CONTAINER FREIGHT STATIONS

[Mr. M. GOVINDARAJAN]

Container Freight Stations – dry ports

Container Freight Stations (‘CFSs’ for short) also known as dry ports are multimodal logistics centers with public authority status under Customs.  They are connected to a seaport either by rail or road and serve as a transshipment point for export and import cargo.  In addition to being transshipment points, they offer services for handling and temporary storage of export/import laden and empty containers, warehousing, temporary admissions, re-export.  CFS is an off dock facility located near the serving ports which helps in decongesting the port by shifting cargo and customs related activities outside the port area.  They provide much needed logistics infrastructure for movement of containerized cargo for imports and exports. 

Privatization

Pursuant to the policy decision taken vide Circular No. 128/95-Cus dated 14th December, 1995, operation of CFSs was opened to private sector. This was done to involve private sector in infrastructure development and to overcome congestion at the gateway ports arising from growth in business on account of widespread industrialization and economic growth. In order to decongest existing ports and cities, CFSs were to be opened in the interior parts of the country. Government wanted CFSs to be established across length and breadth of the country to encourage foreign trade and exports by facilitating custom clearance of goods at multiple points. These stations were to offer all services including custom clearance like any other port. Intention was to bring import and export facilities to the doorstep of the business community right across the country.

Applications and proposals for setting up the CFSs by private or public sector required clearance from Inter-Ministerial Committee, which was given on the basis of recommendations of the jurisdictional Commissioner, who would first examine applications/proposals received on parameters stated in the guidelines. On clearance, letters of intent were issued and thereupon, the operator was required to set up infrastructure within the prescribed time. Jurisdictional Commissioner of Customs, on being satisfied that required infrastructure was in place, would then issue a notification under Section 8 of the Customs Act, 1962 (Act, for short), approving the concerned CFSs. Operators of the said CFSs were thereupon appointed as custodians under section 45 of the Act. Such appointment was conditional upon the operators furnishing an undertaking in terms of the Circular dated 14th December, 1995 for bearing the costs of the custom staff posted in the CFCs.

Customs officers in CFSs

 Customs personnel posted at the CFSs were responsible for customs clearance for exports and imports of goods through the CFSs.

Statistics on CFS

There were 168 CFSs in the Country out of which Tamil Nadu had the highest number (50) followed by Maharashtra (48) and Rajasthan (24).

Prior survey

For the CFSs to be successful, reduction in total transport cost is a prime criterion, as there is a possibility of marginal increase in total handling cost per box on origin to destination basis. This underlines the need for sound economic justification for setting up CFS through a carefully evaluated traffic likely to be handled at the proposed facility. A survey/feasibility study must precede the setting up of all CFSs.  A copy of the report should invariably accompany the application for setting up such a facility. Data for carrying out analysis could be from secondary sources and field observations, structured over time and space. The latter is more realistic and truthful. Prior discussions must be held with exporters, shipping lines, freight forwarders, port authorities, concerned Commissioners of Customs/Excise etc., and their point of view fully reflected in the report.

In-principle approval by Jurisdictional Customs Commissioner:

Before making any investment and submitting the application online, the applicant should obtain an “in-principle” approval from the Jurisdictional Customs Commissioner regarding the feasibility of the proposed facility and furnish it along with the application.

The traffic flows between Inland centers of production and ports need to be analyzed with reference to-

• Commodities;
• Directional-split (Imports/Exports);
• Proportions of less-than-container load (LCL) & full-container-load (FCL);
• Forecast of future growth.
• Modes of transport available.
• Possible reduction in tonne per kilometer or
• Box per kilometer costs.

The facility has to be economically viable for the management and attractive to users, to the railways for full train load movements; to other transport operators; seaports; shipping lines; freight forwarders etc. must have certain minimum amount of traffic. The prospective entrepreneurs are, therefore, strongly advised to study very carefully the viability of the project from the TEU traffic availability point of view.

In the background of growing international trade, the infrastructure facility may have to precede the actual generation of demand. This is particularly important as such facilities have a long gestation period for being fully operationalised. Though it is not proposed to lay down any minimum TEU figures as part of the criteria for approval of CFSs, following are suggested indicative norms: -

• For CFS – 1,000 TEUs per year (Two way)

Land requirements

The minimum area requirement for a CFS would be One Hectare, meters of covered area for imports and exports. However, a proposal could also be considered having less area on consideration of technological upgradation and other peculiar features justifying such a deviation.

Design and lay out

The design and layout should be the most modern state-of-art equipped with mechanical/electrical facilities of international standards. Key to a good lay-out is the smooth flow of containers, cargo and vehicles through the CFS. The design and layout should take into account initial volume of business, estimated volume in 10 years’ horizon and the type of facilities exporters would require. The initial lay out should be capable of adaptation to changing circumstances. The design broadly should encompass features like (rail) siding, container yard, gate house and security features, boundary wall (fencing), roads, pavements, office building and public amenities. The track length and number of tracks should be adequate to handle rakes and for stabling trains where relevant.

The perimeter fencing and lighting must meet the standards required by Customs authorities. The gate being the focal point of site security should be properly planned.

The administration building is the focal point of production and processing of all documentation relating to handling of cargo and containers and its size will be determined by the needs of potential occupants. Fixed provisions should be made for sanitation facilities and possibly a food service facility.

