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Big Shipping Heist of 2004: $150 million


Import News: The Big Shipping Heist of 2004: $150 million

Shipping companies have colluded to transfer up to $150 million from importers to their bank accounts. Government does nothing.

Our Wellington Secretary, Ivan McNicholl, warned us of freight increases of up to 80% in 2004 during our last annual meeting. Here are some of the freight rate increases announced for 1 April:

All origins in North Asia (except Japan), South East Asia, and Indian Sub-continent: USD 250.00 per 20' container USD 500.00 per 40' container USD 10.00 per cbm/1000kgs (LCL cargo)

Japan: USD 150.00 per 20' container USD 300.00 per 40' container USD 6.00 per cbm/1000kgs (LCL cargo)

But wait, there's more. Shipping companies have said that, as part of their joint 'business plan,' rates will increase again by these same amounts on the 1st July and again from 1 October.

Europe and Middle East: USD 250.00 per 20' container USD 500.00 per 40' container USD 10.00 per cbm/1000kgs (LCL cargo)

The lines involved have also advised that rates will increase again from 1 October.

Australia: AUD 100.00 per 20' container AUD 180.00 per 40' container AUD 5.00 per cbm/1000kgs (LCL cargo)

So, what is this likely to amount to? One of our members, Paul Gilbert, made this quick calculation on the back of an envelope: "New Zealand imports 450,000 containers per year. Say that 60% (275,000) come from the affected areas and that the average increase is USD 350. This amounts to something close to NZ$150 million in added costs to the New Zealand economy."

In reality, shipping companies will not be able to get away with these increases for all their clients. Larger importers will shop around and will continue to get discounts; the increases will apply mainly to smaller companies, who lack the negotiating power of The Warehouse or Fonterra.

Shipping companies are quite open about the fact that they collude with each other against importers. They hold pricing meetings and advertise their decisions in the Shipping Gazette. In any other industry, this type of anti-competitive behaviour would land the executives involved in trouble with the law but, for some reason, overseas shipping is specifically exempted from the Commerce Act.

We pointed out this anomaly to the former Trade Unionists running the transport sector of our Government, but they couldn't give a fig. Instead, they busied themselves with attempts to restrict foreign-owned ships from the coastal trade and worried about their perception of the excessive market power of Ports.

Things are different in Australia. This trade was brought under Part X of the Trade Practices Act in 2001, following the 1999 review by the Productivity Commission.

According to the Lloyd's List Daily Commercial News of 16 October 2003, "The last ACCC investigation of liner shipping, which followed a similar rapid burst of increases, was on the southeast Asian export trade in 1999 and 2000. That investigation was eventually inconclusive, even though much of the trade data originated in Australia. However, the ACCC investigation did see further increases in that trade shelved, only resuming at a much lower key."

We will be asking government to again review this area. We will do this as soon as we have a government that is not inimical to (and quite ignorant of) business. In the meantime, our advice to importers is to shop around. These cartels never quite manage to keep a total lid on competition.

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