Clear communication is a must in business, but especially so in importing and exporting. Confusion causes chaos, and chaos usually means delayed delivery, extra costs and a host of other potential consequences. Perhaps the most critical issue that needs to be made clear is who pays for what.
When it comes to dealing with overseas suppliers, there is an acute need to have every aspect clearly understood. After all, with the different logistical elements involved, the process of getting a consignment of goods from its place of manufacture to its destination can be complicated. And if things go wrong, finger-pointing is not going to solve anything.
Where Problems Can Arise
The core of the problem lies in your sales contract. If, for example, an importer wants to bring 5,000 t-shirts into Australia out of Vietnam, you begin by placing an order for those items from a manufacturer or supplier. Obviously, the importer and supplier have to agree the number of items and the price per unit, but more questions remain. For example:
Who arranges and pays for their transport to the port?
Who covers the freight from the port of origin to port of destination?
Who pays for Marine Insurance coverage?
Who is responsible for getting export clearance at the port of origin?
Who is responsible for getting customs clearance at the port of destination?
Who pays customs and duty fees?
Even, who deals with charges for loading and unloading the cargo onto and from their vessel?
Unfortunately, these are agreements that your freight forwarder is not involved in. A forwarder simple follows the agreed procedure as set down by their customer – the importer, or buyer. It is up to the buyer to ensure everything is clear, so that the forwarder can collect, transport and deliver their cargo with ease.
How To Avoid The Problem
The good news is that the problems that typically arise are very easy to avoid, but central to the remedy are Incoterms. At International Cargo Express, we implore all of our customers to know the Incoterms inside out, and to use them all the time, every time.
Incoterms were first introduced in 1936 by the International Chamber of Commerce (ICC) as a means to avoid the ambiguity that frequently affected international trade. As a common global trading language, clear agreement as to the responsibilities of the supplier and the importer can be more easily reached.
The Key Incoterms To Know
EXW (Ex Works) – the buyer has to pay for loading the delivery vehicles at the place of manufacture
FCA (Free Carrier) – the supplier pays for transport from their place of manufacture to their warehouse. The buyer has to pay from the warehouse. Be sure to clearly state the delivery place. The seller must also clear the consignment for export.
FAS (Free Alongside Ship) – the supplier is responsible to getting the cargo to the port up to the point of loading. This generally means that the goods are delivered to the container depot for loading into the container. The seller must also clear the consignment for export.
FOB (Free On Board) – this is not often used anymore but responsibility for any incurred fees must be clearly agreed if goods are left waiting in the container port for a period of time before being loaded for shipping – especially with bulk cargo. The seller must also clear the consignment for export.
CFR (Cost and Freight) – this means that the seller arranges the cost of transport to the port of destination. So, if your cargo is travelling going from Hong Kong to Sydney, the buyer covers the cost of unloading the container and onwards.
CIF (Cost, Insurance and Freight) – this is similar to CFR, with the critical difference being that the supplier covers the cost of Marine Insurance.
CPT (Carriage Paid To) – the supplier covers the cost of freight to a specified destination, but be aware that all risks from EXW onwards are accepted by the buyer, so the buyer needs to be covered by Marine Insurance. When transportation involves several modes of transport, sellers sometimes only accept responsibility for the first carrier, so be sure to clarify if this is the case.
CIP (Carriage and Insurance Paid to) – similar to CPT but this time the supplier also agrees to cover the insurance costs.
DAT (Delivery At Terminal) – this means that the supplier has successfully delivered the cargo once the cargo has been placed in a terminal at the port of destination. It’s then up to the buyer to arrange to collect the cargo consignment, from which point the buyer accepts all costs and risks.
DAP (Delivered At Place) – this is similar to DAT, but involves one or two stages beyond the port terminal. It means the supplier is also responsible for unloading the cargo, and may extend to delivery to the buyer’s premises. This needs to be clarified in advance.
DDP (Delivered Duty Paid) – similar to DAP, but this time the supplier accepts all costs incurred, including customs clearance and tax duty. It may also mean delivering the consignment to the buyer’s premises too, but this needs to be clarified in advance.
