Wednesday, April 16, 2014

Freight Forwarding and Ocean Shipping Export/Import Charges Under the Spotlight

With Cartel and Antitrust Action Rife It's Time to Examine Those Unwarranted Extras says GSF
Shipping News Feature

UK – US – WORLDWIDE – Few involved in the export/import supply chain can fail to have noticed the proliferation of successful prosecutions in the past few years of ocean shipping lines, freight forwarding agencies and the like who have indulged in antitrust behaviour, seemingly forming cartels at will despite the obvious consequences if caught. A swift News Search of the Handy Shipping Guide using the appropriate keyword produces a seemingly endless stream of stories naming and shaming the perpetrators. Additionally the use of incoterms can often be abused by the addition of ‘extras’ unforeseen and unwarranted in the eyes of shippers and consignees.

Now, at its recent annual meeting in Los Angeles, the Global Shippers’ Forum (GSF) has agreed to organise a new global campaign to confront the imposition of unsubstantiated shipping surcharges, terminal charges and more than twenty other non-negotiable local charges on shippers worldwide which, although they may have so far escaped the eye of the authorities, are still considered by many in the freight community as unlicensed blackmail.

The campaign is focused on persuading national competition authorities or other appropriate regulatory bodies to introduce new shipping regulations and laws to prevent these local anti-competitive practices. Current widespread malpractices include imposing non-negotiated charges on consignors and shippers for a range of local charges over which the consignor or shipper has no control or influence in their freight rate negotiations with the shipping line, terminal operator, shipping agent, or third party logistics provider. Shippers generally are not party to the contracts in which these fees are set, yet they have no choice but to pay the fees if they want their cargo to be transported. Addressing the GSF annual meeting Mr Sean Van Dort, Vice Chairman of the Sri Lankan Shippers’ Council said:

“We are already seeing the benefits of new laws in Sri Lanka that specify that all charges for shipping containerised cargo must be quoted so as to cover the entire cost of the carriage of goods from origin to destination or agreed delivery point. The provision of so-called ‘all in inclusive freight charges’ to be paid by the shipper, including all local add-on charges and surcharges, has resulted in dramatic reductions in the door-to-door freight costs, reductions that benefit both the seller and buyer of the goods.

“In just one real-life case study we have achieved a saving of US$1,950 on one forty foot equivalent unit representing a staggering 31% reduction in logistics surcharges and multiple charges on the bills of lading since the new Sri Lankan regulations came into force on 6 January 2014. They will take effect from April 30 2014 for existing contracts. These new arrangements have increased earnings on sales and the competitiveness of our products in world markets.

“The new arrangements do require close collaboration and cooperation between buyers and sellers, and in particular there will need to be a change in business practices including using the new and more appropriate Incoterm for containerised cargo shipments such as ‘free carrier named place’ (FCA). But the prize for both sellers and buyers is the elimination of illegitimate and inflated charges and surcharges and considerable reductions in freight costs which benefit both parties."

Discussion at the GSF annual meeting noted that the problem of unsubstantiated charges and surcharges imposed on consignors and shippers without bargaining power in Africa, Asia and South America has been a concern for shippers in these regions for many years. It is only now that the true scale and impact on shippers and trade in these regions is being fully understood and appreciated. The GSF maintains that non-negotiable surcharges and local charges imposed on non-contracting consignors and shippers effectively act as an indirect trade barrier which inhibits international trade. The GSF agreed to take up the matter with the relevant global trade authorities.

In work undertaken in West and Central Africa by GSF member Union of African Shippers’ Councils, shippers’ organisations in the region have identified the additional cost to trade from these anticompetitive practices in the region is likely to represents billions of dollars. The UASC estimates that the cost to the economies of Ghana, Cameroun and Nigeria alone to be in the region of €437 million per annum. The Secretary General of the Union of African Shippers’ Council Mr Adamou Saley Abdourahamane said:

“These unsubstantiated and unjustified local charges and carrier surcharges not only increase the cost of doing business in Africa, but impose unacceptable burdens on the economies of West and Central Africa whose goods and commodities often struggle to compete in the modern global economy.

“The UASC therefore believes that wider regulatory measures are necessary to curb the power of shipping lines in the African region. We fully endorse the changes made to national legislation in Sri Lanka which has prevented exploitation of shippers exposed to a long list of local charges and surcharges. Shippers’ organisations in the region will, with the support of the Global Shippers’ Forum and UASC, campaign for Sri Lankan style legislation to tackle the problem of local charges and surcharges."

The fierce, if sometimes contentious, reaction of US and European, Japanese and Oceanic authorities to what they consider covert corruption has encouraged freight forwarders and importers in other regions to take up the call for similar programmes in regions which such actions are merely considered everyday practice, with collusion between ostensible rivals and monopolistic charges becoming the norm. Commenting on the launch of the surcharges campaign GSF Secretary General Chris Welsh said:

“Shippers in Africa, Asia and South America have now called time on these unacceptable shipping practices which long ago disappeared in European, North American and liner shipping trades in other more developed economies. As part of a coordinated global campaign, the GSF will take the matter up with the main political, UN and other international agencies such as the African Union, UNCTAD, WTO, OECD, ASEAN and MERCOSUR. In addition we will support the implementation of the kind of national legislation introduced in Sri Lanka to deal with this widespread problem.

“The GSF will also launch a global programme to explain how the use of the most appropriate commercial terms can potentially reduce freight costs in the transport and logistics supply chain. The programme will further focus on liability implications, responsibilities of the respective parties and the allocation of risk under modern commercial terms."