Friday 28th Oct 2016 - Logistics Manager

Surcharge for Far East imports sparks row

Imports from the Far East are going to be surcharged because of congestion at UK ports. The Far Eastern Freight Conference is imposing the surcharge of £68.64 ($145) per teu, sparking an angry reaction from shipper’s groups.

The FEFC, which represents 16 major shipping lines, reckons cargo carried by its members into the UK for the first eight months of 2007 has increased by almost 15 per cent over the same period in 2006, and has averaged 485 teus per day for the year to date.

The conference said: “Together with substantial growth seen in other trades, this level of increase has created congestion not only at the major UK terminals, but has also caused congestion of the inland transport and delivery systems. On occasions, lines have found it necessary to by-pass UK ports and feed cargo to the United Kingdom, and in some cases divert their vessels to non-scheduled ports and equalise the costs from these ports. This has created even more congestion for an infrastructure that is already overloaded. The infrastructure congestion has also made it very difficult to repatriate much needed empty containers to Asia.

“In meeting these, and other operational problems, FEFC members have incurred substantial extra costs in supplying their liner services to customers. The study undertaken by the Lines has identified major cost increases in vessel operations, transhipment of cargo and port equalisation.

“The aggregated increased costs identified by the study amount to an extra cost of USD 145.00 per teu and to recover this amount the FEFC will announce a UK congestion charge of $145 per teu applicable to the westbound trade for all containers discharged on or after 1 December 2007. The costs will be reviewed after 60 days and adjusted as necessary,” it said.

While congestion in the UK is the most immediate problem faced by the lines, they are also worried by the possibility of increased congestion in both Northern Europe and the Mediterranean. They expect this to become worse as continued high growth rates expected in 2008 and 2009 will add ever increasing volumes of containers to the already overloaded infrastructure throughout Europe.

The Freight Transport Association’s British Shippers’ Council has condemned the increase pointing out that it comes on top of recent rate hikes for goods going from Europe to the Far East.

Christopher Snelling, the FTA’s head of global supply chain policy, said: “There are huge problems with congestion at Britain’s ports, but introducing a charge does nothing to address this. This is a very outdated and inappropriate response by the conference to a complex problem.”

Snelling pointed out that one of the causes of congestion at the ports is lines missing their berth slots for delivery, so to some extent the lines are surcharging customers for their own failings.

And h argued that BSC members believed these rates were above proper market levels, and merely a response by the conference to its impending abolition under EU competition law in eleven months. The rates are unsustainable as they do not reflect genuine supply and demand pressures.

BSC members had reported lines being willing to undercut FEFC rates by 25 per cent, showing that their levels are artificially high.

“Hopefully this will be seen across industry and the FEFC rates will fail to gain credibility. Concern remains that smaller shippers may not be in such a good position to bargain.”