lighthouse - March 2020

Chairman’s Message

The year started with a bang and on such a positive note. Certain developments in the business realms and the world, in general, have shaken us to our very cores. The Australian bush fires ravaged the landscape of the island continent and opened our eyes to the brutal realities of climate change. Sustainability has always underscored every activity at CSS. We have laid great emphasis on environmentally sound practices from when we set sail 25 years ago. Growth is never by mere chance; it is the result of forces working together said the famous American entrepreneur and retailer, James Cash Penney. I foresee brighter days for the industry and our company as the year 2020 unfolds. We need to strive hard to achieve through synergistic working and innovation. I understand that CSS, as it stands today, is the result of many hands that have worked hard to build it from foundation up. We want to be part of a team that leaves a legacy and is remembered in the annals of this great organization that we have raised. As part of the team that is continuously breaking standards of excellence, we need to push ourselves outside our comfort zones. Growth never happens when we keep doing what we have done in the past; it comes with failures as we try to make progress. If you aim to achieve five great things this year and achieve only two, you are still outperforming all the people who never bothered to try to do anything at all. Next time you plan for your work ahead, evaluate your practice to include a “stretch goal.” Try to push yourself to perform 50% better than your existing goals. You will be surprised at reaching targets you thought were impossible! This is called a “growth mindset,” this sets the ones who achieve success from the ones who do not. When you have a growth mindset, you learn from anything by putting effort into it. If you fail, you approach the problem from another perspective until you arrive at a solution. No man is an island, so start supporting other people’s success. Celebrate with them, and when it’s your time to shine, they will exult in your moment with you. As a closing note, I want to leave you with this thought, “Expectation is the mother of manifestation.” So keep your hopes high and let your spirits soar as we surge towards a highly successful leg of the journey we embarked on in the year 1995.

CSS TAKES PART IN THE 25TH NATIONAL CHAMBER OF EXPORTERS AGM MEETING IN COLOMBO, SRI LANKA

The National Chamber of Exporters of Sri Lanka (NCE), the only private sector Chamber which exclusively serves Sri Lankan exporters, conducted its 25th Annual General Meeting (AGM) for 2020 on 28th January in the Grand Ballroom at the Hotel Galadari in Colombo. As a special invitee, we introduced CSS Colombo as a new NVOCC in Sri Lanka.

The NCE represents the interests of a broad spectrum of stakeholders in the export sector and performs as a platform to address various issues and make representations to the concerned government authorities. The NCE works together with the exporter community in Sri Lanka to facilitate and achieve the national economic developments in exports for the island nation of Sri Lanka.

The chamber functions as a voice of the exporter community, serving more than 500 Sri Lankan exporters. The members vary from export-oriented enterprises across all product sectors and most services sectors, as well as service providers to exporters. From the leading export houses to small and medium-sized enterprises, the chamber promotes the interests of the exporter community, and it is today known in the exporter circles as the ‘Voice of the Exporter’ in Sri Lanka.

Sri Lanka is the hotbed and the center of attention in the competition between China, India, and the United States to conquer the Indian Ocean. All three countries have their agendas and priorities for this region. Sri Lanka’s strategic location in the east-west corridor gains geopolitical eminence, thereby playing a vital role in the game of dominance between these three nations.

“Whoever controls the Indian Ocean will dominate Asia… the destiny of the world will be decided on its waters”, said Alfred Thayer Mahan, a United States naval officer who was known as the most famous American strategist of the nineteenth century.

The island republic of Sri Lanka stands at the cusp of being thrust into a position of global prominence. Maritime trade is at an all-time high, and Sri Lanka has all the advantages to serve as the trading nerve center facilitating maritime transactions as part of a broader Sea Lines of Communications Matrix.

Besides the Chinese Belt and Road Initiative and America’s established maritime presence in South Asia, Sri Lanka’s littoral position holds immense potential. India, USA, and China are actively seeking a Sri Lankan alliance to strengthen their position in the Indian Ocean. With the political unrest in the Middle East and new security commitments, countries have been seeking alternative sea lanes near Sri Lanka.

