Asian shippers are urging Sri Lanka to introduce laws to prevent arbitrary price increases by shipping lines.
Asian shippers are urging Sri Lanka to introduce laws to prevent arbitrary price increases by shipping lines. These price increases by shipping lines make Sri Lankan exports more expensive. "Over the past year, liners continued to collude to impose new and higher surcharges. If this cartelization by shipping lines continues, the cost of shipping out your exports will artificially increase. This will hurt your economy," the Chairman of the Asian Shippers Council (ASC), John Lu, told journalists last week after the ASC annual meeting, hosted in Sri Lanka for the first time.
Many Asian countries still do not have laws to prevent shipping line cartels. This gap in the legal system, say Asian shippers, are leaving small exporting countries like Sri Lanka open to exploitation by shipping lines, that control sea cargo transport.
"Asia is the world's biggest merchandise exporter, exporting a total of over US$ 1 trillion each year, 90% of it transported by sea. But Asia is the only major trading bloc that has no proper regulatory protection for their shippers against shipping linecartels," said Mr Lu.
Shippers say shipping lines artificially increase shipping costs by hitting shippers with ad hoc surcharges, on top of the official freight charges. Shippers pass on these costs to exporters, making exports more expensive. "For instance, in the apparel sector, exports are mostly under FOB and the buyer tells the Sri Lankan exporter what shipping line to use. The buyer negotiates a freight rate with the shipping line. But the shipping line tells shippers in Sri Lanka to pay extra charges, on top of the freight rate. Shippers pass on these extra costs to the local exporters," explained the Chairman of the Sri Lanka Shippers' Council, Randolph Perera.
This year freight costs reduced by 50% to 70% compared to 2008. But shippers say these reducing freight costs are often not passing onto Sri Lankan exporters because of the extra charges by shipping lines. At this point, say shippers, different shipping lines come up with different 'surcharges' whenever they want, because there are no laws to control such exploitative behaviour. "Export volumes have reduced because of the global recession and there is an over supply of ship capacity. But the liners are artificially pushing up prices to shippers through a range of additional charges," said Mr Lu.