Importers pay huge demurrage in 2013

Over 73 million dollars was paid as demurrage in 2013 by importers to shipping lines for delaying the clearing of their goods at the various Ghanaian ports.

An estimated 32 million Ghana cedis was also paid by the importers as rent during the same period, Mr. Emmanuel K. Arku, Tema Branch Manager, Ghana Shippers Authority, said on Tuesday at a day’s seminar of the Chartered Institute of Logistics and Transport (CILT) on the theme: “The causes and impact of demurrage and rent on business at the ports”.

Demurrage is the charges that a charterer pays to a ship owner for the use of the ship or container beyond the agreed period as stipulated in the charter party- rent applies to the charge imposed on the shipper for the use of a terminal beyond the stipulated seven-day free periods.

Mr. Arku said a study by his outfit showed that over 85 percent of liner imports in Ghana incurred demurrage, rent or both.

He said such demurrage and rent could be avoided if shippers could clear their cargoes within the seven-day free period generally provided by the Terminal Operators and Shipping Lines.

The resultant effects of such huge demurrage and rent, he noted, included higher prices of imported goods on the market which in turn increase the cost of living.

Mr. Arku said another effect was the reduced competitiveness of the shipper or exporters who used these imports as inputs for their exports.

Touching on some of the causes of demurrage and rent, he stated that the major cause was delay in clearing of cargo.

He said whereas the cargo throughput of the port continued to increase, it did not tally with the requisite port capacity such as infrastructure, equipment, cargo handling space, efficient transactional processes and up-to-date technology among others.

He stated for instant that, the cargo throughput (import, export and transit) increased from 8.4 million metric tonnes in 2000 to 22.7 million metric tonne in 2013, showing a 170 percent increment.

Mr. Arku added that there had been an average year-on-year growth of about 10 percent with the exception of a decline of -17 percent and -0.5 percent.

He spoke about the lack of effective planning and implementation for port infrastructure and said “there seem to be a lack of adequate planning into the future or inability to implement the plans for the ports due to reasons not known to us”.

Other causes of demurrage and rent, he said, were lack of effective coordination among port stakeholders leading to independent decisions being taken by these agencies without recourse to other stakeholders.

He again said due to the overriding objective of revenue maximization, the transaction procedures at the port had become complex and had contributed to congestion and delays.

Mr. Arku recommended a “port paradigm shift from the service provider’s terms to a shipper-centred approach to service delivery” to effectively address the causes of high demurrage and rent at the port.

“For example, where a delay is occasioned by a terminal operator, a shipping agent or clearing agent, the shipper must not be made to pay for the demurrage or rent that arises as a result,” he said.

He called for a crash programme to auction all cargoes that have stayed in the ports for more than six months.

Mr. Arku said the Customs Division of the Ghana Revenue Authority must encourage pre-arrival clearance processes with minimum documentation in line with the World Trade Organization (WTO) Agreement on Trade Facilitation.

He said cargo throughput would continue to grow and therefore developments, both infrastructure and transactional, must be stepped up to keep pace with such growth.