USA: With China exerting control over Chabahar in the Gulf of Oman, Gawadar in Pakistan, Colombo, and Hambantota in Sri Lanka, USA is wary of China’s growing dominance and control over global trade. The US is strengthening its maritime arrangement in Diego Garcia to incentivize Sri Lanka to a mutually agreeable position.

India: Both India and China have constructed maritime outposts to secure their economic interests. With the increasing Chinese dominance over the Indian Ocean, India’s position is being challenged. To safeguard its SLOCs to the Middle East, which is used to supply oil and energy, India has several development projects in Sri Lanka to counter the Chinese bid for power. The Trincomalee port can be seen as a counteraction against the China-funded Hambantota port.

China: China is fully aware of the strategic position that Sri Lanka enjoys, being a natural corridor between the East and the West. Security of sea lines of communication (SLOC) is also directly linked to Sri Lanka, which is very important for China to establish its roots in the Indian Ocean.

The busiest East-West shipping route is just ten nautical miles south of Lanka. This nautical corridor accounts for almost half of the world’s container traffic, one-third of bulk cargo movements, and 80% of the global petroleum supply. International maritime trade can be hugely affected even if there is a slight disturbance at the southern tip of Sri Lanka.

For the island republic of Sri Lanka, this position lends immense opportunity as well dilemma. Whether Sri Lanka will play it neutral or align with any of these countries will determine who will emerge the winner in this battle for dominance.

CSS TO IMPLEMENT VIDEO SURVEILLANCE AS A SOLUTION BY ETISALAT

CSS’s top management team met with Etisalat for the initial discussions to implement the Etisalat Video Surveillance as a Solution (VSAAS) along with a Smart Messaging Platform. Etisalat Video Surveillance as a Solution provides business enterprises with value-added services that address their security and regulatory compliance requirements.

Enabled by the state-of-the-art onsite video surveillance technology that will be deployed at CSS, Etisalat can proactively use, manage, troubleshoot, and support this solution. Hamad Mohammed Al Marzooqi, VP of Etisalat Managed SMB, Khalid M Yateem, Director of Etisalat Managed SMB and Jithesh Vijakumar, Sales Manager, Etisalat attended the meeting, along with the CSS team, which included Chandrakala, Krishna Kaladharan, Susanth Shekar, Pothen Thomas, and Arun Snehajan. A visit to the Innovation Center has also been scheduled for the near future.

The first-of-its-kind video surveillance solution in the UAE, this one-stop solution, is for all our video surveillance needs. From end-to-end managed services, security surveillance with analytics, web and mobile access, business intelligence and upgradable cloud storage, other features include end to end managed services, heat maps, people counting, a security system, and a queuing management solution.

Enabling this solution at the CSS office premises will help us manage our business more efficiently while increasing our business productivity. This partnership resounds with Etisalat’s tagline, which says, ‘Your business grows with us.’ Enabling this solution will increase the safety and security of our premises, resources, and assets and allow us to optimize our operations.

MIDDLE EAST BUSINESSES MUST ADOPT NEW TECHNOLOGIES IN RESPONSE TO SUPPLY CHAIN RISKS

At the Procurement and Supply Chain MENA Forum, the industry leaders highlighted that businesses in the Middle East could become among the most competitive in the world by taking a bold approach to their procurement and supply chain strategies.

Sam Achampong, head of the Chartered Institute of Procurement and Supply (CIPS) MENA, stressed that forward-thinking companies should look to their procurement and supply chain strategies as a key differentiator. In his keynote address on the topic, What Future Procurement Leaders Look Like, he said: “The application of comprehensive procurement and supply chain strategies can add real value to all aspects of a business including profitability, accountability, reputation, sustainability, and corporate governance.”

