New worry for exporters as container charges up 25%

The Bangladesh Inland Container Depots Association (BICDA) once again hiked its charges for handling export goods by 25%, causing concern especially among RMG owners in an already highly competitive global market.  

The BICDA on Sunday took the decision after a meeting with the Bangladesh Freight Forwarders' Association (BAFFA), with the new rates already coming into effect from 6 August. 

Earlier on 4 November, private inland container depots (ICDs) increased handling charges by 23% on both import and export goods. 

The latest hike means handling charges for export goods have increased by 48%. 

One twenty-foot equivalent unit (TEU) export container handling cost was about Tk3,920 before November 2021 which has now risen to Tk6,362, an over Tk2,000 rise. 

On 11 August, BICDA had increased the handling charge on imported goods by 35% citing the fuel oil price hike. 

After the increase in import charges, handling charges for empty containers were increased by 24% on 17 August. As a result, charges increased by a total of 58% in two phases over a span of nine months. 

Before the increase in oil prices, the charge of a 20-feet container of imported goods was Tk 9,754, which is now Tk13,080. 

The hikes spell worries for exporters, especially those involved in the readymade garments sector. 

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Acting President Shahidullah Azim said the move will have an adverse impact on production costs.
"Already a number of factories are facing hardship to pay their workers' salaries without bank loans," he said, adding that some big companies were operating factories at half of their capacity due to less gas pressure and electricity supply.

On the other hand , a number of buyer's are also cancelling orders, he added.

Azim feared that the aftermath of the hike would become more visible in 2-3 months. 

It should be noted that most of the products handled by ICDs are garment products. 

Rakibul Alam Chowdhury, vice president of the BGMEA, termed the increased charges by the tariff committee unethical, adding that they were repeatedly charged extra although the rule was to collect the charge from the buyer. Loopholes in various laws were being exploited to pass the cost on to the producers, which was not good for the business. 

After fixing the import and export handling charges in 2010, BICDA increased them by 16% in 2016 and later by 15% in March 2020.

Bangladesh Garments Accessories & Packaging Manufacturers & Exporters Association (BGAPMEA) Director Al Sharier Ahmed said if any cost increases in the supply chain, it will be added to the product cost and customers will have to pay that.
 
If manufacturers are not able to transfer costs onto customers, it will hurt their profit margins, he said. 
 
Currently, a majority of exporters are doing business at breakeven cost and those will lose their competitiveness, he added. 

BICDA Secretary General Ruhul Amin Shikder told The Business Standard that the machinery used in the operation of ICD was powered by diesel so the charges had to be increased. 

He said the 25% increase had come after bilateral negotiations with the stakeholder, the freight forwarders. 

BAFFA Vice President Khairul Alam Sujan told TBS that BICDA had proposed a 42% increase in charges for export products, but had settled on 25% after discussions. 

Earlier, BGMEA First Vice President Syed Nazrul Islam wrote a letter to the president of BICDA on 17 August last year following the 11 August increase. 

The letter mentioned that the private ICDs were unilaterally levying various charges on containers carrying imported goods without the approval of the Tariff Committee, which was completely illegal. 

The BICDA, however, said the ICD policy does not specify any condition which states that the committee will determine the ICD charges, but rather it will be the depot owners. 

On 6 August, the government fixed the price of diesel from Tk80 to Tk114 per litre, spurring the BICDA to increase its own charges. It sent emails to various stakeholders informing them of the development. 

Around 93% of goods exported through Chattogram port go through the 19 private ICDs there. 

Besides, 38 types of containerised products, including imported food products, are delivered from the ICDs. The container capacity of all ICDs in the country is 76,255 TEUs.

In 2021, Chattogram port handled 32 lakh TEUS of containers, of which ICDs handled 7.2 lakh TEUs of export containers in 2021 and 2.92 lakh TEUs of import containers.