Trust Your ICE Team Advice
International Cargo Express has beentailoring solutions for individual customersfor the past 25 years, so we are extremely knowledgeable in the best ways to get your cargo to you. Our ICE Team is only too happy to advise you on the right Incoterms to you, and to explain why. Simply contact the ICE Teamand we’ll answer whatever questions you might have.
Every importer and exporter knows that they face a certain amount of risk. Even over relatively short distances, incidents and accidents can always occur that may not only see some of the goods in transit damaged, but perhaps the whole cargo lost. Having adequate protection is important, and arguably the most important form of protection to have is Marine Insurance.
Marine Insurance is considered by many freight forwarders as essential. By definition, it covers any possible risk of damage or loss to cargo while in transit. However, the policy does not relate to the quality of goods being transported, such as sub-standard materials used in their manufacture or if there are equipment parts missing.
And, it’s not limited to transport by sea either. In fact, policies usually offer warehouse-to-warehouse coverage over 90 days, so your cargo is protected whether it is transported by air, sea, road or rail.
So, if your consignment of t-shirts from Vietnam is lost during a storm at sea, or your custom-made machinery is broken when a container falls off a truck, you have indemnity against those events. The policy covers such events as:
accidental damage while in transit, including from fire
theft of goods
incidents relating to the ship, including sinking, capsizing, or being grounded
often includes General Average, where cargo is jettisoned to prevent a ship from capsizing or sinking
incidents relating to truck and train, including overturning, road accident, derailment
loading and unloading of cargo
while in warehouse storage between transport stages
What Marine Insurance Doesn’t Cover
Of course, while Marine Insurance is the principal mode of protection for cargo, it doesn’t cover every eventuality. These can vary, so it’s important to speak to your freight forwarder or insurance broker to ascertain the details of the coverage offered, but usually Marine Insurance does not cover:
dangerous goods, like firearms and ammunition
combustible substances, like fuel and chemicals
damage due to poor packing
transport by a third party
There are also other insurance policies that importers (and exporters) should consider. Here’s a brief run-down of the most significant.
Political Risk Insurance – Your cargo’s country of origin, or the countries it’s due to stop off in while in transit, might be politically unstable. This increases the risk of an overseas government intervening in your investment by either closing ports or airports unexpectedly, confiscating cargoes or otherwise freezing international traffic. This policy can cover your cargo in such events as a civil war, a coup d’état or major civil unrest, like a riot. Some policies also cover unexpected importation or exportation bans, or sudden trade agreement collapses.
Product Liability Insurance – This policy protects against the risk of harm to customers or third parties by the product. For instance, liability can be a grey area so if a heavy box falls and injures someone, and it’s important to have a defense against claims that, since it was your box that fell on the person, that you are responsible. However, liability coverage does not cover goods that arrive spoiled or poorly made.
Currency Insurance – International trade is greatly influenced by the currency markets, with sharp changes in exchange rates sometimes turning a healthy profit into a loss. Importers can protect themselves against this event through a Currency Insurance policy. While it cannot guarantee the expected profit is conserved, at least losses are avoided.
Credit Insurance – This has nothing to do with transportation, and is of greater concern to exporters that importers. But when dealing with companies abroad, it’s common for business to declare themselves insolvent in order to avoid paying money owed. Credit insurance can protect an exporter for up to 90% of the sum owed.
Getting Marine Insurance Through ICE
International Cargo Express has always recommended its customers to take out Marine Insurance but, according to Managing Director Ronald Spahr, it’s an optional extra that not everyone feels compelled to take.
“It is a choice, but it is one that we encourage our customers to get,” he says. “We have customers that have been with us for 25 years, and they have never had a problem, but the fact is they are flying without a net. If they suddenly have a problem, they have to pay for it themselves.
“The risk is something that every customer has to weigh up. After 25 years not paying Marine Insurance, they can argue they save money. But then, something does go wrong and they face perhaps a $100,000 claim.”
