What is Port Disbursement Account (PDA) in Shipping?

The shipping industry is constantly evolving, with new technologies and methods being introduced to make the process more efficient and secure.

One such innovation is the Port Disbursement Account (PDA), a financial tool that has become increasingly popular in recent years.

A Port Disbursement Account (PDA) is a special type of bank account that is used by shipping companies and freight forwarders to manage the financial transactions related to the shipping process.

It provides a centralized and efficient way to handle the payment and settlement of charges associated with loading, unloading, and transporting goods.

Now let’s discuss in detail what a PDA is, how it works, and its benefits for businesses involved in international trade.

What is the Purpose of a Port Disbursement Account?

The purpose of a PDA is to streamline the payment process for various charges incurred during the shipping process. This can include charges related to customs clearance, terminal handling, storage, and transport.

With a PDA, shipping companies and freight forwarders can pay these charges from a single account, which reduces the time and effort required to manage multiple payments.

How Does a Port Disbursement Account Work?

A PDA works by linking the shipping company or freight forwarder’s bank account to a central account managed by the port authority. The port authority can then use this account to collect and manage all the charges related to the shipping process.

The shipping company or freight forwarder can then pay these charges from the PDA, which reduces the need for multiple payments and improves the overall efficiency of the shipping process.

The costs included in a Port Disbursement Account

The costs included in a Port Disbursement Account (PDA) can vary depending on the specific requirements of the shipment, but typically they may include the following expenses:

• Terminal handling charges: This includes charges related to the handling of containers at the terminal, such as loading, unloading, and storage.
• Port charges: This includes charges such as berth or wharfage fees, pilotage, and tugboat charges.
• Customs duties: Any duties or taxes imposed by the government for the import or export of goods.
• Inspection fees: Fees for inspections and certifications required for the shipment, such as quarantine, phytosanitary, and veterinary inspections.
• Freight charges: Charges for the transport of goods, such as sea or air freight, and any additional charges such as fuel surcharges.
• Miscellaneous expenses: This may include charges for services such as warehousing, handling of dangerous goods, or for any additional documentation required for the shipment.

Port Charges and How They Are Calculated

Port charges are fees levied by the port authority for the use of port facilities and services. Some of the most common port charges include:

• Berth or wharfage fees: This is a fee charged for the use of the berth or wharf to load or unload the cargo. The fee is usually calculated based on the size and weight of the cargo.
• Pilotage fees: This fee is charged for the services of a marine pilot, who guides the vessel into and out of the port. The fee is usually based on the tonnage of the vessel.
• Tugboat charges: This fee is charged for the services of tugboats, which assist the vessel in maneuvering in the port. The fee is usually based on the size and tonnage of the vessel.
• Anchorage fees: This fee is charged for the use of the anchorage area by the vessel while waiting to enter the port. The fee is usually calculated based on the size and tonnage of the vessel.

It is important to note that the specific port charges and how they are calculated can vary between ports and countries. Freight forwarders and shipping companies need to be familiar with the specific charges at each port they operate in to effectively manage their costs.

The basis for the calculation of port charges varies between ports and countries, but some of the most common factors include:

• Tonnage: This refers to the weight of the vessel and is often used as a basis for the calculation of pilotage, tugboat, and anchorage fees.
• Size: This refers to the dimensions of the vessel, such as length, width, and draft, and is often used as a basis for the calculation of berth or wharfage fees.
• Type of cargo: The type of cargo being transported can also affect the calculation of port charges, as certain cargoes may require special handling or storage, resulting in higher fees.
• Time spent in port: The length of time the vessel spends in the port can also be a factor in the calculation of port charges, with longer stays often resulting in higher fees.
• Services used: The specific services used by the vessel while in port, such as the use of cranes, forklifts, or other handling equipment, can also affect the calculation of port charges.

It is important to note that the specific basis for the calculation of port charges can vary between ports and countries, and freight forwarders and shipping companies need to be familiar with the specific regulations at each port they operate in to effectively manage their costs.

Pro-Forma and Final Disbursement Accounts

Pro-Forma and Final Disbursement Accounts are two important terms related to the Port Disbursement Account (PDA).

Pro-Forma Disbursement Account: This is an estimated disbursement account that is prepared before the arrival of the vessel. The pro-forma disbursement account provides an estimate of the expected port charges based on the information available at the time of preparation. The pro-forma disbursement account is used by the shipping company or freight forwarder to budget for the expected costs associated with the port call.

Final Disbursement Account: This is the actual disbursement account prepared after the vessel has arrived at the port and all the port charges have been incurred. The final disbursement account provides a detailed breakdown of the actual port charges incurred, including any additional charges that may have been added since the preparation of the pro-forma disbursement account.

It is important to reconcile the pro-forma and final disbursement accounts to ensure that the actual port charges incurred are in line with the original estimates. Any discrepancies should be thoroughly investigated to prevent overpayment of port charges.

The preparation of both pro-forma and final disbursement accounts is a critical aspect of effective cost management for shipping companies and freight forwarders, and it requires a deep understanding of the specific port charges and regulations at each port they operate in.

What are the Benefits of a Port Disbursement Account?

There are several benefits to using a PDA, including:

1. Streamlined Payment Process

With a PDA, the payment process is streamlined, as all the charges related to the shipping process can be managed from a single account. This eliminates the need for multiple payments, which can be time-consuming and confusing.

2. Improved Cash Flow Management

A PDA helps to improve cash flow management, as all the charges related to the shipping process are paid from a single account. This makes it easier to track expenses and manage cash flow, as there is no need to worry about multiple payments and due dates.

3. Reduced Risk of Fraud

A PDA reduces the risk of fraud, as all the financial transactions related to the shipping process are managed by the port authority. This provides an added level of security, as the shipping company or freight forwarder does not need to manage multiple payments, reducing the risk of fraud.

4. Increased Transparency

With a PDA, the shipping company or freight forwarder has access to detailed information about all the charges related to the shipping process. This increased transparency helps to reduce the risk of errors and improve the overall efficiency of the shipping process.

Conclusion

In conclusion, a Port Disbursement Account is a valuable tool for shipping companies and freight forwarders to manage the financial transactions related to the shipping process. By providing a centralized and efficient way to handle payments, it streamlines the payment process, improves cash flow management, reduces the risk of fraud, and increases transparency. If you are involved in international trade, consider using a PDA to manage your shipping expenses and improve the overall efficiency of your business.

Frequently Asked Questions (FAQs)