To: All Members / BGMEA                                                                         5^th January 2013 

My dear Members, 

Sub: On the issue of huge increase in CFS labor handling cost per package for export. 

This subject issue is a matter of great concern & we have been holding several meetings & discussions with highest authorities in different Ministries, NBR Port etc. This remains a top priority in my Agenda.  

However I feel BGMEA Members must share with me the full details of the background, what BGMEA has done as protective measures to avert payment of such charges & increases thereof time to time. It is very important that you go through the contents below and realize how important it is for you to cooperate & understand the same.   

How incorporation of  “FCA” in lieu of “FOB” protects our Member Industries 

As you are aware, the trend of export shipment over the years has undergone a massive change with containerization & advent of nominated Freight Forwarders/Consolidators. In the changed scenario, for “Freight Collect” shipments through Freight Forwarders/ Consolidators, there is no scope/provision for application of “FOB”. Instead, the shipment term should be “FCA” as per Incoterms of ICC (“FOB” has no locus standi in this context).  

Under shipment term “FCA” BGMEA Member as exporters are simply required to handover the export consignment at the Entrance Gate of CFS (irrespective whether Off-dock or In-dock) to the nominated Freight Forwarders/Consolidators. All expenses from that point onwards would be on Buyer’s account to be settled by them with their Forwarders. Further all liability & responsibility to safeguard export consignment after receiving in CFS Entrance Gate till delivery at destination is on the Freight Forwarder/Consolidator who play the role of Buyer’s nominated person (Agent). In other words BGMEA Members are completely exonerated from any responsibility or liability from the point of physical handover of export consignment from the point of delivery at CFS Entrance Gate.  

Under the circumstances I would request our Member Industries to note:

a) Under “FCA” terms they are not affected or concerned with Charges or increase thereof after handover & beyond the Entrance Gate of CFS.

b) For such situations where major catastrophe of 600 containers carrying garments worth Taka 30 crores on “FOB” basis were damaged at Portlink CFS in Chittagong – under “FCA” our Member Industries will remain unaffected/exonorated - as the liability in that case after handover, will automatically come on Freight Forwarder/Consolidator’s shoulders.  
 

BGMEA’s efforts to protect Member Industries to this end chronologically 

BGMEA on 30th May 2009 vide their letter Ref # BGMEA/Cus/09/9861 made a detailed submission to the then Governor Bangladesh Bank seeking his intervention on gross violation of Incoterms in matters of “FOB” viz-a-viz “FCA”. The mainstay of BGMEA’s stand on this matter was that concept of in “FOB” had become obsolete & redundant in the backdrop of Bangladesh’s export shipment by bringing goods at Exporter’s cost alongside Conventional Vessel by the Exporters for Port to Port carriage. It was further submitted that with the advent of Containerization and adaptation of concepts like Multimodal Carriage, Consolidators/Freight Forwarders, Forwarders B/L or HAWB, Forwarders Cargo Receipt & introduction of CFS/ICD was cognized by ICC and as per ICC Publication 623 appropriate Incoterms “FCA” was universally apportioned in lieu of “FOB”. The pertinent features of Cost Responsibilities distributing/apportioning  various charges between Sellers (Exporters) & Buyers under said ICC Publication 623 for “FCA” compared to “FOB” is given below: 

 Bangladesh Bank fully endorse BGMEA’s submission & issues Circular 

** Bangladesh Bank found BGMEA’s submission extremely genuine/valid. Thus on 29th June 2009 under FE Circular No. 07 made it mandatory on all Authorized Dealers that for Export L/Cs that stipulate delivery (handover) of goods to Buyer’s nominated person (meaning Freight Forwarders/Consolidators) - should not be on “FOB” terms & as such Export L/Cs are required to be opened on “FCA” basis.

** Bangladesh Bank also recognized in said FE Circular that due to undue application of “FOB” term as oppose to “FCA” – Exporters were unnecessarily incurring extra expenses and exposed to undue risk.

