I had written about the need for Pakistan to have proper and co-ordinated Port Master Plan (PMP) sometime in November 2009 to generate the maximum benefits for the nation. Any PMP should also create the maximum efficiency for handling and movement of cargo.
Efficiency not only involved minimising the tangible cost to those who are directly engaged in the business of handling and moving cargo, but also the intangible impact such as environmental impact on all Pakistanis. One issue, which has not attracted the attention of the policymakers, is the handling of dirty cargo like coal, phosphate in bulk form and its impact on humans and the environment.
This brings to mind the handling of cargo at the Karachi Port. A total of 3.4 million tons of coal was handled as the Karachi Port during 2008-2009. Conservative estimates indicate that this figure will be close to 4 million tons during 2010-2011. This increase in volume will result in an increase in revenues for the port and for allied businesses and bring economic benefits to Karachi and Pakistan.
The incessant demand for energy to support a growing population has spurred ports such as Karachi to dedicate spaces as the KPT did at the Keamari, for the imported coal, which is stored in the open after being off-loaded from ships. As the volume of coal imports increases so does the size of the coal yard at Keamari. While economic materials are reaped by businesses, intangible costs are borne by others who live and work in the area.
The area where coal is handled at the Keamari area is adjacent to the residential colonies of Keamari and Jackson, which house thousands of residents, comprising people who cannot afford decent healthcare. The continued handling of coal in an area containing major population centers and storage of explosive material does not consider the long term welfare of the people in Karachi, especially those living right next to the area.
The question that must be asked is whether there is any serious long-term plan to move the handling of dirty cargo such as coal, phosphate further away from population centre. For those in daily contact with these polluting substances, there is untold suffering.
A port traffic department officer, already suffering respiratory problems, said, on the condition of anonymity that the yard now covers an area of 12.5 hectares with circular mounds of coal piled up to a height of over 150 feet at some places. Coal is transported from the berths to the yard in open top dumper trucks that spill coal on their way to the yard. He added that of all the dirty cargos handled by the port, coal was by far the dirtiest and that he was trying to get a transfer to some other berth as his health continues to deteriorate.
Efforts to curb coal dust from being carried away by the strong coastal winds blowing towards densely inhabited areas has remained cosmetic, as water sprinkling is being kept to the minimum so as not to increase the moisture contents of the coal thus decreasing its market value and utility. Then, there is the real concern about risk of a major explosion as the Keamari coal yard is situated adjacent to the Keamari oil terminals.
Despite repeated caution warnings of such potential risk by oil terminal owners, coal dust continues to accumulate forming a thick layer on top of the large tanks containing various types of highly inflammable petroleum products. Thus increasing risk of igniting the highly flammable products through what is technically known as the coal dust explosion hazard.
Despite this pending risk the KPT continues to ignore occupational safety and health guidelines for coal dust handling and continues to invest more funds in its Keamari coal yard by building a 1.87 km rail link to the yard in 2010 at a cost of Rs 55.54 million and also plans to install a new sprinkler system.
These investments will do little to reduce the environmental and health hazards posed by the coal yard but might go a long way in ensuing that the coal yard is not relocated as any such shifting of the coal yard might be detrimental to the interests of KPT officials. When queried where the water spill from the sprinkler system would end up it was indicated by staff that this spill, comprising coal slurry, will flow unabated into the sea causing incalculable damage to fisheries and other marine life.
Another matter is that the KPT plans to build a new terminal for the handling of containers in the area adjacent to the coal terminal. Phase I of the terminal will be capable of handling 3.1 million TEUs (twenty foot equivalent boxes). When all the phases are completed, it is capable of handling 10 million TEUs.
Experience in other parts of the world demonstrates that it is a natural development that following a plan for container handling, dirty cargo handling is moved to another location. Handling coal so close to a container terminal poses major risks to the employees working at the terminal. The impact of coal dust on equipment leads to frequent breakdown and could cause accidents risking lives.
The long-term solution could be to move the handling of dirty cargo from the Keamari area to Port Qasim. The Port Qasim Authority signed an agreement with Pakistan International Bulk Terminal Ltd in November 2010 establishing a US $173 million modern bulk coal and cement terminal with a backup area of 25 hectares. The facility is expected to come into operation within the next three years.
If there is proper co-ordination between the ports under a PMP, instead of investing more funds at Keamari coal yard, the government should, in the better interest of the local residents and port users, exercise greater corporate social responsibility and look towards preparing to transfer all coal and cement handling to Port Qasim away from densely populated areas.
