28/6/04 - LOCAL shippers (importers and exporters) are pushing forlegislation that will compel shipping lines to consult and negotiate withthem before any tariff amendments.

After enduring years of price rise one after another, shippers havedecided that enough is enough and now want to be consulted before shippinglines raise their shipping rates, said Federation of MalaysianManufacturers (FMM) logistics committee chairman Mohamad Radwan Alami.

Similar legislations are in place in countries such as South Korea andAustralia that require shipping conferences (ocean liner carrier cartels)serving those countries to negotiate with a shippers’ association

before increasing shipping charges.

Mohamad Radwan said FMM hopes that Malaysia will soon follow to protectthe interests of its shippers and allow them to put across their views onany proposed tariff amendments.

Countries like China do not need such legislation as their shippingindustries are well served by their own domestic shipping fleets. NotMalaysia, though. It is dependent on foreign shipping lines for carryingthe vast majority of its international commerce, Mohamad Radwan toldBusiness Times.

Freight rates have shot up during the last two years due to increaseddemand from Asian factories, but shipping lines have been at pains topoint out that their charges have not risen for several years.

The rising international oil prices have also resulted in higher bunkersurcharges (oil used to steer ships) to between US$25 and US$50 (US$1 =RM3.80) per TEU (20-foot equivalent units), with effect from July 1 2004.

Exporters have taken serious note of this development and feel that theirexports would be subjected to higher cost and would become uncompetitivein the world market.

Mohamad Radwan said exporters that trade on cost and freight, or cost,insurance and freight (CIF), basis in particular have borne the brunt ofthe increase in freight rates as part of their cost of doing business. CIFmeans that the exporter or seller has to clear the consignment for export.

These exporters will have two choices. Either way, it’s bad news for them.If they absorbed the additional cost, their profits will be reduced. Butif they pass on the additional cost to consumers, it will increase theprice of their products which will affect their competitiveness in theglobal market, he added.

What is arousing the ire of shippers, however, is shipping lines’ apparentfondness to impose additional charges without the prior consent ofshippers.

We are not asking them (shipping lines) to run in losses. We are partnerswith the shipping lines. However, any increase in shipping rates must beconsensual, said Mohamad Radwan.

For instance, two weeks’ notice is not enough for most exporters to adjusttheir prices to the price increases. That’s because they have long-termforward contracts with their buyers and by giving such short notice mayaffect the price contracted to, he added.

Mohamad Radwan said shippers were also upset because while shipping lineshave been fast in increasing their shipping rates when the opportunityarises, the same can’t be said when it comes to reducing them.

For instance, when shipping lines say they have been affected by high oilprices, we understand that they have to increase their bunker surcharges.But we have not seen at any time the surcharges coming down along with theoil prices. The problem is that when they apply some charges, they nevertake them back. And when they do, it’s only years after the situation hasrecovered, he said.

FMM vice-president Tan Sri Clifford Herbert agrees.

We would like any suggestion for tariff amendments to be discussed firstwith the manufacturers and all parties involved rather than any partyunilaterally saying that it wants to do so. In this way, we can beprepared for it, he said.

We will not welcome any sudden suggestion to increase charges because itputs the whole shipping industry into chaos. We like to be consulted andgiven our views. I think the manufacturing sector, as the biggest sectorin the economy and one of the sectors that contribute to exports, has theright to be consulted, said Herbert.

He said shippers are simply requesting the right to know.

We are not disputing that there may be circumstances where shipping lineshave to increase freight rates. In fact, they have a right to do so.

But what we want to know is why they are doing it, how much of anincrease, and where does it go from there? And when the situationrecovers, we want to be assured that the rates would come back down,Herbert added.

Meanwhile, Mohamad Radwan said FMM does not support the recent move by theInternational Shipowners’ Association of Malaysia to reduce

the free time for cargo to be stored at ports in Peninsular Malaysia.

Shippers must be given the flexibility to meet their export commitmentsbased on the availability of existing port services. Manufacturers shouldnot be made to pay for inefficiencies of hauliers or port and Customsauthorities by having to pay demurrage charges imposed by ports in theevent that goods are not cleared due to delay by other parties,” he added.

Effective July 1, shippers will only be allowed to store their containersat local ports free of demurrage charges up to five days from the currentseven days.

Importers will also be required to unstuff or unload and return thecontainers to shipping lines within three days, while exporters can onlypick up the containers for stuffing or loading less than six days earlierto the day of vessel arrival.

Mohamad Radwan anticipated that the requirement to pick up the containersonly six days before vessel arrival will create problems for shippersexporting large volume of cargo comprising different models and types suchas electronic and food products.

The shippers will usually receive empty containers to stuff or load cargoas per model, size and type of product. With the reduction into six days,this will definitely cause a lot of roll-overs and shiftings of deliveryschedules.

Furthermore, any short or late delivery of containers caused by haulierswill disrupt the shipments and will force the shipper to short ship hiscargo consignment or to roll over the shipment to the next vessel whichalso will affect the operations and the efficiency of the shipping linesthemselves, he said.