Shipping’s dark side is revealed behind high container tariffs

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Ocean carriers are cracking down on the rise of fraudulent contract bookings driven by Asia’s sky-high FAK rates.

In addition, carriers are winning business from shippers based on “speculative” quotes.

Struggling to overcome supply chain disruptions, beleaguered shippers facing massive increases in their transportation costs have cast a wider net to seek new service providers and have indirectly encouraged the emergence of what one contact described as the “dark side of the industry.”

MSC said it would apply a misdeclaration fee of $1,000 per container for Asian exports worldwide for “any misuse of the contract.”

MSC said the charge would apply for “any named account change, after the booking has been confirmed by MSC and in the event the rate is lower than initially booked.”

The carrier added that its interpretation of a “misuse of the contract” included “goods and port pairs different” from those tendered.

Another carrier source said he was “not surprised” that MSC took a hard line on contract abuse.

“In recent months it has gotten out of control as some forwarders have found ways to circumvent the system to book space at high rates and then somehow alter the terms after shipment to a lower rate,” he said.

“If this is true, it would show that carriers are cherry-picking rates for space and shippers are taking advantage of their greed to secure bookings,” one forwarder said.

Another NVOCC contact said that while he did not condone the fraudulent actions of “a small minority” of forwarders, he did not blame them for trying to mitigate the impact of huge freight rate increases.

“Let’s not forget that, in some cases, Europe-bound shippers are paying five times as much to ship a box this year as they did last year. The companies can’t nearly absorb those kinds of hikes and neither will the consumer, so unless they find another way, everybody loses, including the shipper in the long run,” he said.

In fact, the rate crisis seems to herald a return of freight forwarders to quote “speculative” rates to attract shippers, which are lower than market rates, and to bet on carriers discounting rates back in due course.

“Forward quoting is often a process that less scrupulous forwarders use to make their current supplier look expensive by comparison. After all, they can quote exactly what they want in a moving market, when in reality they are not actually running their business,” said U.K.-based Westbound Logistics Services.

Freight forwarders attract business by undercutting the market, but if rates don’t come down, they simply pass the cost overrun on to the customer.

Westbound Logistics co-owner and director Ryan Clark said he had witnessed a growing trend of forward quoting or “carrot dangling” by freight forwarders and logistics providers “noticeably absent when rates were skyrocketing.”

He added: “Importers have overpaid for their freight from Asia for many months, and are understandably looking to make savings.”

However, he urged shippers not to fall into the trap and to “proceed with caution and be sure to talk to their current supplier before jumping ship.”

Source The Loadstar

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