Floated surcharges raised import and export freight costs

At the meeting on surcharges beyond the cost of container shipment for import and export by sea, the Vietnam Maritime Administration reported that there are approximately 38 foreign shipping firms providing container shipping services in Vietnam, handling more than 90% of the import and export cargo volume, with ten major shipping companies handling transportation routes to America and Europe.

"Fee storm"

According to Mr. Phan Thong, General Secretary of the Vietnam Shipper's Association, the surcharges charged by shipping firms to import and export shippers have lately altered fairly quickly, considerably harming the shippers. Import and export activities are hampered by global political turbulence, which has obstructed transportation routes and severed numerous international sea channels, increasing both costs and delivery times dramatically.

"While ports loading and unloading taxes have grown by just 10%, which is little in comparison to port expenditures, shipping company surcharges have climbed significantly, with many absurd points. Shippers feel pushed since they are tiny, fragmented, and have a poor voice. Shipping businesses must set appropriate pricing so that all parties may earn while still supporting one other. We recommend that the state study and amend the applicable legal provisions, including making surcharges an obligatory declaration item," Mr. Phan Thong said.

According to a Vietnam Maritime Administration study on the subject, surcharges in excess of the transport freight collected by shipping firms for Vietnam's import and export products apply to all types of exported and imported commodities. The major charges for exports are THC, documentation, seals, and customs declarations (for products bound for the United States and Europe); for imports, the expenses include THC, container cleaning, container imbalance, and delivery orders. THC makes up the biggest amount, with all transportation firms collecting it.

A few shipping firms additionally collect costs for container imbalance, container repairs, and cargo weight declarations. Some uncommon fees exist at specific periods or seasons, depending on the time and the shipping company's policies, such as port congestion surcharges, fuel surcharges, peak season surcharges, etc.

The surcharges have been disclosed on the shipping firms' Electronic Information website, however the listings only display the amount, not the reasons for the charges, or the start and finish timeframes. The shipping corporations choose the price of these fees without consulting with customers.

Since the beginning of 2024, numerous shipping firms have increased fees for import and export container goods moved by sea, most notably the THC (Terminal Handling Charge). The typical rise in THC service costs is 3-22%, with average prices ranging from $120-$155 per 20' container to $180-$270 per 40' container. Pancon charges the most: 3.4 million for a 20-foot container and 6.57 million for a 40-foot container, which equals $140 and $270, respectively.

Other surcharges have also increased, such as TS Lines' container cleaning fee, which increased by 40% from February 1, 2024 (from 150,000 to 210,000 VND for a 20' container, from 300,000 to 420,000 VND for a 40' container); and MSC's DOC and DOF (document surcharge) increased by 12.5% from February 1, 2024 (from 800,000 to 900,000 VND). Yang Ming, a shipping business, announced a reduction in other fees outside THC in February and March 2024, with the exception of the import container balance surcharge, which will increase by 30% beginning in March 2024.

Meanwhile, following Circular No. 39/2023/TT-BGTVT, the container loading and unloading service pricing frame at ports was changed to rise by 10% in areas I, III, and deep-water port regions, with increases ranging from $3.3-$5 per 20' container to $5-$7 per 40' container. However, shipping companies modified THC service fees by 3-22%, resulting in a $4-$26 increase per container. Although THC service prices charged by shipping companies were previously 45-75% higher than container loading and unloading service prices at ports, the shipping companies continue to adjust the price increase, resulting in an even greater disparity between THC prices and port loading and unloading prices.

Previously, transportation prices had been "climbing" due to conflicts in the Red Sea area, with shipping companies forced to change routes, not passing through the Suez Canal but going around the Cape of Good Hope, extending the ship's journey from 10 to 14 days compared to before, incurring many additional transportation costs, and resulting in high transportation prices. For example, in January 2024, the cost of container shipping by sea, particularly routes to Europe and the US/Canada, increased dramatically compared to December 2023, depending on the operator and route. The container transportation price index peaked in late January 2024, at around $3,900-$4,200 per 40' container, over three times more than in November 2023.