The likelihood is greater than many think, especially with such aspects as General Average to consider. This is where a ship captain jettisons some cargo in order to save the ship and crew. But the owners of all the rescued freight have to pay proportionally for the cargo that was jettisoned. It could be 3 years after the event, but even if you imported $1,500 worth of freight you might be hit with a $15,000 share of the lost cargo. Marine Insurance would protect importers in these situations.
Contact Your ICE Team
International Cargo Express is always happy to highlight the advantages of taking our Marine Insurance, especially for the small and medium-sized businesses that can suffer greatly from cargo loss, or a General Average claim.
To find out more about Marine Insurance, simply call your nearest ICE teamand talk to experts who can help you towards better protecting your cargo, and narrowing the financial risks you face.
We have mentioned it before, but the need to seek container rate quotes on a daily is something no freight forwarder can ignore. But while it can be a monotonous practice, is also has definite advantages. Not least, it’s an essential part of freight benchmarking, which can secure real savings for importers and exporters.
There is no secret to benchmarking, and in fact it’s something we all do from time to time, probably without ever realising it. It’s all about finding the best price by comparing several prices, usually three or more. For example, when you are looking for a better car insurance premium, don’t you contact a few insurance brokers and ask them for a quote? Then you can choose the best quote from amongst them.
Benchmarking container prices is the same thing. International Cargo Express has a network of independent forwarding agents around the world that we ask for quotes from when we are assessing costs for our customers. Depending on a number of aspects – for example, the type of cargo, the size or weight of the consignment, even the time of year – prices quoted can vary.
But through freight benchmarking, the best deal can be found. It may not always be the lowest available price, but it is always a very competitive one. However, the advantages relate to more than simply the price.
Securing Space, Saving Money, Reducing Stress
Freight forwarders tend to face the same challenges every day. As well as finding the best container rates for their customers, they also have to secure actual space on a ship or plane. These factors are included amongst the 3 main benefits of freight benchmarking:
Securing A Space – in many cases, this is the toughest task since competition from other freight forwarders is always extreme. Benchmarking our full container rates allows us to stay in constant contact with agents that can secure that place. It’s not our buying power we use, it’s their buying power because they control the space as well as the freight rate. These agents have good connections to certain shipping lines, so if you want your container shipped on that line, these agents are in the best position to make it happen.
Saving You Money – this is achieved in two ways. Firstly, it allows us to identify which agent is offering the lowest container prices, but it can also allow us to use a shipping line that offers a better overall deal. Remember, the total cost of shipping includes a range of extra fees and surcharges that, when added to a container rate, can show up what first looked like a good deal as being bad – or vice versa.
Reducing Your Stress – we know you need your cargo to arrive on time, and that if it doesn’t it may actually cost you money. Some importers face price penalties from their customers for every day that an order is late. Another line could see your consignment arriving later, perhaps by as much as 10 days. Uncertainty, therefore, creates a lot of stress, but since freight benchmarking keeps us in touch with our best-placed agents, the chances of being stuck with Plan B are lessened considerably.
Why Multinationals Don’t Benchmark
Logically, multinational freight forwarders should be able to offer huge savings to their customers by getting the best rates from agents. But they are not structured in that way. They arrange massive volumes of cargo, and so tend to accept the flat rate that agents give them, which on balance can be quite good. Their priority is in getting their cargo from A to B quickly, and their customers are often willing to accept a higher price in return for certainty.
Contact Your ICE Team
International Cargo Express made a conscious decision to offer benchmarking, because they recognise the benefits that it has to the small and medium-sized importers and exporters, to whom the modest savings and peace of mind can be significant.
To find out more about how our benchmarking policy can translate into real benefits you, simply call your nearest ICE team. We’ll be glad to address any questions you might have.
The much-anticipated free-trade agreement between Australia and Japan looks set to be completed as soon as July this year, promising a major boon for Australian exporters.