Infrastructure

A good communication system and computerization and EDI connectivity is essential. Following Infrastructure should be available at the CFSs

• Provision of standard pavement for heavy duty equipment for use in the operational and stacking area of the terminal. In cases where only chassis operation is to be performed, the pavement standard could be limited to that of a highway.
• Office building for ICD, Customs office and a separate block for user agencies equipped with basic facilities.
• Warehousing facility, separately for exports and imports and long term storage of bonded cargo.
• Gate Complex with separate entry and exit.
• Adequate parking space for vehicles awaiting entry to the terminal.
• Boundary wall according to standards specified by Customs.
• Internal roads for service and circulating areas.
• Electronic weighbridge
• Computerized processing of documents with capability of being linked to EDI.

Equipping the CFS

The CFS would select most modern handling equipment for loading, unloading of containers from rail flats, chassis, their stacking, movement, cargo handling, stuffing / destuffing, etc. Following minimum equipment should be made available at CFSs (Reach stacker may not be mandatory:

• Dedicated equipment such as lift truck (front end loader, side loader or reach stacker), straddle carrier, rail mounted yard gantry crane, rubber tyred yard gantry crane, etc. of reputed make and in good working condition (not more than 5 to 8 years old) and equipped with a telescopic spreader for handling the 20 ft and 40 ft boxes. The equipment must have a minimum residual life of 8 years duly certified by the manufacturer or a recognized inspection agency. An additional unit of equipment should be provided when the throughput exceeds 8000 TEUs per annum or its multiples for lift truck based operations.
• Terminals resorting to purely chassis-based operations do not require dedicated box handling equipment. However, chassis-based operations should be restricted to CFSs proposed to be set up near ports.
• Small capacity (2 to 5 tonnes) forklifts must be provided for cargo handling operations in all terminals.
• Equipment in respect of AFS shall be as indicated in the detailed guidelines for AFS as issued by Ministry of Civil Aviation.

Tariff

Tariff structure and costing should be worked out along with the feasibility study and information provided with the application.

General

The main function of a CFS being receipt, dispatch and clearance of containerized / palletized cargo, the need for an up-to-date inventory control and tracking system to locate containers / cargo is paramount. Each functional unit of the facility (e.g. siding, container yard gate, stuffing/destuffing area, etc.) should have up-to-date and where possible on-line, real time information about all the containers, etc., to meet the requirements of customers, administration, railways etc. As far as possible, these operations shall be through electronic mode.

Procedure for approval of CFS and its implementation

• Proposals for setting up CFSs will be considered and cleared, on merits, by an Inter-Ministerial Committee for CFSs, which consists of officials of the Ministries of Commerce, Finance (Department of Revenue), Railways, Shipping and Civil Aviation. Views of the State Governments as necessary would be obtained.
• The applicant should submit a copy of the application to the jurisdictional Commissioner of Customs for examining the feasibility of the proposal prior to submission of application to the IMC. The Commissioner of Customs will examine the proposal and send his in-principle approval based on the feasibility of then proposal to the within 30 days.
• The application to the IMC should be submitted online at URL: www.imcdryports.commerce.gov.in
• The applicants are also requested to familiarize themselves with the statutory Custom requirements in relation to Bonding, Transit Bond, Security Insurance and other necessary procedural requirements and cost recovery charges payable before filing the application.
• On receipt of the proposal, the members of the IMC will furnish their comments / No objection to the IMC within 60 days.
• The decision of the IMC would be taken within six weeks of the receipt of the proposal under normal circumstances. The committee will consider and approve or refuse to grant approval for setting up of CFS.
• On approval of a proposal, a Letter of Intent (LoI) will be issued to the applicant with conditions as may be considered necessary, which will enable it to initiate steps to create infrastructure. “Any investment in the development of infrastructure before the issue of LoI would be at the risk of the developer concerned, and need not be made prior to obtaining the “in-principle” approval of the Jurisdictional Customs Commissioner”
• The applicant would be required to set up the infrastructure within one year from the date of approval. The IMC may consider subsequent extensions after reviewing the progress of the project & justification given by the applicant or withdraw the approval granted.
• The applicant, after receipt of approval, shall send quarterly / annual progress report in the prescribed proformae to Ministry of Commerce through electronic mode as well as through hard copy.
• The applicant has to put up the required infrastructure and meet the regulatory requirements as per the Customs Act, 1962 and rules framed therein to become functional.
• The IMC has right to suspend or revoke the approval granted in the following cases:
  • On breach of any conditions attached thereto; or
  • if it is satisfied that the continuance of the CFS would be prejudicial to public interest; or
  • if the CFS enterprise is convicted of an offence under the provision of any Act in force.

Disobedience

In ‘Giridhari Homes Private Limited v. Principal Commissioner of Customs, Chennai – III and others’ – 2018 (9) TMI 517 - MADRAS HIGH COURT, the petitioner filed the present petition with a prayer to direct the respondents to cause release of the goods imported without paying the demurrage and container detention charges in terms of Regulation 6(1)(I) of the Handling of Cargo in Customs Areas Regulations, 2009 read with Detention/Demurrage Waiver Certificates.  The Department has granted waiver certificates to the petitioner.  But the respondents 3 and 4 (CFS) have not obeyed the direction and they have defied the order passed by the Department.  The High Court held that if the CFSs are flouting the orders passed by the Department, then, it is for the Department to initiate necessary action against them.    The High Court directed the CFSs to release the imported cargo without insisting upon the payment of demurrage charges and detention charges till the date of release.  The High Court also directed the Department to initiate appropriate action under relevant regulation against the respondents (CFSs) on account of their disobedience.