In the interim, while policymakers mull over what to do, there are short term solutions that the Karachi Port may implement. Merchants take a long time to remove the coal from the port area and this is for economic reasons. It has been learnt that KPT's storage yard at Keamari offers storage said to be at cheaper rates than other locations outside the port.
Any rational importer would keep this cargo at the port until it is required, as moving them outside would be more costly and there are more restrictions imposed due to its environmental hazard. These costs are externalised to the residents in the area in form of impact on health, with short-term medical cost and in the long-term, reduction in their life span.
There is no incentive by officials to increase the charges for the importers as it removes opportunities to secure the coal business. In the light of these gains, the authorities have conveniently turned their backs towards the continuing health and environmental hazards being posed by the KPT's coal storage yard at Keamari.
This ignores medical risks to the local population and material risks to surrounding businesses such as those oils storage. Costs are externalised to others. The KPT may consider increasing the storage charges for the owners of coal and this should lead to speedy evacuation of the cargo at the port area.
This strategy proved to be effective at the port of Chittagong around 2006 where congestion was resolved when the port doubled the charges to the owners of cargo as once mentioned by ex-Chittagong Port Chairman. This increase in charges gives no incentive for the cargo owners as outside storage charges become lower than those in the port. It may well be that the official revenue received by the KPT will be the same or even higher despite the cargo staying a much shorter period at the port.
I commend all public and private sector enterprises who have saved the exchequer by using coal in cement factories, yet my intentions are humble without causing umbrage to any institution. The only compelling reason to pen this column is environmental and fire hazards and the health safety of the residents of the adjoining areas even extending to Clifton.
My main concern was visiting the oil pier, I noticed traces of coal dust on oil tankers berthed on OP-I/II/III and imagined the complexities ie underwriters of ship owners may demand additional risk premium from ship owners for berthing at Karachi, thus it is essential to raise the issue for the discretion of those concerned, who are competent and may be concerned equally, but for reasons best known may be ignoring the hazards.
Sunday, January 23, 2011
Sunday, January 16, 2011
Rotterdam Rules: Carriage of Goods by Sea Act
he shipment of goods by sea under Sea Act, commonly known as COGSA is our statute, governing the rights and responsibilities between shippers of cargo and ship owners regarding ocean shipments to and from Pakistan. Our trade is assumed to be 95% by sea. It is the enactment of the international convention regarding bills of lading, commonly known as the "Hague rules."
We, in Pakistan still rely on outdated carriage of goods Act by Sea 1925. A serious effort was made in 2004-05 to amend the outdated/obsolete carriage of goods act by taking all the stakeholders onboard whilst Director General of Ports and Shipping, Karachi, being the regulatory regime played host to all the stakeholders, ie shippers, carriers, chambers, NTTFC and others, to arrive at a consensus.
The consensus was reached bearing in mind the problems faced by trade and commerce and amended draft rules were submitted to the concerned ministry to enable it to move the bill in the parliament to amend the obsolete act. However, the Ministry of Law and Justice instead of vetting the draft bill, dumped it into to the cold storage with no outcome to-date, thus nullifying all the productive man hours put to revise the bill to address the modern day needs.
It is interesting to note that rest of the world amended the "Hague Rules" in 1968 on the premise that the "Hague Rules" are in favour of ship owners, limiting their liability to trade. The rules were replaced by "Visby" amendments, which replaced "per package" with limitation per kilogramme.
The "Hague Visby Rules" have been in force internationally for over years and performed well, both for the maritime law and the countless parties around the world who have chosen courts and arbitral tribunals, invoking Arbitration Act 1996 as per English law, whereas our Arbitration Act is still that of X/1940, thus international entrepreneurs, signing any contract in Pakistan, insist arbitration in London or Switzerland, having no faith in our obsolete Arbitration Act. My personal experience as arbitrator confirms Arbitral proceedings of contract as per the English Arbitration Law of 1996.
Three developments in the maritime world lead to believe that "Hague Visby Rules" have started showing their age. First, the big increase in container traffic required more serious legislative attention then the simple package/unit tinkering effected in 1968 Visby Protocol.
Secondly, the legal framework for carriage of goods by sea has lagged behind the use of electronic means of communication in the issue and transfer of bills of lading, which are negotiable instrument as per negotiable instrument act. The carriage of goods by Sea Act 1992, provided powers for accommodating electronic instruments in the civilised world, but those powers remained unused for lack of comprehension and clarity.
Finally, increased globalisation of markets required that some accommodation be made, even within the liner market, for contracts agreed freely between parties, with some room of departure from Hague Visby Rules, which originated, in the study of the US Harter Act in the late 19th century.