Although the price trend has progressively reduced, it is still 12% lower than the peak in January 2024, but 82% higher than the same month last year, 131% more than the average price prior to the Covid-19 epidemic, and 24% higher than the average price over the last ten years. Specifically, the cost of carrying a 40-foot container from Vietnam to Europe fell from $5,500 to $3,500, and from Vietnam to America from $3,500 to $2,500.

The transportation industry is projected to remain difficult owing to continuous armed conflicts. As a result, import and export enterprises must strategically organize their production and transportation to guarantee that signing long-term contracts considerably reduces the impact of price variations.

Inadequacies in the mechanism

The Vietnam Maritime Administration criticized the administration of freight rates and surcharges. Specifically, the published freight prices do not correspond to the actual freight rates, and shipping firms have varied freight rate regulations for different clients. Shipping businesses typically post freight rates at exorbitant costs to guarantee compliance with listing laws. The real pricing are not publicly available and are described by the corporations as business secrets.

The published surcharges just display the price, without specifying the start and finish hours, explaining the rationale for the charges, or keeping track of the listing time and revisions.

The shipping firms determine and enforce the premium prices, with no agreement between the two parties. Vietnamese shippers are typically not the ones negotiating and signing transportation contracts (mainly by foreign partners), thus they must accept the terms of the shipping companies in order to obtain the products. The rates of surcharges imposed by shipping firms are not registered and notified to the appropriate authorities, making it impossible to regulate the costs and types of surcharges. As a result, a more advanced management mechanism is required than the price listing technique.

Regarding discounts, price reductions, or refunds for certain client groups: Based on discussions with shipping firms, all companies have a freight rate policy for each customer group, with individual costs agreed between the two sides. Customers that sign long-term contracts have set freight rates that do not fluctuate during the contract's validity. Small clients that do not sign long-term contracts see freight rates fluctuate with the market.

Customers who are agents or intermediate forwarding firms (forwarders) signing transportation contracts with shipping companies are regarded clients of the shipping companies, and the shipping companies have no say in the pricing forwarders provide to shippers.

Meanwhile, during the conference, Mr. Nguyen Trung Dung, a representative of Yangming Shipping Company in Hanoi, indicated that the increase in surcharges by shipping firms was caused by the challenges they had when operating below the break-even mark. With various worldwide developments posing challenges for shipping businesses, and Vietnam being a surplus-exporting country, there is always a container scarcity. Financial challenges are the reason why transportation firms raise surcharges to balance.

The representative of MSC shipping firm indicated that the company had been losing money for many years, so when the market began to improve, the shipping company boosted rates in response. The shipping firm is under a lot of pressure from costs, and the rise in loading and unloading fees coincides with the increase in port service pricing, which is totally reasonable. Of sure, some agents are taking advantage of excessive price rises.

Opinions during the discussion recommended that shipping businesses' fees and surcharges require a tougher control system. According to Mr. Le Do Muoi, chairman of the Vietnam Maritime Administration, shipping firms' tariffs and surcharges are now "floating," enabling them to determine.

At the same time, the maritime authority leader urges shipping companies to work together to reduce surcharges to help Vietnamese businesses, encouraging shipping companies to find ways to reduce surcharges as much as possible or to charge at a moderate level to ensure the shipping companies' profitability.

Mr. Mười emphasizes the importance of communication and negotiation between shipping firms, enterprises, and cargo owners to achieve harmonious solutions in the absence of regulatory punishments and legal frameworks for management. The listing of shipping firms' surcharges should likewise be open and visible.

"Most of the shipping companies that increase surcharges are small, individual companies. Larger shipping companies can balance costs better, so they may not increase or slightly increase THC surcharges," Mr. Mười observes and emphasizes that in the future, the Maritime Authority may organize inspection teams to strictly control brokerage companies and agents through Vietnam's legal mechanisms and regulations, addressing issues where they arise.