Chittagong port: Increased surcharges may trigger price hike

Ignoring users’ objections, the new additional tariff at Chittagong port will come into effect after midnight next Tuesday. The new tariff has been increased by nearly 41 per cent. Review of various studies shows that once implemented, Chittagong port will become a high-cost port in the region.

Right before handing over four major container terminals to foreign operators, the government has taken steps to increase port tariffs. A large portion of the port fees will be directly collected by the foreign operators.

The project’s transaction advisor, International Finance Corporation (IFC), an affiliate of the World Bank Group, stated in its report last April that the existing tariff structure is insufficient to attract private investment. It was mainly after this that the move to raise port tariffs gained momentum, which will take effect next Tuesday.

Experts say that port tariff increases will lead to a proportional rise in costs. Shipping companies have already started raising charges step by step to pass on the additional port expenses, and traders are expected to pass on these extra costs as well.

Economist professor Anu Muhammad told Prothom Alo that the port tariff increase is not aimed at enhancing the port’s capacity but to benefit foreign companies. He said this move is being implemented based on advice from multinational firms, including the International Finance Corporation. The rise in port tariffs will hurt the country’s economy in multiple ways: import costs will increase, which consumers will have to bear, leading to higher inflation.

Amid objections from traders and users, the new port tariff was gazetted on 14 September. According to the notification, tariffs have increased by an average of 41 per cent compared with previous rates. Container transport costs saw the highest rise.

A review of the audited accounts for the 2023–24 fiscal year shows that, on average, an additional charge of around USD 39 (Tk 4,395) has been applied per 20-foot container. Most of this fee will be collected from shipping lines, while importers and exporters will pay a portion. Shipping lines will recover the extra cost from importers and exporters, who will then pass it on to the product prices.

Based on discussions with stakeholders, the additional cost due to the port tariff increase has been calculated. Reviewing the audited accounts for the 2023–24 fiscal, it is found that total charges per standard container will rise by Tk 4,395, equivalent to USD 39 at that fiscal’s exchange rate. However, the extra cost per 20-foot box container is expected to be around USD 60.

The government’s explanation for the tariff increase is that port charges have not been significantly raised since 1986. In 2007 and 2008, tariffs were increased in five sectors. Shipping adviser Sakhawat Hossain has also stated on several occasions that the increase was made after discussions with traders and that, even now, the charges remain lower than those at many international ports.

Due to the increased tariff raising port costs, shipping lines have now also started announcing higher surcharges than the port. Most recently, last Friday, Denmark-based leading shipping company Maersk Line announced a rate hike. The port authority, citing the tariff increase, informed online that the company’s costs have risen and the new rates will apply.

According to Maersk Line’s announcement, the company previously charged USD 120 as terminal handling charge (THC) for a 20-foot container. From next Wednesday, the charge will rise to USD 165, an increase of USD 45 per container. For a 40-foot container, the charge has increased from USD 205 to USD 310. The company said the new rates will take effect from Wednesday, the day the port tariff comes into force.

Earlier, on 7 October, three lines—CMA CGM, CNC, and ANL—announced an additional surcharge of USD 45 on 20-foot containers, effective from 26 October. According to port data, these four shipping lines have handled 36 per cent of total containers in the first seven months of the current fiscal. Other shipping companies operating through Chittagong Port are also expected to raise charges gradually, sources said.

In a 2024 survey, the IFC compared port and terminal charges across 14 ports in seven countries: Bangladesh, India, Sri Lanka, Malaysia, Myanmar, Vietnam, and Cambodia. A review conducted last March, before the port tariffs were increased, showed that ten regional ports or terminals had lower charges than Chittagong Port, while three had higher charges.

For example, the average handling and storage charge at Chittagong Port for each box container (20- or 40-foot) was USD 126.66. This charge was lower only than that at South Asia Gateway Terminal (SAGT) in Sri Lanka, Myanmar International Terminals Thilawa (MITT), and APM Terminals Pipavav in India.

However, Chittagong Port’s charges were higher than those at ten other ports, including Phnom Penh in Cambodia, Laem Chabang International Terminal in Thailand, Tanjung Pelepas in Malaysia, and Vietnam International Container Terminal in Ho Chi Minh City, which are competitors in the garment industry.

According to IFC’s survey, once the new tariff is implemented, the cost per box container at Chittagong Port will rise to around USD 186. This means Chittagong’s charges will be higher than those at 13 other ports, with only Sri Lanka’s South Asia Gateway Terminal being lower. In other words, Chittagong Port will become the second most expensive port in the region.

Fayaz Khandakar, former president of the Bangladesh Container Shipping Association and managing director of Japan-based Ocean Network Express (ONE) Line, told Prothom Alo that for most of the year, congestion at the port had already increased costs. Previously, shipping agents could absorb these expenses because the port tariff was low. Now, with the tariff increase, the port will become even more expensive, and there is no alternative but to pass these costs on to importers and exporters.

Goods are imported and exported either directly in containers or in loose/bagged form. With the tariff increase, costs will rise more for containerised goods, while expenses for loose or bagged items will increase comparatively less. Raw materials for several industries—including fuel, cement, steel, and ceramics—and some consumables like oil, sugar, and wheat are imported in loose or bagged form. Nearly all other products are transported in containers, so the container tariff hike will mainly affect production-oriented industries, consumables, and commercial goods.

Of the country’s three seaports, 99 per cent of containerised cargo passes through Chittagong port. As a result, this tariff increase will affect the import–export sector across the country.

Asked about the potential impact, Mohammad Abdus Salam, managing director of exporter Asian-Duff Group, told Prothom Alo that the higher tariff will raise production costs. While part of it may be passed on to buyers in the export sector, ultimately it will be reflected in product prices. Foreign buyers will be unwilling to pay extra, meaning exporters will have to bear the burden. If exporters are affected, garment orders may not be secured. Compared to competitor countries in the garment sector, a more expensive Chittagong port could backfire on exports.

Last year, Chittagong Port’s Patenga Terminal was handed over to Saudi Arabia’s Red Sea Gateway International. Currently, the operating New Mooring Container Terminal is managed by DP World of the UAE, Laldia Container Terminal by APM Terminals of the Netherlands, a partner of Denmark’s Maersk Line, and one of the two Bay Terminal projects will be handed over to Singapore-based PSA International and DP World of the UAE. Within the next two months, the government has nearly finalised handing over Laldia and New Mooring terminals to foreign operators.

It is observed that except for the dilapidated GCB Terminal and the small Chittagong Container Terminal at the two jetties, all other terminals are being handed over to foreigners. As per regulations, when foreigners take charge, the bulk of terminal tariffs will go to the foreign operators. The port will receive a certain portion from them, determined through negotiation.

Asked about the impact, Amirul Haque, managing director of Seacom Group, which is involved in the trade of consumer goods, cement, and LPG, told Prothom Alo that the sudden 41 per cent tariff hike will sharply increase business costs. Shipping agents or traders will add this extra cost to product prices, meaning consumers will ultimately bear an even higher burden than the increase imposed by the port.