Shippers in West and Central African countries have been over-burdened over the decades by unfair surcharges and high local shipping charges imposed by international shipping lines, who believe they have got the monopoly of shipping with their merchant bottoms. This development has continued unabated in defiance to complaints and subtle rejections by the shippers and regulatory authorities of various African countries. Worried by its alarming consequences on the economies of the region, and Nigeria in particular, the Nigerian Shippers’ Council(NSC) under the auspices of the Federal Ministry of Transportation hosted the Union of African Shippers’ Council(UASC) and the Global Shippers’ Forum(GSF) organized a summit on unfair surcharges and local shipping charges in West and Central African States. The Secretary General of GSF, Mr. James Hookham, brought the GSF surcharges campaign from London to Nigeria. In this encounter with MMS Plus Newspaper, he bares his mind on the seeming intractable market slap Africans have had to endure because of capacity disadvantage in shipping. His antidotes to this seem very doable, writes Kingsley Anaroke, who was there. Enjoy the reading:
In the course of your presentation you talked about the Global Shippers Forum event in London coming up in September. You highlighted areas of threats and you made mention of the IMO Low Sulphur Fuel deadline in January 2020. You said that is one of the threats to the possibility of having harmonized surcharges. Why do you think that could constitute a threat?
The first reaction that shippers got from the shipping lines with this new regulation is for the shipping lines to announce a whole load of new surcharges. So, shippers were naturally cautious because once again there are new costs confronting the shipping lines without any consultation or discussion with shippers. They are simply posting on their websites the amount extra that shippers are supposed to be paying. As if that was not bad enough, some of the shipping lines were putting these charges in place more than twelve months before the new regulation takes effect. The first postings went up in the autumn of last year, which was 15 months before the regulation applies and the shipping lines started including the costs.
I think shippers were naturally disappointed and jaded because it was the same old reaction from the shipping lines; new regulations, new surcharges and shippers saw this as an unverified gross mass speculation only a couple of years previously. So, that’s why we think that for shippers, the IMO 2020 Sulphur cap will be a surcharge issue rather than an environmental issue.
On the issue of war risk insurance premium; over the years we have come to understand that even when these things are not applicable and when these insurance companies are supposed to make payment, sometimes, they don’t. We are surprised that even at the GSF, as a global body that takes care of shippers; you seem to be helpless.
We are governed by what our members think and if our members think that we should be doing that, they need to let me know. I rely on our national and regional members for that information. They are closest to the situation but I think a good example was how it has been identified that Lloyds of London had a role to play and I think we can support that. I think we can do that through the insurance market. They are very well connected with the insurance sector through transport club with the hull insurers, cargo insurers and I’m sure that we can find a way of asking the risk assessors in Lloyds to not just have another look but have a review of the Gulf of Guinea situation on a frequent basis. We shouldn’t have to wait for another two or three years before there is another review. We should be able to have that re-assessed every 3 months or 6 months.
You also talked about all- inclusive freight rates. What do you mean by that?
This is mainly for contracted business. So, when you negotiate a year’s contract with a shipping line, you expect terms of that contract to be honoured, including the price. What a lot of shippers find is that the base rate is applied but when the invoice arrives, there is a lot of other additional surcharges demanded which were never part of the contract. In any other world of procurement, fined services or even products from any other sectors of commerce, you agree a price, quality and delivery date and that’s the deal. It’s only on exceptional cases that your supplier could come along and say ,“I need to charge you a little bit more because of increase in the cost of raw materials”. Well, you might have a conversation and review.
In the shipping sector, you have a contract, you think you have a price and then they said, “no, no; we have a price on our website”. You have several surcharges coming into the contract. It’s a very unreasonable and unfair practice. What a lot of shippers would like to see is a single price in which the shipping line takes responsibility for all the other incidental costs. I think shippers would recognize that price might be a little bit higher on the spot at the moment, then it will be at one price. There will be no extras. It is for the shipping lines to organize its suppliers of port services, management of its vessels and so on. They should make assessment of food price, the fuel currency fluctuations and so on in order to avoid these additional costs coming through. Every other supplier of services in the transport sector makes the assessment of his cost with an all-inclusive price, why is shipping different? It’s not different fundamentally to the aviation sector; it’s not different fundamentally to the supply of other goods and services.
When you talked about solutions, you talked about shippers rejecting the surcharges. We know it is very difficult in this part of the world because sometimes you have to be aware there is even one existing before you reject that. Are you giving us confidence that in the Global event to be held in September, there is going to be hope for the Shippers’ Councils of various regions to find solution these trade inhibitors?
It’s just one strand of the overall strategy. I think that from what I heard at this event in Abuja, there is a lot of awareness about the surcharge issue. You had a whole day’s conference about it. In other parts of the world, I believe that surcharges are not well understood and they should be challenged. I know that with my own British Shippers’ Council which I represent, not a single shipper has paid for any IMO 2020 surcharge because they said no. They challenged it and the shipping line withdrew the surcharge. I know it is very different in other markets, but if you start to push back, it will do two things. The first is that it will make the shipping lines aware that this is not going to be easy anymore and it will force them to think through what they are charging. Secondly, it will help give all shippers the confidence to question and to make sure they understand properly the bills, invoices that they are being asked to pay.
Do you think the idea of coming up with legislation from various countries affected would solve the problem?
It certainly solved the problem in Sri Lanka, as you heard. Now, that may be peculiar for the economy and for the government in Sri-Lanka, but it was one way in which a national government was supporting its exporters and importers. We heard in the conclusion at the end of the proceedings that there was a call for the national governments to be more engaged in this issue. I think Sri Lanka is a very good example of how government engagement can work to the benefit of shippers.