The agreement, which commentators have suggested is to be signed when Japanese Prime Minister Shinzo Abe visits Canberra, would be the second significant trade agreement with a principal Asian market. In December, an agreement was signed with South Korea, Australia’s third largest export market.
A third agreement, with Australia’s largest Asian market, China, is still some way off, but hopes remain that signatures will be swapped before the end of the 2014 following a promise by Australian Prime Minister Tony Abbott in October last year to conclude negotiations with the three Asian economic powers within 12 months.
Trade between Australia and South Korea was worth almost $31 billion in 2012, with exports to the Asian peninsula worth $26.6 billion, or 7% of Australia’s total exports. The economy is expected to be boosted by as much as $650 billion between 2015 and 2030 as a direct result of the Free Trade Agreement.
Under the terms of the agreement, South Korea’s tariffs on a range of agricultural products and manufactured will be eliminated, including the removal of an 8% tariff on automotive supplies and 15% on wine. Tariffs on Australian beef would be phased out over 15 years.
The significance of the trade deal was highlighted by Trade Minister Andrew Robb when he admitted it was a higher priority for the current government than any other issue with Japan.
“Japan’s a huge market. It’s one of the biggest economies in the world and we already have a huge relationship but this would turbo-charge it. There is an enormous scope for Australia to provide high-value products and services to a sophisticated market.”
Two-way trade between Australia and Japan is estimated to be worth $53 billion, and the free trade agreement could see the Australian economy boosted by as much as $39 billion over the next 20 years. The potential for exporting to Japan is, therefore, set to increase dramatically.
According to some media sources, it is expected that tariffs on Australia’s beef exports will be cut by 8.5%, while Australia will eliminate its 5% tariff on Japanese auto imports.
Successfully importing goods into Australia does not only depend on satisfying the Australian Customs and Border Protection Service. Proving your cargo is not a quarantine risk is also essential before it is accepted into the country.
The purpose of having quarantine controls is to minimise the risk of exotic pests and diseases getting into Australia and damaging health, environment and even industry. For centuries, cargo crisscrossing the globe has contributed to the movement of insects, plants and even viruses, and despite modern health standards and technology, these risks remain.
There is a common misconception that the Customs Service looks after quarantine matters. In fact, inspections are carried out and certifications issued by Biosecurity Australia, a division of DAFF.
Until 2012, the Australian Quarantine and Inspection Service (AQIS) was invested with the task of enforcing Australian quarantine legislation, screening both cargo and passengers for animal, plant and human quarantine risks using traditional sniffer dogs and X-ray machines. It also certified Australian exports to ensure they complied with international or nation-specific importation requirements.
But since AQIS was advised on policy by Biosecurity Australia anyway, when the government decided to restructure the DAFF and its agencies, AQIS was absorbed by Biosecurity Australia.
Avoiding the Quarantine Nightmare
Importers should make use of the advice given by experts, like ICE’s own team of customs experts. But even this will not guarantee quarantine problems are avoided. Often, these personnel negotiate with quarantine officers.
According to International Cargo Express Managing Director Ronald Spahr, most problems can be avoided if sufficient care is taken at the port of origin. But with documentation needing to be completed properly, manufacturers responsible for packaging, and quality checkers need to be alert, there is always room for errors.
“You try your best to give manufacturers very stringent instructions about how they should be packed,” he explains. “The manufacturer is actually responsible for that aspect, but to meet required standards, they have to use properly treated timber, if they use timber. You should also ask them to use plastic pallets instead of timber.
“Again, it’s a very complex area because not all of the instructions provided by Biosecurity Australia can be applied to every country. Some do not have timber pallets, but only use plastic. Then you have countries like Sweden, who are very environmentally friendly, so they don’t like using plastics. So, you can get fumigation problems that mean we have to fumigate the cargo here before it can be released.”
The Quarantine Process
So, what happens when it comes to the quarantine process? And how quickly can it be completed? It still begins with the Customs Service, which communicates closely with Biosecurity Australia when it has reason to believe arriving consignments may be a biosecurity risk. Briefly, the procedure runs like this:
Import Declaration Lodged – the importer declares details about the goods to be imported.