He explained that organizations in the MENA region had undertaken procurement transformation exercises which in time allow these entities to become more competitive, not just regionally, but globally.

Maha Bouzeid, VP Head of Sourcing in the MEA region for Ericsson, reiterated Achampong’s belief in the potential of the procurement strategy to support business transformation and competitiveness. She said: “Organizations are on a constant search to find even more efficiencies and increase their top-line growth. Procurement has an important role to play in both cases by securing the right cost base and by building the partner ecosystem to deliver on new solutions in the Industry 4.0 era. We need the know-how of all the different players in the industry to enable innovation, create new use cases to fulfill rising customer demands, and monetize these for the benefit of all.”

Achampong and Bouzeid emphasized that the procurement sector needs to invest in skills development to achieve its potential and be a driver for business change. “Traditional skills, such as negotiation, and administrative skills, such as planning and coordination, are being replaced by the need for critical thinking skills and complex problem solving, aligned with emotional intelligence centered around stakeholder management and influencing skills,” said Achampong.

“For procurement leaders to be effective, they need to be able to convince their key C-Level stakeholders to adopt recommended strategies aimed at aiding business growth and increasing value for the organization. Those unable to align with their stakeholders will not be able to lead the transformation of their functions from a transactional cost center to a strategic net contributor to an organization’s overall value.”

Bouzeid added: “Competence is key – procurement needs to attract the best talents in the industry with a solid understanding of the procured solution and the cost drivers for these. Businesses need people who are strong influencers, who can guide stakeholders through the decision-making process and who can be efficient negotiators. “We need to lead the way in terms of digital transformation – we can work heavily on automation to reduce manual, tactical tasks. If we can effectively do this transformation, the added value we provide will be significant.”

Procurement & Supply Chain MENA, in partnership with CIPS MENA, gathered heads of procurement & supply chain to share big picture, business-led strategies on how not only to guarantee supply during industry flux but become a key value driver, innovator and business partner for any organisation.

THE RECYCLING OF SHIPS ACT, 2019: TOWARDS AN ENVIRONMENT FRIENDLY AND SAFE SHIP RECYCLING IN INDIA

Shipbreaking or ship recycling is defined as one of the most hazardous jobs in the world by the International Labour Organisation (ILO). It is the process by which old ships and vessels are taken apart, dismantled, and its components are recycled. As observed by the International Maritime Organisation, the ship recycling process is most productive as nothing from a dismantled ship goes into waste. The equipment and components of a recycled ship can be reused in its entirety in other industries. If done efficiently and economically friendly, it can be turned into a green business by using the recycled components for even building new ships. The darker side of ship breaking is that it creates a variety of pollutions, including air, land, water, and noise due to the generation of hazardous and non-hazardous wastes. As most of the works are done manually, it also leads to many occupational hazards to the manual workers if the working conditions are substandard and not in compliance with international safety standards.

India is in the frontline among the countries that are engaged mainly in the business of ship breaking. Apart from India, South Asian countries like Bangladesh, China, and Pakistan also give massive competition in the ship breaking industry. The ship owners mostly choose these countries due to the relaxed environment regulations and labor standards followed by the Countries in this industry.

Joy Thattil

Maritime Lawyer & Partner @ Callidus

Dubai, Singapore & India

joy@calliduscmc.com

In India, the condition was no different since the Central Government announced the ship breaking industry as a small scale industry. The business started to flourish under minimal regulations concerning environmental protection and labor standards.

The Supreme Court decision in Research Foundation for Science, Technology and Natural Resource Policy v. Union of India (2007) 15 SCC 193, provided an impetus to the legal framework governing ship recycling in India. According to the directions put forth by the Supreme Court in this case, the Central Government formulated the Shipbreaking Code in 2013, providing a comprehensive scheme for regulating shipbreaking in India. But the Code failed to address many provisions contained in the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009, adopted by the International Maritime Organisation. This Convention ensures that ships, when being recycled after the end of their operational lives, do not pose any unnecessary risk to the environment and human health and safety. The Convention details out the procedure to be followed for the survey and certification of ships as well as for the authorization of ship-recycling facilities.

