Rising costs at ports severely impact trade!

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JOINT STATEMENT – FREIGHT & TRADE ALLIANCE (FTA) AND THE AUSTRALIAN PEAK SHIPPERS ASSOCIATION (APSA) 
Australian jobs are being lost in record numbers – impacts of drought, bushfires and COVID-19 on the Australian economy, combined with the rapidly changing global trade environment are being compounded by an estimated $300M+ in supply chain costs imposed by stevedores across all major sea freight container ports.

COMMERCIAL MODEL – All businesses face a dilemma of how to deal with unavoidable costs such as rent, infrastructure, labour and power. Those same businesses are then forced to either absorb costs or pass them on to their commercial clients. Similarly, stevedores should be forced to either absorb operating costs or pass these on to their commercial client (shipping lines). Shipping lines then have the choice to absorb or pass this onto shippers (exporters, importers and freight forwarders) through negotiated freight rates and associated charges.

COSTS – In contrast to the above, transport operators (road and rail) are forced to pay an Infrastructure Surcharge to collect and deliver containers – this aligns to an appropriate renaming of the surcharge by some stevedores as a ‘Terminal Access Charge’. Many transport operators have included administration fees to manage cash flow associated with these charges resulting in cascading costs flowing through the supply chain. Ultimately, Australian exporters and importers pay further inflated prices. Over the last five years, each stevedore has periodically increased the quantum of the surcharges. The current economic downturn has not slowed this trend with DP World adjusting their East Coast fees during May 2020; Hutchison (Brisbane) increasing fees by a staggering amount ($50 to $94.78 per container effective 27 July); and Victoria International Container Terminal extending their lead with the most expensive national charge ($131.03 per container effective 1 August 2020).

DEVASTATING IMPACTS – With repeated warnings by state governments being ignored, particularly during the current COVID-19 crisis, increased costs are having devastating impacts on our trade sector with the most significant impact on our retailers, manufacturers, farmers and regional communities. The solution deployed by the Victorian government is the introduction of a Voluntary Port of Melbourne Performance Model (VPPM). If the VICT response is any indication, stevedores will continue forging ahead by using Infrastructure Surcharges as a means of recovering costs. “The change to VICT’s Infrastructure charge will provide income only to cover the lease increase, and equates to a direct pass-through of the increased port costs.”

ADVOCACY – following our submission to the Australian Competition and Consumer Commission (ACCC) Discussion paper – Proposed Class Exemption for Ocean Liner Shipping and response to the Deputy Prime Minister Status Report – Container Stevedore Imposition of Terminal Access Charges, FTA / APSA this week provided a formal submission to the Standing Committee on Foreign Affairs, Defence and Trade Inquiry into the implications of the COVID-19 pandemic for Australia’s foreign affairs, defence and trade with a focus on two key areas requiring reform, being a need for effective competition in international shipping and other measures to reduce supply chain costs.

REGULATORY INTERVENTION – It is the efficient movement of goods that will lead our economic recovery and generate national wealth, not the welfare of infrastructure owners. A statutory monitoring process to oversee further price increases is NOT the answer. Incremental increases on an already high base would continue the devastating impacts on Australian jobs. Our regulators need to protect shippers by forcing stevedores to cease this practice. Stevedores should be given appropriate notice to allow negotiations of charges with shipping lines. This outcome would allow market forces to take effect. An open and competitive environment will determine appropriate price for services without the need for further government monitoring or intervention.
FURTHER DETAIL FTA / APSA MEDIA RELEASE: DEVASTATING IMPACTS OF $300M IN UNREGULATED STEVEDORE CHARGES available HERE
  CONSOLIDATED TABLE OF NATIONAL INFRASTRUCTURE SURCHARGES available HERE (FTA / APSA MEMBER LOGIN REQUIRED) 
Paul Zalai –  Director and Co-Founder, FTA / Secretariat, APSA