Logistics industry slams excessive charges levied by shipping lines
By Bernie Cahiles-Magkilat
The logistics industry has slammed the exorbitant charges imposed by international shipping firms to Philippine importers even as they asked government to impose measures, including the appointment of a government body in charge of logistics, to protect importers and the economy of this import-dependent country.
Michael K. Raeuber, Group CEO of Royal Cargo Inc., in his presentation during the general membership meeting of the Supply Chain Management Association of the Philippines (SCMAP), slammed the exorbitant fees by international shipping companies to Filipino exporters with schemes being allegedly designed to conceal transparency in the imposition of charges.
Raeuber also noted that while this illegal practice is not exclusive to shipments from the People’s Republic of China to the Philippines those are in particular affected by these abusive , catel-like practices.
“Protect importers from excessive import logistics cost which affects and damages the Philippine economy and create a level playing field for global suppliers,” said Raeuber, who is also head of the EPBN Infrastructure Logistics Committee and Integrity Initiative Inc. vice-president.
“Protect Philippine importers from abusive, competition preventing freight pricing structures and the government from being defrauded of due duties and taxes on freight. We should make sure that international norms and rules such as INCO trade terms are respected and allowing no charges to be imposed under duress without contract.”
According to Raueber, the root causes of excessive, uncontrolled import logistics cost are the huge commercial losses from miscalculations and overcapacities. As result, international shipping firms impose multitude of “charges” collected from consignees. They also apply zero or negative freight at origin.
Apparently, he said, in desperation over huge commercial losses caused by miscalculations and self-inflicted overcapacities some shipping lines invented schemes to make freight cost calculations as in-transparent as possible.
For instance, he noted that freight due to be collected from shippers under applicable INCO terms are replaced by “kickbacks” to shipping agents and/or shippers at origin ports and instead collected from consignees by inventing multitudes of “charges.”
“This scheme is designed to avoid competition by giving benefits to the party obligated to pay, taking it by way of coercion, (by refusing to allow delivery of cargoes without the payment of exorbitant ‘charges’ at destination), from the party with whom the carrier has no contract of carriage,” he said.
Applying zero or negative freight at origin no freight at all will be charged by the shipping line, and therefore paid by the shipper at origin, even if the applicable INCOTERMS of the shipment such as “Cost Insurance Freight (CIF)”(new term CIP), “Cost and Freight (CFR)”(new term CPT), “Delivery Duty Paid (DDP)”, and “Delivery Duty Unpaid (DDU)” as agreed between shipper and consignee mandates such payment by the shipper at origin.
According to Raeuber, international firms have undisclosed origin and destination charges, they invent charges making consignees defenseless. This also means substantial subsidies to exporters.
“When asked to submit quotations shipping lines at times do not, or even refuse to disclose their ‘destination charges’ to shippers or ‘origin charges’ to consignees,” he added.
Philippine consignees, though having no contractual relationship with carriers, are defenseless and must pay up any charges thought of to get release of their cargoes.
The carriers impose origin surcharges such as operations cost recovery surcharge (OCRS), equipment cost recovery surcharge (ECRS) and equipment positioning services (EPS).
Shipping lines also impose destination surcharges such as Container Imbalance Charge and equipment management import of between $500 to $600.
Also, these lines impose OCRS, ECRS and EPS for $300 to $400 and online release fee of $4.
The only standard destination charges among all carriers are DTHC and DOC.
Container deposit charges range from a low of P7,000 to P40,000 depending on the size of the container and area.
As an import-oriented economy, the Philippines is particularly vulnerable to such schemes as the onus to pay freight on certain commercial terms is shifted without their knowledge and consent, uncontrolled to its consignees.
This would result in substantial export subsidy for the sellers’ country and a huge burden to the economy of the Philippines.
Other questionable practices of international shipping lines are excessive “container deposits” and undefined “demurrage” and “detention” charges.
Demanding excessive “Container Deposits”, combined with onerous conditions for the return of such money paid in trust. Again this singles out the Philippines as globally there are very few countries where market conditions or legislation allows shipping lines to demand such deposits.
In fact, he said, that demurrage and detention charges are not defined as to their nature whether they are fines, components of freight or recovery cost.
“Fines can’t be imposed by private entities, freight should be collected based on INCO terms and cost recovery should be limited to actual not consequential cost per day, estimated at 1-2 USD per day,” he said.
The SCMAP has proposed some like passage by Congress of a legislation to clarify the jurisdiction of government entity in charge for logistics; the Philippine Competition Commission must also investigate possible violations of anti trust laws, prevent cartel like behavior of shipping lines, and promote ethical and unrestricted competition; the Bureau of Internal Revenue and the Bureau of Customs to investigate the negative impact on VAT and duty collections; importers to insist in freight quotations under INCO terms to be complete and include all “origin charges” and “destination charges”; and for importers to take control of their supply chain cost by buying on freight collect terms instead of fake “prepaid terms”.
Raeuber has urged importers to refuse any charges for which they have no contractual obligation to pay. If under duress pay under protest and sue for recovery.