Realising the need for an inclusive legislation on ship recycling, the Indian legislature enacted the ‘The Recycling of Ships Act, 2019’, and on December 13, 2019, the Act came into force after receiving the assent of the President. This Act is an attempt to bring about an environment-friendly shipbreaking practice in India. The object of the Act is to provide for the regulation of recycling of ships by setting certain standards and laying down the statutory mechanism for enforcement of such standards.

The Recycling of Ships Act, 2019, is in tune with the Hong Kong Convention in many aspects, and the Act restricts and prohibits the use or installation of hazardous materials, which is uniformly applicable to all ships in India, irrespective of whether a ship is meant for recycling or not. For new ships, such restriction or prohibition on the use of hazardous materials will be immediate, that is, from the date the legislation came into force. In contrast, the existing ships shall have a period of five years for compliance. However, such a restriction or prohibition on the use of hazardous materials does not apply to warships and non-commercial ships operated by Government.

Under this Act, ship recycling facilities are required to be authorized, and ships shall be recycled only in such authorized ship recycling facilities. This Act also provides that ships shall be recycled following a ship-specific recycling plan. Ships to be recycled in India shall be required to obtain a ‘Ready for Recycling Certificate’ under the Hong Kong Convention.

The Act also imposes a statutory duty on ship recyclers to ensure safe and environmentally sound removal and management of hazardous wastes from ships. Appropriate penal provisions have been introduced in the Act to deter any violation of statutory provisions.

India, being the global leader in ship breaking, aims at boosting its economy as well as the ship recycling industry through the enactment of this legislation by bringing about an environment and labor-friendly regulatory mechanism in the ship breaking process.

TWELVE INDIA GOVERNMENT-OWNED PORTS SWITCH TO RENEWABLE ENERGY

Twelve government-owned major ports in India have moved to renewable energy sources for their power. The twelve ports are Deendayal Port Trust, Mumbai Port Trust, Jawaharlal Nehru Port Trust, New Mangalore Port Trust, Mormugao Port Trust, Cochin Port Trust, Chennai Port Trust, VO Chidambaranar Port Trust, Visakhapatnam Port Trust, Paradip Port Trust, Kolkata Port Trust, and Kamarajar Port Ltd. This landmark move makes India the first country to have all state-owned ports powered by solar and wind energy.

Following the directive issued under the Shipping Ministry’s green initiative, the ports had to install grid-connected and roof-top solar and wind power projects to run the day-to-day operations, including supplying shore-power to visiting ships in an eco-friendly manner.

Also called cold ironing or alternative maritime power, shore power allows docked ships to work their electrical systems using shore-side power and to switch off their auxiliary engines. Shore power works in reducing emissions and cutting operational costs for shipping companies. It also allows shipping companies to meet emission targets, especially those related to emission control areas.

The emissions from ships at berth are estimated to be ten times more than the port’s operations. Ships consume a large amount of power even though they are not propelling, and running the fuel-powered generators result in noise pollution and emissions. The shore-side power supply is environment-friendly, and all the major Indian ports have developed the necessary infrastructure to power all types of vessels when they are berthed at these ports.

Renewable energy also enables ports to bring down their energy costs, thereby bringing down operational costs, finally lowering shipping and cargo levies. India’s maritime governing body has framed the operating procedures (SOP) for shore electric power supply to ships in Indian ports that presently cover only a low power supply – up to 150 kW at low voltage. However, they will issue the new SOP when the high voltage supply is ready at the ports.

