flags are operated," he said.
Mr Rubayat said the foreign trade transactions typically involve two different countries with a port or place of origin and a port or place of destination, in accordance with the Bill of Lading and Letter of Credit contract, while Bangladesh flag vessels are not calling to that particular destination to carry 50 per cent cargoes as per the act.
He said the reality is that Bangladesh flag vessels have no participation in the international liner trade and that "the objective of keeping a legal regime for protecting the international liner traffic for Bangladesh flag vessels in itself is self-defeating".
Mr Rubayat said restrictions on waiver applications have been creating adverse effects on buyers' requirement for timely delivery, which is ultimately impacting the apparel sector for their supply chain management.
Shamsuddin Minar, executive director of Galaxy Bangladesh, emphasised that exports and imports should have access to regular and competitive shipping services without any impediment created by law or by practice for the enhancement of national economic growth.
"Due to the complications created over the flag vessels rules already two ships were pulled out from Chittagong while two more are about to leave," he said.
Singapore-based X-Press Feeders is one of the major sufferers of the flag vessels act which mainly has been supporting eight locally owned container vessels that have the capacity to carry around 5.0 per cent of total sea-borne trade.
In a customer advisory, X-Press Feeders on Friday said that its partner vessel SOL Promise arrived at Chittagong port on October 24 and could berth on October 27. It completed the cargo operation and sailed from the port on October 29.
The operator's other vessel, X-Press Nilwala, arrived at Chittagong port on October 27, berthed on October 29 and sailed on October 31.
"It's important to note that because of these conditional waivers, both vessels faced load-out restrictions which had resulted in a 50 per cent utilisation rate of the overall capacity," said the operator.
X-Press Feeders added that due to the complexities of issuance of waiver certificates, foreign flag ships are not able to utilise their full capacity and not able to fulfil their contractual commitments.
"Majority of X-Press Feeders' long-term contracted mainlines are now subject to forceful diversion of their shipments to a Bangladesh flag vessel despite not having any contractual nominations, which itself violates international norms," added the operator.
The operator apprehended that if the current flag rule implementation practice persists, the viability of foreign vessel services will come under threat, which will have a negative impact on overall Bangladesh trade.
Syed Md Arif, chairman of the Bangladesh Shipping Agents Association, told the Financial Express on Friday that everyone involved in the shipping trade is aware of the problems, but no one is acting properly to resolve them.
He said the Department of Shipping will soon convene a meeting in the presence of all stakeholders, including the garment manufacturers who are the top users of the shipping service.
"We are hopeful of getting a solution to the long-standing problem that is hindering the shipping business and causing immense suffering to seaborne trade," he said.
Commodore Mohammad Maksud Alam, director general of the Department of Shipping, could not be reached for comment despite several attempts.

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