Shipping Companies Surcharges and Rising Cost of Business At Seaports

In this report, Abiola Seun examines the recently introduced surcharges slammed on Nigerian Importers by two foreign shipping companies, CMA-CGM and Hapag-Lloyd and how it contributes to high cost of doing business at the seaports.

High cost of doing business at Nigerian seaports has been identified as one of the many challenges facing the ports and making it uncompetitive and unattractive compared to other neighbouring ports.

Due to high cost, a vast majority of indigenous importers have abandoned Nigerian seaports for neighbouring ports and end up smuggling or transporting the goods into the country.

To this end, Nigeria is losing huge amount of money that would have accrued into the coffers of the federal government to neighbouring countries.

But, while the Nigerian government is doing everything possible to reduce cost and as well make the Nigerian ports efficient and effective, foreign shipping companies have continued to be a clog in the will of the progress for the government.

They increase their charges by slamming surcharges at will on Nigerian importers thereby increasing the cost of doing business at the seaports.

For instance, two foreign shipping lines CMA-CGM and Hapag Lloyd recently issued electronic statements, announcing the increment in their freight rates with the introduction of what they called ‘Peak Season Surcharge’ (PSS) on all cargoes originating from anywhere in the world to Tin-Can, Apapa ports in Lagos and Onne port in Rivers State.

The Surcharge on Nigerian importers however caused outrage among importers and clearing agents operating in the country.

The surcharge reviewed its Peak Season Surcharge (PSS) on all container types originating from anywhere in the world to Tin Can Island, and Apapa ports in Lagos, Nigeria.

The German-based firm, which is also the Fifth Largest shipping company in the world, in a memo obtained, claims a 20-foot and 40-foot containers from China, Taiwan, Hong Kong, and Macau would pay $700 PSS each; while those from USA and U.S. territories would pay $700 each from March 15; and those coming from the rest of the world would pay €610 on the consignment.

The review it said is to enable it, “maintain a continued high level of service.”

Accordingly, the company excluded the consignment from the United States of America in the rate review.

The growing demand leads to lack of space on vessels and increasing costs for supplying sufficient equipment. Carriers can implement this surcharge any time and at any level until further notice.

In practice, PSS functions like the General Rate Increase (GRI). It is usually announced as an additional fee on top of the base rate, although it may be cancelled or mitigated at a lower rate.

Hapag-Lloyd said the PSS would become effective from March 1, 2019, until further notice for all origins (excluding USA).

It added that consignments from USA would also pay PSS from March 15, 2019 until further notice.

According to the company, a 20-foot and 40-foot containers from China, Taiwan, Hong Kong, and Macau would pay $700 PSS each; while those from USA and U.S. territories would pay $700 each from March 15; and those coming from the rest of the world would pay €610 on the consignment.

Hapag-Lloyd had in November last year introduced PSS for all container types to Nigeria at the rate of $505 and $450 each.

It has a fleet of 222 modern container ships and a total transport capacity of 1.6 million TEU (Twenty Foot Equivalent Unit).

Also, another shipping line, CMA/CGM slammed another $750 on each container coming into Nigeria.

The Singaporean shipping company released on Monday a Peak Season Surcharge (PSS) which will make a Nigerian importer pay in excess of $750 (N270,000) on freight charges.

According to the advisory note made available to journalists and titled ‘PSS – Cargo to Apapa, Tin-can, Nigeria’, the shipping company said the new surcharge will affect Apapa, Tin-Can and Onne port in Nigeria.

It reads, “Dear Esteemed Customer, in a continued effort to provide with reliable and efficient service, CMA CGM Group wishes to inform you of the Peak Season Surcharge (PSS) update: PEAK SEASON SURCHARGE 20′, 40′ 20′ REEFER or 40’REEFER to Apapa, Tincan, Nigeria USD 750 USD, 750, USD 750 and USD 750 respectively.

According to the note, “From Asia including China, South Korea, Taiwan, Japan, South-east Asia and Bangladesh; from India Sub-continent and Middle East Gulf, from North and South America and from Africa to Apapa, and Tincan, Nigeria.

“All cargo Dry, Reefer, OOG and Breakbulk. As from March 7th, 2019 (date of loading) for non-FMC trades, as from April 1st, 2019 (date of loading) for FMC trades.”

However, the surcharge has raised eyebrow from stakeholders in the sector who expected the government to step in to arrest the situation.

They expressed shock and concern over the way and manner foreign shipping companies introduce new charges on Nigerian bound cargoes.

Speaking to newsmen, former National President of the Association of Nigerian Licensed Customs Agent (ANLCA), Olayiwola Shittu stated that before any shipping company can jerk up freight rates, the law says there should be a stakeholders meeting.

According to Olayiwola Shittu, “Because many of these shipping companies have affiliations politically, that is why they do here what they cannot do in their country. Many of these shipping companies have highly placed Nigerians as their promoters. That is why we say the government itself is the enabler of the problems in the ports.

“In saner climes, you cannot just increase charges by fiat and get away with it. It’s not done. But what can the Nigerian Shippers Council (NSC) do? Mr. President has not signed the National Transport Commission (NTC) Bill which would have assisted with all the necessary penalties and sanctions.

“If the NSC decides to close down a shipping company over increase in charges, somebody from the top will just call the Executive Secretary of the agency to remind him that he cannot go to that extent. That is what is happening in the ports. It is sad when we have a government agency that cannot enforce its powers. It’s pathetic.”

Also speaking, a Business/Investment Consultant, Dr. Vincent Nwani explained that due to multiplicity of regulators in the ports, some operators don’t see the NSC as the port economic regulator.

In his words, “Late last year, we had a meeting with some operators in the ports, which included terminal operators, shipping companies, Nigerian Ports Authority (NPA), NSC, Bureau of Public Enterprises (BPE) and other government agencies. From that meeting, it was very clear that some of the operators don’t still see the Shippers Council as the economic regulator.

“When the question on ‘who regulates who’ came up, we were hearing answers like NPA, BPE etc, none mentioned the Nigerian Shippers Council. It is when you have multiplicity of regulators in a sector that this kind of confusion sets in. We ended that meeting without concluding on who actually regulates who at the ports.

“Any form of increment at the ports is detrimental to the Federal Government policy on Ease of Doing Business. Nigerian ports are arguably the most expensive in West Africa. Something needs to be done to address this incessant increase in freight rates by the foreign shipping firms because 65percent of what we consume in Nigeria are imported.”