Deemed A Risk - this can be based on one of two things. a. The importation documents – including the import permit, fumigation certificate and packing declaration – may not be in proper order b. An initial inspection or observation reveals poor quality or damaged packing, smells or evidence of pests.
Consignments Referred to Quarantine - this is where the cargo is confined to quarantined, necessitating a more detailed inspection and testing.
Release or Destroy - the results of inspections and tests decide whether the consignment is to be released to the importer, and into Australia, or is deemed non-compliant (unsafe) and is either destroyed, exported back to the country of origin, or held for treatment and repackaging.
The length of time a consignment might spend in quarantine depends on a number of factors, like the type of cargo and the testing procedure involved. The 2012 DAFF study also revealed that the average referral-to-release time for cargo was 3 days (sea cargo) and just 4.3 hours (air cargo). However, the wait for consignments deemed non-compliant can be as long as 38 days.
Contact Your ICE Team
For decades, International Cargo Express has been guiding its customers through the quarantine minefield, advising on how best to avoid the quarantine nightmare that some importers face. With a team of in-house experts, its the best choice for steering clear of lengthy and often costly quarantine delays.
For most people, DIY is the most prudent way to get things done. But while it’s generally a good idea for home improvement projects and the like, there are some undertakings that should be left to trained professionals. Amongst importers, one such undertaking is securing Customs Clearance.
An essential stage in the importation procedure, Customs Clearance can be highly complicated, fraught with a web of conditions, categorisations and regulations that can leave the best mind in a spin. So, unless you are an expert in the area, the chances of making a costly error are extremely high.
International Cargo Express Managing Director Ronald Spahr understands every business wants to keep their expenses low, but he warns that taking on the task themselves doesn’t always pay.
“Everyone can take care of their Customs Clearance paperwork themselves if they like, but it’s discouraged by the Customs Service,” he explains. “They make it very difficult so it’s likely to take all day to do it and, in the end, errors will be made. It’s like doing tax. Everyone can do their own tax return, but do they do it as well as an accountant?”
The Australian Customs Service points out that correctly filling out the required paperwork lies firmly on the shoulders of the importer and that “penalties may be imposed for the submission of incorrect or misleading information”.
Where The Complexities Lie
Trade agreements between Australia and the EU can be different to those agreed with the US, ASEAN bloc countries, or individual nations, like Chile or Malaysia. These agreements have a significant influence over the tariffs that are charged.
The category that product types fall into is also influential. For example, the percentage alcohol content in one imported spirit may mean it is put into a different category to other drinks. Tariffs are then linked directly to these categories.
These are just two of many examples that affect the import duty charged, but the chief complexity is created by the regular series of amendments applied as the Australian government negotiates new trade agreements with existing and first-time trading partners. Simply staying on top of these amendments is a full-time job.
The Advantage of Using Professionals
In order to make sure the customs process does not delay delivery, cargo needs to be pre-cleared before arriving at its destination port. But getting Customs Clearance finished in advance is only part of the advantage of leaving it to the experts. They will also know where loopholes might exist.
The entire customs tariff is extremely intricate, and a good customs expert will be familiar enough to know quickly how to get the lowest tariff for the importer. Certain items can be declared differently to what an individual might declare it as. For example, screws can be left-threaded or right-threaded but one might be duty free, the other might not. The customs expert can declare it as the most beneficial for the importer.
To Ronald Spahr, hiring a professional to deal with customs issues is the only logical option for any importer, and providing such expertise is essential for a modern freight forwarder.
“Customs Clearance is a hugely important aspect of the entire importation process, and that’s why we have invested in it,” he explains. “We have five highly paid and highly experienced customs experts working for us in-house. You will also find a lot of forwarders these days outsourcing that service, but we don’t because having our own experts means we can offer our customers the best possible advice.”
Contact Your ICE Team
International Cargo Express has a long history of providing accurate customs advice that saves its customers time and money. With a team of dedicated customs experts looking after your customs concerns, our customs and barrier clearance servicescover everything from documentation preparation to electronic duties payment.
