Tuesday, September 8, 2020

Rumours of More Surcharges Start a Rumble of Discontent from Freight Forwarders

For Shipping Lines it Seems as One Income Stream Dries Up - Another Two May Open
Shipping News Feature

UK – It is a fact of life these days that many suppliers will try for extra income via 'add ons', surcharges and the like to wring more cash from the customer. It is one thing however to list a gratuity separately, or extend the breadth of insurance cover by adding separately billed additional clauses for legal expense or breakdown cover, as against a mandatory surcharge as often levied by shipping companies to their clients.

Not for the first time the practice is now being questioned by the British International Freight Association (BIFA) which initially says that recent announcements by some container shipping lines that they will discontinue low sulphur fuel surcharges will be welcome news for its members. These started springing up, in that collective fashion which the lines seem to adopt by some sort of telepathic process in these matters, with the imposition of the IMO sulphur cap.

The question of course is, why a surcharge? If a genuine expense then surely it is applicable as a rate increase. The lines will no doubt say that it was to cover initial introductory expenses such as retrofitting scrubbing technology, this for a policy they had a decade of notice for. If however it was for an increased fuel cost does this mean that the cost of low sulphur fuel has just fallen through the floor?

The answer quite simply is no. In April this year very low sulphur fuel oil (0.5% sulphur) was trading at a level so low that the previous standard fuel (3.5% sulphur) had not been that cheap since 2016! So what justification was there for the surcharges? Or could it be the collapse of traffic when the pandemic struck simply left the lines to seek extra income without ostensibly raising the rates.

This month back in 2018 the European Shippers’ Council (ESC) objected to the announcement from the major container carriers that they would be introducing Global Fuel Surcharges to ‘ help customers plan for the impact of the Sulphur Cap’, well thanks for that.

It is not however the Sulphur Cap charges that are at the root of this problem. Once again it is the practice of simply levying miscellaneous charges unilaterally which has stirred BIFA to comment. The trade association for UK freight forwarding and logistics companies has long challenged the legitimacy of such shipping line surcharges.

It too accused the carriers of profiteering when they announced in 2018, almost in unison, that they would be introducing the low sulphur surcharges significantly in advance of the IMO 2020 regulation which took effect on January 1st 2020. Now Robert Keen, BIFA Director General takes up the point:

“Forwarders do not like shipping line surcharges of whatever nature, and we are hoping that other lines will follow suit and also stop their low sulphur surcharges, as well as reconsider their policies in regards to applying surcharges for anything from equipment imbalance to port congestion. Over the last few years, the number of surcharges and fees has continued to grow, often with no real explanation or justification.

“Whilst I welcome the news on the low sulphur fuel surcharges being discontinued, in the last few days, I have heard that one line is introducing a Merchant Haulage Surcharge, whilst another is adding a Container Compliance Charge. Forwarders do all they can to minimise the effects of the surcharges but in the end at least some of the costs need to be passed on to the customers, and there is sometimes an unfair perception that our members are to blame.

“If a shipper enters a contract to buy goods they should know exactly what they are paying and that price should not change. If they use Incoterms they can buy ex works or FOB and control the supply chain. If they let their supplier arrange shipping, they have no control over the charges applied. But in either case, additional surcharges imposed by shipping lines should not be allowed.

“Where is the justification for adding a surcharge for the general costs involved in running the business of container shipping? Some surcharges should already be consolidated within freight rates, with any required fluctuation being managed against that figure.”