The Australian Peak Shippers Association (APSA) and Freight & Trade Alliance (FTA) thank Marika Calfas and the executive team at NSW Ports for their ongoing direct engagement and for taking the proactive measure of delivering a NSW Ports CEO Update – March 2021 providing a trade trend analysis, commentary on global supply chain disruptions and an overview of Port Kembla and Port Botany operations.
In terms of the controversial Port Botany Congestion Surcharges imposed by shipping lines, Marika notes:
"Whilst we understand that there continue to be disruptions to shipping lines, this is increasingly being driven by global shipping conditions, including high volume demand. We therefore remain concerned about the continued application of congestion surcharges by shipping lines specifically for Port Botany calls and we look forward to such charges being wound back."
BACKGROUND – PORT BOTANY CONGESTION SURCHARGE INTRODUCED DUE TO INDUSTRIAL ACTION
During September 2020 several shipping lines announced the implementation of Port Botany Congestion Surcharges:
9/9/2020 MSC Mediterranean Shipping Company
15/9/2020 CGM CMA ANL
15/9/2020 Hapag Lloyd
29/9/2020 Maersk
APSA and FTA received a response to formal correspondence on 16/9/2020 from one shipping line stating that the imposition of their Port Botany Congestion Surcharge was made in a completely independent and in a commercial manner and there was no discussion or any other interaction with other shipping lines. Assurances were also given that the particular shipping line is well aware of their obligations under Australian law.
While not suggesting any breach of Australian Antitrust and Competition laws, it certainly appeared to be a case of 'follow the leader' with each justifying very similar surcharges (ranging from USD 285 to 350 per TEU) within days of each other.
It is important to note that all of the above shipping lines referenced the rationale for Port Botany Congestion Surcharge as delays caused by industrial action.
Other international shipping line and their local agency representatives also followed, notably TS Lines on 16/9/2020 with a generic rationale of "Ongoing congestion and delays at the port of Sydney".
CURRENT STATUS - NEW RATIONALE EXPLAINED FOR RETAINING PORT BOTANY CONGESTION SURCHARGES
APSA and FTA last week issued a member notice titled IMPORTANT DP World Operational Update - Time for Shipping Lines to Stop Ripping Off Industry highlighting the continuation of the Port Botany Congestion Surcharges despite a sustained period over recent months without any industrial action. The notice also included reference to the positive news that DP World had finalised their national Enterprise Agreements and that all terminals are operating normally.
In direct response to our commentary, we welcomed the news that some shipping line agencies removed all references to Congestion Surcharges from their public tariff.
Having stated that, many other shipping lines appear resolute in maintaining the Port Botany Congestion Surcharge and through Shipping Australia Limited (SAL), responded with an "Explainer" titled Container logistics, industrial woes, berthing delays and propaganda-busting.
It is important to note that the SAL 'Explainer' no longer uses industrial action as the rationale for imposing Port Botany Congestion Surcharges, instead extensive reference is made to "global issues / delays" causing vessels to "miss windows".
The SAL 'Explainer' also makes reference to residual Port Botany stevedore delays, specifically that in "some cases" a day and a half wait at DP World has been experienced and up to 7 days vessel delay at Patrick (SAL noting that this a significant reduction from 21 days in September 2020 when the above referenced Port Botany Congestion Surcharges were introduced).
While we are waiting on further detail from Patrick in terms of these reported delays, advice from DP World re-stated that services have returned to pre-industrial action levels without berthing delays. Furthermore, DP World have an ability to accept subcontracts, ad hoc callers, and above contract exchanges which includes empty container repositioning.
The SAL 'Explainer' states that costs to vessel delays are "massive" and that shipping lines have been forced to adapt by adjusting sailings and / or recover costs through surcharges. The bottom line is that these same shipping lines have achieved significant financial returns with at least one last year netting a multi-billion dollar annual profit.
We are totally reliant on foreign owned international shipping lines to continue servicing Australian trade and therefore there is no questioning that they must be incentivised to do so on a profitable basis. Having stated that, APSA and FTA remain unapologetic in calling for regulation to: 1) monitor the appropriateness of shipping line (and contracted stevedore / empty container park) surcharges, fees and penalties; and 2) to ensure vessel sharing consortia can continue with qualified exemption from normal competition rules administered in Australian commerce.
In this context, Part X of the Consumer & Competition Act 2010 currently allows for shipping lines to be given partial and conditional exemptions from cartel conduct and contracts that restrict dealings or affect competition and exclusive dealings.
APSA is the designated peak shipper body as defined in the Act with FTA administering the Part X compliance in a contracted Secretariat role to the association and reporting to its Committee of Management. The events over the last 12 months have re-affirmed the APSA and FTA position that Part X does not adequately protect the interests of Australian exporters and importers and to that end we commend the Australian Competition and Consumer Commission (ACCC) in examining a replacement block exemption regime.
CONTAINER DETENTION
The SAL 'Explainer' justifies ongoing administration of container detention fees by stating if there were to be little to no cost for consignees to remain in possession of containers, then there would be little incentive for containers to be returned to shipping lines. This reference suggests that the Australian import sector has been deliberately holding onto containers for extended periods of time for their own commercial benefit. Furthermore, the SAL 'Explainer' states if there are any problems, the import sector can simply talk to the shipping line.
Nothing could be further from the truth.
It has been well documented that we have had a significant surplus of import versus export containers at Port Botany since September 2019, well before COVID and other "global issues". This mis-management led to shipping line contracted empty container parks having extensive periods of time whereby transport operators were forced to double-handle and store containers. Shipping lines have refused to compensate importers for this cost and are forcing extensive additional administration for the sector to prove their inability to return containers to avoid container detention. penalties.
The SAL 'Explainer' states that ocean shipping works 24/7 and that the land transport industry could greatly help itself by extending working time beyond office hours and over the weekend. FTA and APSA do not disagree with this sentiment. The problem is that most shipping lines continue to issue container detention penalties automatically despite the fact that their contracted empty container parks experience extended periods at 100% capacity and are not able to physically receive some equipment types, irrespective of whether or not the transport industry is taking up all available slot hours offered.
We note with interest that the US Federal Maritime Commission is taking action by issuing Information Demand on Detention & Demurrage Practices orders to shipping lines and "maritime terminal operators" to provide information on their policies and practices related to container dehire (returns) and container availability for exporters. APSA and FTA see merit in this approach and will be calling for similar action from Australian regulators.
WHERE TO FROM HERE – FTA AND APSA ADVOCACY
Based on our estimates, if current conditions continue, Australian exporters and importers will be paying in excess of $1.2B per year in congestion surcharges, staged movements costs to dehire containers and fees to shipping line contracted stevedores and empty container park operators. This cost is above and beyond existing freight rates, Terminal Handling Charges and other pre-existing surcharges.
APSA and FTA will use this data and the latest SAL 'Explainer' as further evidence focussing on the need regulate certain shipping practices as a part of our submission to the Productivity Commission independent review into supply chain vulnerabilities and risks and in our supplementary submission to the Australian Competition and Consumer Commission (ACCC) Proposed Class Exemption for Ocean Liner Shipping – the APSA and FTA original joint submission to the ACCC is available HERE
In the interim, we will continue direct engagement with shipping lines to encourage reasonable measures in voluntarily reviewing existing practices and surcharge administration. |
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