IN the past few weeks, Federation of Malaysian Freight Forwarders (FMFF) and Malaysian National Shipper’s Council (MNSC) have issued various press statements which have not been appropriately represented and in some cases, rather misleading. Shipping Association of Malaysia (SAM) would like to provide clarity on the issue and explain the actual situation through this press release.
1) Container Security Deposit
The proposal from the Ministry of Transport (MOT) and Port Klang Authority (PKA) on alternative security instruments to security deposits vis-à-vis Non-Cheque Deposit (NCD), Container Ledger Account (CLA) and iCARGO+ is merely a recommendation as a way forward in resolving the issue of security deposit collection but not a gazetted law as depicted by both MNSC and FMFF in their press statements.
The accusation that shipping lines have been disrespectful of the law on this issue is then totally incorrect because the alternative security instruments (NCD/CLA/iCargo+) are merely proposed recommendations. SAM wishes to make clear that those mechanisms are elective for shipping lines and are subject to each merchant subscribing to these schemes as a sincere effort on the part of carriers to try and resolve this long outstanding issue. In addition, SAM had clearly explained its position on this matter in a paid press statement published on February 25, 2020.
2) Waiver of Demurrage and Detention Charges
MNSC’s call for MOT’s intervention with the shipping lines to waive or to provide discounts on demurrage and detention charges due to delays in the collection of cargoes held during the Movement Control Order (MCO) period is in our opinion unnecessary and unlawful pressure. During the MCO period, MOT together with all shipping and logistics stakeholders successfully implemented four port clearing exercises where importers were permitted to perform clearance and subsequent delivery of import containers out from the port terminals. Reportedly, our members have also given discounts on demurrage and detention charges to consignees who had appealed to them. MNSC’s call to seek a total waiver of demurrage and detention charges, which equates to asking other stakeholders to totally absorb their members’ losses due to their own inability to take delivery of their imports on account of their own economic reasons, is totally unfair and unjustifiable.
3) Bunker/Low Sulphur Fuel Surcharge
The reported RM9 per cubic metre Low Sulphur Fuel Surcharge (LSS) which was claimed to be imposed by shipping lines were actually charges raised by the console operators instead. These console operators are providing Less than Container Load (LCL) consolidation services and most of them are members of FMFF, thus it is more appropriate for MNSC and FMFF to direct this concern to their respective FMFF members.
4) Claims by MNSC That Shipping Lines Are Profiteering from Shippers by Imposing Exorbitant Charges During This Challenging Time
The landside recovery charges which MNSC highlighted are actually the evolution of the pricing model where carriers are actually trying to mitigate their continued losses through the recovery of more landside charges because of their own inability to stabilize the volatility of ocean freight rates due to the highly competitive nature of the industry. This is already an established pricing model for quite some years and we firmly believe that importers and exporters would have costed these charge items into both their FOB and CIF pricing. The fact remains that carriers are still reporting huge losses since 2016, as reported in the annual Review of Maritime Transport published by the United Nations Conference on Trade and Development (UNCTAD), thus we fail to understand how carriers are profiteering when they continue to report such losses, especially during the COVID-19 crisis.
Blue Alpha Capital founder John McCown who has done a thorough analysis in container shipping industry, has estimated a loss of USD10.6bn in container shipping industry for year 2020, with the worst case resulting in a loss of USD15.9bn; container shipping industry has showed a first-quarter loss even before the full impact of the worldwide demand shock, which will flow through the balance of the year. Container shipping is also set to see net negative fleet growth over the next three years, according to the Maritime Strategies International (MSI). These published analyses have clearly showed that shipping lines are making losses instead of profiteering, in contrast to the unwarranted claims made by MNSC.
The fact of a matter is that the global import and export business community has actually benefited from the continued investments in new and bigger ships by shipping lines in respect of the efficiency and lower costs of global ocean logistics distribution even to the extent of enjoying ocean freight rates below the carriers’ costs due to the extremely competitive nature of the container ocean transportation business which continues to be under a lot of pressure due to a prolonged overcapacity scenario. This has contributed to the huge global trade expansion that the world has seen in the past few decades.
MNSC and FMFF should carefully consider the facts presented above and should take into account the total shipping line charges covering both ocean and land side charges instead of continuing to harp on land side charges without consideration to the highly competitive ocean freight structure they are enjoying today. As a responsible association, MNSC and FMFF should withdraw all the false profiteering accusations directed on an industry which is already ultra-competitive, loss-making and requiring huge capital investments in order to stay relevant and to comply with safety and environmental regulations imposed by the International Maritime Organisation.
5) The Call by MNSC and FMFF to Regulate Shipping Companies
The global direction has been moving towards deregulation rather than regulation and the shipping industry by itself is already a highly competitive business tied to a lot of regulatory requirements imposed by the International Maritime Organisation (IMO) with regards to its operations from the perspective of safety and environmental standards which have incurred a lot of additional investments from shipowners and operators. We fail to understand the need to regulate an industry which is already highly competitive and requiring huge capital investments with minimal return of investments. It is unfair for MNSC and FMFF to continuously call for regulating shipping companies when there is no similar call for regulating their own businesses.
SAM has always appreciated feedback from the industry stakeholders, but we seek the correct understanding from all stakeholders i.e. MNSC, FMFF and all other trade associations on these highlighted concerns. SAM and our members are constantly working in improving various initiatives in the best interest of everyone in the business community.
Ooi Lean Hin is chairman of Shipping Association Malaysia.