Tuesday, May 29, 2018

Bunker Surcharges Produce a Whiff of Historic Cartel Agreements Between Shipping Lines

Shippers Lobby Group Unhappy at Seemingly Coordinated Emergency Add Ons
Shipping News Feature
WORLDWIDE – Anyone of any age who is familiar with the international shipping profession will be aware of some of the disputes and scandals over the years pertaining to antitrust or cartel actions by a range of sector stakeholders, from freight forwarding agencies to container lines and car carriers. The bunker industry itself has not been free of the whiff of corruption and now the bad old days of shipping lines colluding on surcharges to ensure collective rate rises seem to be creeping back according to some in the industry.

The Global Shippers' Forum (GSF) has once again raised the case as the world's leading liner shipping companies have recently announced the introduction of ‘emergency’ bunker surcharges in response to rising fuel costs, almost in unison. The GSF points out that, in most cases, the extra costs are being imposed on top of existing bunker surcharges.

In 2014 the GSF made exactly the same point, echoed by FIATA which criticised surcharges en bloc, and GSF Secretary General, Chris Welsh, believes this latest tactic is an indictment of the liner shipping industry in that, almost a decade since the abolition of the liner conference system in October 2008, the box lines are still using conference-style pricing methods to impose surcharges on customers. Welsh is adamant that few operators in other transport sectors would risk imposing such short-notice emergency surcharges because of the likely strong reaction from customers, including the loss of business. He points out:

"Container ship operators need to ‘fess-up' by taking responsibility and greater control of their costs, rather than announcing vaguely explained short-notice unrecoverable surcharge costs on customers. It is incumbent on container carriers to provide their customers with full transparency regarding bunker surcharge costs, and to explain why an emergency surcharge is warranted on top of existing bunker surcharge mechanisms. Shippers will also want to know what steps have been taken to mitigate the impacts of rising fuel prices, including the impacts of fuel hedging arrangements which are designed to manage the risks associated with the single largest cost component of operating container ships.

"The imposition of emergency surcharges has no place in a modern liner shipping market where costs and prices should be mutually agreed between customers and suppliers, preferably in mutually agreed service contracts. Such arrangements enable the parties to build long term business partnerships, as well as providing clarity on the terms and conditions for the services provided and for appropriate remuneration.

"The use of emergency surcharges is a none-too subtle attempt to impose non-negotiable charges on customers. The liner industry needs to employ more appropriate pricing arrangements, in conjunction with its customers, if it is serious about developing partnership approaches and improving individual customer-supplier relationships."