DUBAI LAUNCHES WORLD LOGISTICS PASSPORT AS PART OF THE DUBAI SILK ROAD STRATEGY

Dubai has launched the World Logistics Passport as part of the implementation of the first phase of the Dubai Silk Road strategy. To boost the role of the Dubai Silk Road strategy, it seeks to enhance the demand for Dubai’s products and services and integrated transportation systems. It also gives further impetus to the growing role played by Dubai Customs in regional and international trade.

Offering a set of special operational and financial advantages, the World Logistics Passport will connect key government bodies with logistics service providers. It can prove to be advantageous for businesses and shipping companies by facilitating commercial transactions with government entities like Dubai Customs and Dubai Trade.

Crown Prince of Dubai and Chairman of the Dubai Executive Council, Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum has emphasized that the Dubai Silk Road strategy will spur economic growth which will further strengthen Dubai’s position as a global economic and business hub, powered by its exceptional connectivity and logistics services. The Dubai Silk Road strategy also offers state-of-the-art logistics services using the latest smart applications.

Sheikh Ahmed bin Saeed Al Maktoum, President of Dubai Civil Aviation Authority, reiterated, “Dubai’s sophisticated logistics services will further enhance its value offering for investors and businesses by saving time and effort and reducing their operational costs. This is a powerful tool that will eventually lead to increased revenues. We are keen to offer investors and businesses new advantages in conducting global trade.”

76 PARTICIPATING COUNTRIES AGREE TO DIGITALIZE CROSS BORDER CUSTOMS UNDER UNITED NATIONS TIR CONVENTION

On February 5, 2020, the 76 nations under the TIR Convention of the United Nations have unanimously agreed to digitalize its operations (eTIR) under the global customs transit system. This momentous decision will facilitate trade and the seamless movement of goods across borders.

Olga Algayerova, executive secretary, United Nations Economic Commission for Europe (UNECE) said, “The adoption of eTIR, which is the result of over 20 years of negotiations, marks a new chapter in the TIR Convention’s 70-year evolution. With more and more countries joining the convention in recent years, including major economies like China, India, and several countries in the Middle East, this important step will help to harness trade and connectivity as drivers of sustainable development.”

What is TIR?

A multilateral customs treaty among world nations, the TIR (Transports Internationaux Routiers or International Road Transport) Convention came into effect on March 20, 1978. The treaty signed by 76 countries aims to simplify and harmonize the governmental procedures of international road transport. The TIR Convention’s framework allows 1 to 3.5 million truck trips to cross borders as quickly and efficiently as possible, every year.

Today, the TIR system is used by more than 34,000 transport and logistics companies across 76 participating countries and led to an up to 80% reduction in transportation time and 38% cut in transporting costs. The digitization of the TIR procedures will further improve efficiency.

 

eTIR Test runs in Iran, Turkey, Georgia, Azerbaijan, Kazakhstan, and Ukraine

Since 2017, several of the TIR contracting countries have been implementing a series of eTIR pilot projects. Besides the currently functioning ones between Iran and Turkey, and Georgia and Turkey, there are others in the pipeline like the eTIR intermodal project between Azerbaijan, Georgia, Kazakhstan, and Ukraine and the eTIR project between Azerbaijan and Iran.

 

eTIR in intermodal transport

Paperwork for intermodal transport has proved to be thoroughly cumbersome under the current TIR system. The eTIR is expected to open new applications for the TIR system, especially in the area of intermodal transportation. This new amendment will also secure the TIR system for all customs administrations using it.

 

Reduced trade transaction cost

The TIR system ensures the payment of customs duties and taxes by providing a guarantee mechanism. This has led to a reduction in trade transaction costs, thereby furthering intra and inter-regional trade.

Requiring only minimal manpower and facilities from customs and national authorities, the system significantly reduces transit delays and congestion at border crossings.

CORONAVIRUS AND ITS IMPACT ON THE GLOBAL SUPPLY CHAIN

The news splashed on the front pages of newspapers all over the world is the Wuhan novel coronavirus and alarming rise of its death toll. Reports of confirmed coronavirus cases are coming from all corners of the globe every day, and the disease has taken the scale of a global pandemic.