Recently released figures from 2012 have shown that the time has come for independent freight forwarders – such as International Cargo Express – to outshine the multinationals, with many of the major players in the freight forwarding industry experiencing a decline in revenue.
According to an SJ Consulting Group report published by the Journal of Commerce, 2012 saw a decline in revenues as high as 6.8% for a number of major multinational logistics companies, including DHL, DB Schenker, DSV, Panalpina, SNCF Geodis and CEVA Logistics. The independent freight forwarding sector, meanwhile, saw a slight revenue increase during the same period and has gained market share across all major markets.
This finding confirms what we at ICE have experienced in recent years: more and more clients are seeking a personalised service and price. Our independence allows us to tailor solutions for each and every client, sourcing the best freight rates and keeping our customers informed every step of the way. Extensive due diligence and benchmarking exercises ensure ICE is always one step ahead of the competition and continue to be industry leaders.
To find out more about our best price policy and personalised service simply contact the ICE Team. We’d be glad to address any queries you have.
Once upon a time, a freight forwarder was invested with the straightforward task of transporting customer cargo to its port of destination as quickly and trouble-free as possible. But so much has changed over the decades that forwarders now face a choice: either stick to the old-school Transactional Forwarding philosophy or embrace the new Conceptual Forwarding philosophy.
International Cargo Express has chosen the latter, and for some very good reasons. It’s not just about increasing our competitiveness in an industry famous for its level of competition, it also means providing real savings to our customers and developing further the working relationship we value so much.
But, what is the difference between these forms of forwarding? And how do they affect the cost-efficiency of freight forwarding services?
Understanding Transactional Forwarding
Transactional forwarding is offered by freight forwarders that focus on securing the lowest container rates possible from shipping lines or airlines on any particular day.
Basically, forwarders are price-givers and not price-setters, so we tend to get similar freight rates for the same transportation service providers, and as a result, see our margins squeezed by sheer competition. But concentrating on getting low rates has its limitations for everyone.
Understandably, customers will compare the rates quoted to them and choose the one that seems to be the best deal. But all too often, the difference between one option and another is very small and customers are not aware that there are other expenses to consider too. So, a lower container rate itself does not guarantee savings overall.
Understanding Conceptual Forwarding
Conceptual forwarding is where the freight forwarder focuses on more than simply the latest container rates. Instead, all the individual elements of the supply chain are examined to find a cost-saving solution that suits that specific customer.
Forwarders are essentially the architects of the transport chain because they have the experience and expertise to identify the areas where real savings can be made, and choose the best options for their customer based on their unique needs. This includes:
choosing the right mode of transport
choosing the right frequency of charges
maximising the benefits of consolidation
offering distribution services at point of origin or destination
In essence, the overall concept of the forwarding service is looked at, and in this way, the forwarders take care of the interests of their customers. The result is that customers get a better overall quality of service.
Why Transactional Forwarding Is No Longer Enough
Most customers ask for a quote and then compare it to what they have been paying – or think they have been paying. But because freight forwarding is ambiguous, there can be multiple transport solutions to getting any cargo to its destination. Unless the cost comparison between these solutions is done thoroughly, customers will always lose out.
For example, a container rate out of Europe can vary by as much as €200 per box. This is usually because different shipping lines set their own margins on each of the 13 charge codes that are applied. The trick to securing real savings is to ascertain where the differences lie, and this means examining the entire supply chain.
Many customers tend to make the wrong decisions, slowing down the supply chain and making it more expensive. But getting the different elements right is the key to generating saving, so a freight forwarder offering a Conceptual Forwarding Service is a better option for importers and exporters.
What ICE Is Offering
International Cargo Express has been tailoring solutions for individual customers for the past 25 years. Large multinationals offer generic solutions, but they are not always suited to the importers and exporters using them. This is especially true with Australian companies, where over 90% of companies are small or medium-sized enterprises.