Large commercial concerns now see the carriage of goods on liner terms not simply as incidents to export, but an integral part of serial and large supply chains, which need flexibility in freedom of contract, while we still follow 1925 Carriage of Goods by Sea Act what to talk about amendments or updating.
The UNICTRAL has developed a new regime known as "Rotterdam Rules" and on Wednesday 23rd September 2009, 16 countries have officially ratified the new UN convention Rotterdam Rules and as of today, 23 countries have ratified or signed document of accession, including US.
The IMMTA local office is concerned that whilst we could not amend COGSA, how we are going to take the onslaught or Rotterdam Rules, thus IMMTA is seriously considering to arrange a workshop at Karachi in March to educate all stakeholders on the Rotterdam Rules and hopefully concerned ministries be educated to comprehend the new convention before submitting the document of accession as the rules must be deliberated before approving the convention.
The most serious issue is changing the bills of lading with transport document, thus prudential regulations have to be amended to make the negotiable instrument act/law to accommodate new requirements. The Rotterdam Rules is the United Nation Convention on contracts for the International Carriage of Goods, wholly or partly by sea, and it is highly complex magnum opus of 96 articles.
The IMMTA organised an international conference at Marbella, Spain, from 19th to 23rd September, 2010. Marlaw was also attended by two commercial maritime personnel of repute from Pakistan, who surely are willing to deliberate and educate the local stakeholders.
The Rotterdam Rules were debated in view of multi-modal transportation of goods in the 21st century, needs solution and liability regime, which is yet to be covered by Tokyo Rules or ICC/ UNCTAD rules, thus it is imperative to evolve a binding effect on liability regime of multi-modal transport operator including freight forwarders.
The IMMTA is of the considered opinion that Rotterdam Rules be implemented despite shortcomings to replace the outdated Hague Visby Rules. The International Road Transport Union is, however, urging the government not to ratify the rules as they do not want to bear any liability.
The Rotterdam Rules provides for changes in the Hague Visby/COGSA regime. It will also apply to all carriage of goods wholly or partly, by sea. The convention extends the statutory regime to the entire period the goods are in the custody of the carrier and its maritime performing parties. It is also interesting that charter parties contract, towage agreements and volume contracts are not covered in the Rotterdam Rules.
The IMMTA local office is of the considered opinion of adopting Rotterdam Rules to address the multi-modal transport in Pakistan. Karachi Chamber of Commerce Shipping Committee in the past had expressed its reservation on freight forwarders, thus implementation of Rotterdam Rules will also be netting freight forwarders in liability regime as a MTO.
It is true that the new rules address all deficiencies, in particular containerisation, extending the rules to contract for the carriage of goods wholly or partly by electronic transfer documents which are accommodated as being functionally equivalent to paper transport documents. The liner market is still regulated by rules and charter parties.
The most intriguing question is that are we ready for Rotterdam Rules? The answer is 'no' as neither the ministry concerned, chambers nor the shipping community has been educated on the new UN Convention Rotterdam Rules, which may eventually replace "Hague Visby Rules".
Let us all ponder seriously as it scares me that some layman in the ministry, simply enjoying foreign trips, may endorse the rules, whilst we are not ready, affecting trade, commerce and liability regime. I very humbly give a wake up call to all and sundry and hope the concerned ministry may take the lead. The Shipping Committee of Karachi Chamber of Commerce will be most willing to extend all co-operation to educate the stake holders.
We, in Pakistan still rely on outdated carriage of goods Act by Sea 1925. A serious effort was made in 2004-05 to amend the outdated/obsolete carriage of goods act by taking all the stakeholders onboard whilst Director General of Ports and Shipping, Karachi, being the regulatory regime played host to all the stakeholders, ie shippers, carriers, chambers, NTTFC and others, to arrive at a consensus.
The consensus was reached bearing in mind the problems faced by trade and commerce and amended draft rules were submitted to the concerned ministry to enable it to move the bill in the parliament to amend the obsolete act. However, the Ministry of Law and Justice instead of vetting the draft bill, dumped it into to the cold storage with no outcome to-date, thus nullifying all the productive man hours put to revise the bill to address the modern day needs.
It is interesting to note that rest of the world amended the "Hague Rules" in 1968 on the premise that the "Hague Rules" are in favour of ship owners, limiting their liability to trade. The rules were replaced by "Visby" amendments, which replaced "per package" with limitation per kilogramme.