** Thus in said Circular Authorized Dealers (ADs)were clearly instructed that in future they must exercise due diligence to ensure that Export L/Cs reflect appropriate Incoterms and if ADs found any Incoterm inconsistency in Export L/Cs, they should immediately inform to L/C Opening Bank to make necessary Amendment.  

I will not omit to acknowledge that BGMEA’s efforts to this end was supplemented & complimented by Mr. Mahbubur Rahman the then President of ICC Bangladesh Chapter and the then Chairman Chittagong Port Authority Cmdr. M. Faruk PSC, BN vide their various correspondences with Governor Bangladesh Bank.    

Reaction received by BGMEA after issue of Bangladesh Bank Circular 

Immediately upon publication of aforesaid Bangladesh Bank Circular & distribution thereof to our Member Industries & Associate Buyer Members of BGMEA, it was welcomed by most BGMEA Members. However BGMEA also observed the following: 

i)       The Freight Forwarders were extremely upset as the undue collection of charges that previously was made from our Member Industries, thereinafter required to be collected from their Principals (Buyers). Thus their selling point in terms of giving discounts on freight etc. at the cost of BGMEA Members was impeded by Bangladesh Bank’s Circular. 

ii)      Initial reaction of Buyers reflected manifestly their annoyance, but most of them settled down to Bangladesh Bank’s stipulations under the Circular since the same originated as per internationally accepted convention of ICC Incoterm.  

iii)     As a matter of tactics unusually resorted by some large multinationals in dealing with their third world Suppliers, pressure was mounted on BGMEA directly as well as through their various Suppliers to get this mandatory “FCA” incorporation waived & reinstate “FOB”. Technical grounds like global designing of Buyer’s Software having no scope for switch over from “FOB” to “FCA” was put forward to BGMEA & to a point that their business in Bangladesh may face imminent closure. Some Members even threatened BGMEA for consequences in such eventuality.  

iv)    The scheduled Banks for mysterious reasons has not been quite proactive (even today) to implement proper application of Incoterms as clearly stipulated under the Circular.  

v)     Some Members even requested BGMEA to make some room or scope to have “FOB” run side by side with “FCA”. 

BGMEA again inform Bangladesh Bank to strongly instruct ADs implement Circular  

Against the aforesaid circumstances, BGMEA vide their letter Ref # BGA/CUS/2010 dated 15^th February 2010 to Mr. Ziaul Hassan Siddiqui, Deputy Governor – 2, again sought intervention of Bangladesh Bank for issuing necessary directives to Authorized Dealers to rigorously implement FE Circular No. 07 of 29^th June 2009 and also requested to give necessary clarity & remove some confusion the ADs in field level were creating.  

BGMEA Members cooperation & support - a must to resolve such issues 

Dear Members – time and again in future, the Freight Forwarders or CFS Entrepreneurs will be tempted or apt to increase various charges particularly in a scenario where they can collect unduly or  unscrupulously from us the Exporters. Please understand that Freight Forwarders do not represent or protect us – they act as Buyer’s nominated agent & get business from & not us. As such they will have to think twice before increasing any Charge that their Patrons (Buyers) are required to pay when operating under “FCA” terms as it may mean loss of business for our Freight Forwarder friends.   

The International Chamber of Commerce under ICC Publication 623 has clearly stipulated Cost Responsibilities breakdown between Seller & Buyer as Incoterms shown above. ICC Publication 600 stipulates the ground rules for Letters of Credit opened to you by Buyers.  

Therefore, dear Members, unless we change our mind frame to support and insist compliance to Bangladesh Bank’s Circular No. 07 dated 29^th June 2009 issued to protect our interest and in adaptation of ICC Publication 623 operating globally – we will continue to face subject situation. We must be ourselves commercially disciplined in such matters & only then astronomical increase of various charges can be tackled & put at rest. We will no longer be required to run from pillar to post seeking help & remedy.  

In closing & going forward, dear Members, I would appeal to all of you to insist for “FCA” terms be it in Export L/C or Export Contract whenever freight is “on collect” basis and a Freight Forwarder is nominated by the Buyer. Please “help us to help you”.   

Wish you all – A Very Happy New Year.   

Yours sincerely, 

Md. Shafiul Islam

President