The coronavirus has closed the doors to China and has put a severe strain on the global economy.  There has been upheaval and disruption in worldwide businesses and supply chains, depressing asset prices. All this has forced multinational companies to make hard decisions with limited information.

Most of all, the impact on the trading, logistics, and shipping industry worldwide due to the widespread coronavirus is quite significant. From the travel bans both in and out of China to a shutdown of production in Chinese factories and global fall in oil prices to a severe slump in China-bound imports, the impact has been stupendous.

The scale of this pandemic has been such that nobody can draw a timeline on how long the quarantine will last and when it will get back to being business as usual.

The industrial city of Wuhan

Wuhan, an inland city about 500 miles from the capital city Shanghai, has grown to be an industrial hub. Wuhan is also home to China’s burgeoning steel industry.  A manufacturing center for global giants like Nissan, Honda, and GM, it also functions as a corporate hub for companies including IBM, HABC, Honeywell, Siemens, and Walmart. The economy of Wuhan has exploded in recent years due to lower living and housing costs and easy availability of labor. Part of your supply chain may originate or pass through Wuhan for manufacturing, assembly, or finishing. It is but natural to expect severe shortages, delays in materials sourced or manufactured in Wuhan.

The risk to your supply chain

Since no one can predict the length of the Wuhan shutdown, your global supply chain for raw materials or finished goods stands at risk.

The impact on supply chains will largely depend on the following factors

  • How long businesses remain closed
  • The extent to which supply chains have been effected
  • Companies and logistics service providers take precautionary measures

Freight volumes, activity levels, processes, and volumes will be impacted to varying degrees. But as always, supply chains do adapt and adjust to the demands of the situation to ensure that freight movements happen unhindered.

Alternate plans

It is in a crisis of such a scale that one realizes the need for alternative sourcing and manufacturing strategies. Many countries have started looking beyond China already and have discovered other Asian manufacturing hubs. The coronavirus is but a rude wakeup call for supply chain service providers to have sourcing and manufacturing hubs in various geographical locations spread across the globe as contingency plans in the case of natural or political upheavals.

China might be back in business in the next few weeks, which might even extend to a month or more. Shippers and logistics service providers should continue to watch how long the gridlock on China will continue and then develop remedial plans to surmount this crisis.

INDIAN GOVERNMENT TO UNVEIL A NEW NATIONAL LOGISTICS POLICY

Nirmala Sitharaman, the Finance Minister of India, declared in her Budget 2020 speech that the government will soon roll out a national logistics policy. The policy will help in clarifying the roles of Centre, states, and key regulators in logistics. The policy also envisages the creation of a single-window e-logistics marketplace, which facilitates the creation of new jobs, new skill sets, and making MSMEs more productive. A one-stop platform for exporters and importers, the e-logistics marketplace will promote the seamless movement of goods across the country.

Being drawn out by the logistics division under the Commerce Ministry, the policy garners significance as the high cost of logistics within the Indian market impacts the competitiveness of India-made products in global markets. If implemented correctly, the policy will provide a significant boost to cross-border trade and improve export competitiveness, thereby improving India’s ranking in the Logistics Performance Index. The Ministry of Commerce also stated the highly defragmented nature of India’s logistics sector. By 2022, the policy aims to significantly reduce the logistics cost from the current 14% of GDP (Gross Domestic Product) to less than 10%.

With 200 shipping agencies, 36 logistics services providers, 129 ICDs (inland container depots), 168 CFSs (Container Freight Stations), 50 IT ecosystems and banks and insurance agencies, the Indian logistics industry is a behemoth, providing jobs to more than 22 million people across the country. Streamlining the operations of this humongous sector will lead to a 5-8% increase in exports. With the logistics market in India slated to be around $215 billion by the year 2022, an incredible jump from the current $160 billion, the policy will pave the way to making India into a logistics hub.