He said: "There are two ways of misusing this facility, the easiest being to misdeclare the destination. This entails filing export documentation for a West African country and issuing bills of lading for that country and once the ship has sailed to divert it to a country to which the freight subsidy does not apply."
He said that the solution to malady is very simple: All the Export Promotion Bureau (EPB) has to do is to ask the exporter to provide a destination certificate from the port or the customs authorities in the country of importation. This document will conclusively prove where the ship actually discharged its cargo and this will put a stop to misdeclaration.
The other way of misusing the freight subsidy facility is to inflate the freight rate actually paid. Some exporters are selling their rice on a FOB basis. Since the freight subsidy does not apply to exports in bulk on a FOB basis, the exporter gets around this by asking his buyer to charter a vessel and then convert the contract to C & F basis. The exporter then asks his buyer to establish a letter of credit on a C & F basis and undertakes to remit the freight back to the buyer as soon as the ship sails.
Once the ship sails, the exporter submits a claim for the freight subsidy to the EPB and it is here that the misuse becomes apparent. For example, in a recent case, two leading exporters have claimed that freight paid is US $90.00 per metric ton on a 19,000 metric ton shipment to West Africa.
This is obviously a ridiculous figure as it is well known that the current freight costs to West Africa are ranging from US $68 - US $72 per metric ton depending upon the final destination. Here again it is very simple for the EPB to determine what the actual freight paid was. They ask the exporter to provide documentation supporting their claim.
THESE DOCUMENTS SHOULD BE:
-- A copy of the charter party, which should show that the exporter is the actual chatterer of the ship. The charter party agreement will also contain the actual freight rate to be paid.
-- A copy of the bank's remittance advice or payment instrument showing to whom the freight was paid and the actual amount of freight paid.
By definition, the freight on a cargo is the amount of money paid to the ship-owner for transporting the cargo to its destination. Thus it follows that any freight subsidy should be paid to an exporter on that amount only, it should not include other 'ancillary' charges ie, discharge port disbursements, discharging costs, crew expenses, etc, that are commonly being claimed by exporters in order to inflate their claims.
The EPB can also simply seek the advice of Pakistan National Shipping Corporation (PNSC) in order to determine what prevailing freight rates are - more so as PNSC are regularly sending their ships to West Africa.
Once the exporters, who are misusing the subsidy facility are identified and dealt with then those exporters who file genuine claims will be able to receive the subsidy without having to wait as the EPB will be confident that these claims are indeed genuine.
This will also provide a level playing field and the genuine exporters will be able to compete with those who are trying to defraud the government.