This article was first published in February 2021 by Daily Cargo News.
Even as the world struggles with the health issues from the pandemic, those relying on the supply chain are facing a variety of problems, which collectively are creating additional delays, cost and uncertainty. None of these factors will assist with economic recovery, or the distribution of vaccines and other medical products being used to deal with the pandemic. Further, the economic benefits of a reduction in tariffs through Free Trade Agreements and other trade facilitation measures are being eroded by problems and costs in the supply chain.
The focus of the United States Federal Maritime Commission
The Federal Maritime Commission (FMC) in the United States (US) has been busy dealing with challenges to those using sea cargo including:
- The issue of a Guide on Detention and Demurrage Practices in April 2020 based on legislative provisions giving the FMC jurisdiction under the US Shipping Act to monitor “just and reasonable” practices in handling property by those in the shipping industry.
- A renewed focus on container availability levels for US agricultural exporters as some ocean carriers have indicated that they would not re-deploy empty containers to the interior agricultural areas. The FMC has expressed concerns that these practices may be in breach of the US legislation.
- The launch of an inquiry into the use of the term “merchant” in Vessel Operating Common Carriers Bills of Lading seeking to extend liability for charges to third parties (such as freight forwarders) who have no beneficial interest in the goods being carried.
- A coalition of road freight providers, shippers, and customs brokers have requested the FMC to consider an immediate suspension of detention and demurrage charges at major ports until congestion at those ports has been reduced. Some of those same parties are also proposing changes to the US Shipping Act on the basis that it is no longer fit for purpose in the current environment and the FMC and government should be given increased regulatory powers.
Other international issues
The issues before the FMC are symptomatic of other international issues around cargo. The Indian government has produced a draft Merchant Shipping Bill which includes a requirement that any charges for the provision of shipping must be “all in” precluding the ability of carriers to impose additional surcharges. The World Health Organisation has complained of “outrageous” air freight rates to fly dry ice and other medical equipment.
In other examples, carriers have continued to leave import containers stranded at north European ports and charge exporters more than $5000 to ship a container to Asia.
Several carriers have been diverting vessels from the United Kingdom (UK) due to congestion issues and unloading import containers at ports in Europe with delays in getting the goods to the UK as they try to get the empty containers back to Asia.
That may be made worse by a “no deal” Brexit. In the European Commission (EC), industry associations representing shippers and freight forwarders, facing lack of capacity, increased rates and surcharges have approached the EC to intervene.
The Australian context
The situation in Australia reflects many of the same issues being experienced elsewhere in the world, including significant ongoing congestion and delays at Port Botany. Some carriers out of China responded by refusing to take bookings to Sydney while other others who continued to service Sydney began adding additional congestion charges as well as changing routes, unloading containers in Melbourne and moving containers by road to Sydney. While the congestion issues around access to Port Botany may be reducing, there is evidence similar congestion and delays are arising into the Port of Melbourne.
There are also other issues which have focused the attention of those in industry in Australia. First is the issue of empty container parks which have become “full container parks” limiting the ability of freight forwarders to de-hire containers, requiring those freight forwarders to store the containers at their own premises (without charge, no doubt) for an indefinite period and also reducing the numbers of “empties” available in the supply chain.
Second, there have been concerns expressed regarding the increased land-side “access to infrastructure” charges being levied by stevedores and the fact that these can be increased regularly and without reviews.
Third, there is a real concern that the Port of Melbourne and Port Botany will be unable to berth the ultra-large container-carrying vessels with their current facilities and they may not have additional areas of land to expand their facilities and to recover the costs of doing so.
The interaction between the need for infrastructure at and around the ports, the limited availability of land for that infrastructure, the cost of that infrastructure and the recovery of that cost together with a profit for the investment is difficult to navigate, especially when the ports and infrastructure are owned by the private sector.
There are several initiatives now being considered by governments and the private sector but all of the resolutions tread a fine line between the need for investment balanced against the lack of competition in the sector and the ability to recover that investment.
After extensive representations by industry, led by work by the International Forwarders and Customs Brokers Association of Australia (IFCBAA) (previously the CBFCA), the Victorian government initiated an independent review of the Victorian ports system. The review recommended the adoption of the voluntary performance model at the Port of Melbourne to review the performance of the port and those operating infrastructure around the port. The Victorian government has subsequently commenced another associated review, this time of the wider ports system.
While the Australian Competition & Consumer Commission (ACCC) publishes an annual Container Stevedore Monitoring Report that is only a record of the performance of the stevedores and the ACCC has no power over the operators for these issues. The most recent report shows an increased reliance on “access charges” for revenue and profits. Subsequently, in a speech delivered in October 2020, the ACCC chair expressed concern there was “no or little regulation of monopoly privately owned ports” where the “unfettered market power” of some ports “is costing our nation dearly”, a situation that also applies to airports.
The chairman reported that in his view there was the need for a new “Part IIIB” monopoly regulation regime that would see owners of significant market power subject to some form of price regulation” as “properly priced infrastructure is vital to our economy”.
Industry discussion paper
The Australian Industry Group issued a discussion paper in November 2020 regarding port and shipping policy which addresses many of the Australian issues described above. This includes issues of infrastructure, competition in port pricing, reliance and security of the supply chain and industrial relations reform.
The discussion paper includes a series of proposals for consideration by the government including reference to the ACCC proposal (above), the imposition of a Community Service Obligation by governments to ensure that port infrastructure operates to public benefit and the potential adoption of our own version of the FMC.
A meeting of transport ministers
The 14th meeting of national and state infrastructure and transport ministers was held on 20 November 2020 and reached agreement on a number of significant issues associated with the supply chain including “fast-tracking” of infrastructure to support economic recovery, making roads safer, improving efficiency in the supply chain and adoption of a national approach to stevedore infrastructure charges.
The current proposal is to develop voluntary national guidelines for applying stevedore infrastructure and access charges. The aim is to provide “greater certainty and transparency for both stevedore and landside transport operators and support continued investment in terminal facilities”. That work is to include reference to the Victorian voluntary performance model described above.
Guidelines for the national and state review will be issued in 2021 for comment.
A time for action
The maritime supply chain is vital to the international economy, especially as the world attempts to manage and recover from the global pandemic. Australia is particularly exposed as 98% of our trade goes through our ports and many jobs rely on the movement of goods in a timely and affordable manner.
It appears that the current model may not be working optimally and as a result, there does need to be change. Many of the affected industry associations such as IFCBAA continue to focus on these issues which state and federal governments now recognise as shown by the introduction of the voluntary program for review of stevedore infrastructure charges. Hopefully, the program will set out reasonable expectations which could lead to future regulatory and legal changes if those expectations are not achieved.
In my view, given the importance of the maritime supply chain, that warrants the early creation of a stand-alone and independent agency such as the FMC with similar jurisdiction and powers. In this case, the importance of the maritime supply chain warrants new regulation.
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