The "Hague Visby Rules" have been in force internationally for over years and performed well, both for the maritime law and the countless parties around the world who have chosen courts and arbitral tribunals, invoking Arbitration Act 1996 as per English law, whereas our Arbitration Act is still that of X/1940, thus international entrepreneurs, signing any contract in Pakistan, insist arbitration in London or Switzerland, having no faith in our obsolete Arbitration Act. My personal experience as arbitrator confirms Arbitral proceedings of contract as per the English Arbitration Law of 1996.
Three developments in the maritime world lead to believe that "Hague Visby Rules" have started showing their age. First, the big increase in container traffic required more serious legislative attention then the simple package/unit tinkering effected in 1968 Visby Protocol.
Secondly, the legal framework for carriage of goods by sea has lagged behind the use of electronic means of communication in the issue and transfer of bills of lading, which are negotiable instrument as per negotiable instrument act. The carriage of goods by Sea Act 1992, provided powers for accommodating electronic instruments in the civilised world, but those powers remained unused for lack of comprehension and clarity.
Finally, increased globalisation of markets required that some accommodation be made, even within the liner market, for contracts agreed freely between parties, with some room of departure from Hague Visby Rules, which originated, in the study of the US Harter Act in the late 19th century.
Large commercial concerns now see the carriage of goods on liner terms not simply as incidents to export, but an integral part of serial and large supply chains, which need flexibility in freedom of contract, while we still follow 1925 Carriage of Goods by Sea Act what to talk about amendments or updating.
The UNICTRAL has developed a new regime known as "Rotterdam Rules" and on Wednesday 23rd September 2009, 16 countries have officially ratified the new UN convention Rotterdam Rules and as of today, 23 countries have ratified or signed document of accession, including US.
The IMMTA local office is concerned that whilst we could not amend COGSA, how we are going to take the onslaught or Rotterdam Rules, thus IMMTA is seriously considering to arrange a workshop at Karachi in March to educate all stakeholders on the Rotterdam Rules and hopefully concerned ministries be educated to comprehend the new convention before submitting the document of accession as the rules must be deliberated before approving the convention.
The most serious issue is changing the bills of lading with transport document, thus prudential regulations have to be amended to make the negotiable instrument act/law to accommodate new requirements. The Rotterdam Rules is the United Nation Convention on contracts for the International Carriage of Goods, wholly or partly by sea, and it is highly complex magnum opus of 96 articles.
The IMMTA organised an international conference at Marbella, Spain, from 19th to 23rd September, 2010. Marlaw was also attended by two commercial maritime personnel of repute from Pakistan, who surely are willing to deliberate and educate the local stakeholders.
The Rotterdam Rules were debated in view of multi-modal transportation of goods in the 21st century, needs solution and liability regime, which is yet to be covered by Tokyo Rules or ICC/ UNCTAD rules, thus it is imperative to evolve a binding effect on liability regime of multi-modal transport operator including freight forwarders.
The IMMTA is of the considered opinion that Rotterdam Rules be implemented despite shortcomings to replace the outdated Hague Visby Rules. The International Road Transport Union is, however, urging the government not to ratify the rules as they do not want to bear any liability.
The Rotterdam Rules provides for changes in the Hague Visby/COGSA regime. It will also apply to all carriage of goods wholly or partly, by sea. The convention extends the statutory regime to the entire period the goods are in the custody of the carrier and its maritime performing parties. It is also interesting that charter parties contract, towage agreements and volume contracts are not covered in the Rotterdam Rules.
The IMMTA local office is of the considered opinion of adopting Rotterdam Rules to address the multi-modal transport in Pakistan. Karachi Chamber of Commerce Shipping Committee in the past had expressed its reservation on freight forwarders, thus implementation of Rotterdam Rules will also be netting freight forwarders in liability regime as a MTO.
It is true that the new rules address all deficiencies, in particular containerisation, extending the rules to contract for the carriage of goods wholly or partly by electronic transfer documents which are accommodated as being functionally equivalent to paper transport documents. The liner market is still regulated by rules and charter parties.
The most intriguing question is that are we ready for Rotterdam Rules? The answer is 'no' as neither the ministry concerned, chambers nor the shipping community has been educated on the new UN Convention Rotterdam Rules, which may eventually replace "Hague Visby Rules".
Let us all ponder seriously as it scares me that some layman in the ministry, simply enjoying foreign trips, may endorse the rules, whilst we are not ready, affecting trade, commerce and liability regime. I very humbly give a wake up call to all and sundry and hope the concerned ministry may take the lead. The Shipping Committee of Karachi Chamber of Commerce will be most willing to extend all co-operation to educate the stake holders.
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