We want to offer more to our customers and not be simply a price-giver. By looking at the entire supply chain, we can ensure that our customer saves money. Our staff are experts in their respective fields and so are extremely well positioned to identify the ways in which our customers can reduce costs.
For further details about how our Conceptual Forwarding Services can benefit your business, just contact the ICE Team. We’re always glad to talk to answer whatever questions you might have.
Independent freight forwarders around Europe are being targeted by a fraudulent scam conducted by fake or unscrupulous Chinese agents. Agents are being urged to ensure all due diligence is undertaken before entering commercial agreements with previously unknown partners.
The industry is used to being hit by hundreds of speculative emails from foreign agents offering cheap ocean rates and while most of these are ill-advised and often unprofessional, a number are used as cover for duping unsuspecting victims.
Several regional freight forwarding associations have brought the increasingly prevalent practice to light and highlighted the methods in which the scam operates.
BIFA (British International Freight Association) warned: “On face value these emails appear to be from independent forwarding companies looking for UK partners, by way of offering cheap ocean rates. The majority may be genuine but, for some, deep down there is criminal intent.
“Once an agreement is in place and business starts, all appears to be normal. This is until the cargo arrives at the UK port and no-one has received the original Bill of Lading. When contacted, the Chinese forwarder then demands a large ransom for the release of the original Bill of Lading.
“The dilemma for UK forwarders and their customers is whether to pay, knowing the pain and cost that comes with not having the original documentation.
“BIFA recommends diligence and advises that when entering into any form of agreement with an overseas partner, just asking for a signature on an agency agreement is not good enough.”
Releasing the cargo without the original Bill of Lading can lead to major problems and financial penalties and is to be avoided in all circumstances.
EU efforts to ensure open competition in the container shipping industry increased last week with confirmation from the European Commission that it has begun antitrust proceedings against a number of unnamed global shipping companies.
The move is the last stage of an investigation begun in response to accusations from shippers and forwarders that shipping companies are colluding when publishing intended price increases via the media. The investigation itself is aimed at ascertaining whether there is what the EU terms a ‘concerted practice’ between these companies, with their announcements intended to communicate price hikes between them rather than a genuine warning to customers.
In a statement released on November 22, the EU Commission revealed that its investigation has been ongoing since as long ago as 2009, since when “these companies have been making regular public announcements of price increase intentions” either on their own websites and as press releases in the “specialised trade press”.
“These announcements are made several times a year and contain the amount of increase and the date of implementation, which is generally similar for all announcing companies,” the statement continued. “The announcements are usually made by the companies successively a few weeks before the announced implementation date.
“The Commission has concerns that this practice may allow the companies to signal future price intentions to each other and may harm competition and customers by raising prices on the market for container liner shipping transport services on routes to and from Europe.
“The Commission will now investigate whether this behaviour amounts to a concerted practice in breach of Article 101 of the Treaty on the Functioning of the European Union (TFEU) and of Article 53 of the European Economic Area (EEA) Agreement.”
It’s generally believed that proving any collusion or wrong-doing will be extremely difficult given that, in recent years, shipping rates have fallen to a level that is considered by many in the industry as unsustainably low. This strengthens the idea that announced increases are simply a legitimate effort by these companies to keep their own businesses afloat in the face of extreme competition.
The Commission has confirmed that there is no legal deadline for bringing an antitrust investigation to an end. The duration of an investigation depends on a number of factors, including the complexity of the case, the cooperation of the undertakings with the Commission, and the exercise of the rights of defence.
While the individual companies have not been named, Maersk Line has confirmed that it is amongst them, issuing a statementthat they are confident they have operated within the scope of the EU’s antitrust rules. In 2011, the offices of 14 of the world’s largest shipping companies – including Maersk – were targeted by EU authorities in a series of dawn raids across the continent.
European law strictly defends its open market and competitiveness policies so as to protect its markets against the influence of cartels. Any activities that may suggest companies are colluding or fixing prices between each other are, therefore, carefully investigated, and it is this factor that has brought the container shipping companies under the Commission’s microscope.