DP World Infrastructure Surcharges - proceeding as scheduled for May 2020

Wednesday, April 1, 2020

As outlined in our member notice disseminated on Monday 30 March 2020, I had a lengthy conversation yesterday with Glen Hilton, Chief Executive Officer DP World Australia (DPWA) in terms of the changes to the Infrastructure Surcharges (Terminal Access Charges) taking effect in May 2020.

Disappointingly there was no agreement in terms of the appropriateness of the charges nor the scheduled changes to rates.

I implored DPWA to reconsider and provide a reprieve on import businesses with our projection that many may not survive the financial hardship of the current and emerging economic environment. This may in turn lead to excessive container congestion at terminals which is the last thing that we need during this COVID-19 crisis. 

Glen's argument being that DPWA had discounted export containers (between $9.50 and $18.50) and are cheaper for imports than their major competitors.
 
Accordingly, the scheduled changes will proceed as listed below:
 
A complete list of all stevedore Infrastructure Surcharges nationally is available HERE

Choices for Government

Freight & Trade Alliance (FTA) and Australian Peak Shippers Association (APSA) position is Infrastructure Surcharges should be eliminated with stevedores to recover costs from their commercial client, the shipping lines. In turn, this would leave shipping lines to negotiate freight rates and Terminal Handling Australian Port Charges with their commercial clients being exporters, importers and freight forwarders.

After talking to Glen, my view was confirmed that this outcome would be virtually impossible to achieve on a voluntary basis.

Stevedores are clearly aggressively pursuing cost reductions, productivity improvements and investing heavily in measures to keep the ports operational. They are also competing fiercely to compete to win / retain shipping line contracts in a contracting market with increased deployment of alliances / vessel sharing arrangements. They have become increasingly dependent on the Infrastructure Surcharge revenue to offset the shortfall from what they can charge shipping lines to cover operating costs and remain profitable.

Therefore, the only way that the FTA / APSA position can be achieved is via regulation.

In the event that the Infrastructure Surcharge was eliminated by law, stevedores would be on a level playing field and would be left with no option but to recover operating costs from their commercial client - like every other sector of commerce whereby price and service can be fairly negotiated.

Choices for Government are:
  1. Do nothing and leave industry at the mercy of the stevedores  (we hope that governments do not follow this "weak" option as we would no doubt simply see stevedores continue the cycle of taking turns to ratchet up pricing);
     
  2. Regulate with a government body to oversee / approve any change (better than option 1 but far from ideal as stevedores will still achieve incremental increases on what is already a high base); or
     
  3. Follow the FTA / APSA position and regulation to prevent Stevedores charging transport companies anything other than a container booking fee (any other fee  such as an Infrastructure Surcharge or Terminal Access Charge, can only be levied against the shipping lines who are in a commercially strong position, to negotiate such increases to port charges).  

Regulation

It was encouraging to note The Hon. Melissa Horne Minister for Ports and Freight (Victoria) shares our concerns as reported yesterday in The Age. In context of the most recent DPWA announcements, the Minister was on record as saying "This decision is unacceptable," and "Especially at a time when everyone should be pulling together to keep freight moving."

We anticipate a similar reaction from The Hon. Andrew Constance, Minister for Transport and Roads (NSW) who was previously ignored when warning DP World Australia against the last price increase of 43 per cent introduced on 1 January 2020.

In a NSW context, the heads of power in the Ports and Maritime Administration Act Schedule 4 provides a broad sweeping power to allow the minister to regulate these charges without limitation.
 
Supply chain charges
Regulating (or authorising the Minister to regulate) the charges (supply chain charges) that may be imposed for or in connection with the operation or provision of facilities or services of the port-related supply chain at a port or supply chain facility, including (without limitation):
(a)  setting maximum supply chain charges, and
(b)  regulating the manner in which supply chain charges are to be set or determined (for example, by providing for charges to be set by means of an auction or other market-based pricing mechanism), and
(c)  specifying or otherwise determining the persons by whom supply chain charges are payable, and   
(d)  regulating the collection and recovery of supply chain charges, and
(e)  prohibiting the imposition, collection or recovery of supply chain charges contrary to the regulations. 

Our message to state governments will be simple in what is shaping up to be an extended period of economic uncertainty "please no more reports, the issues are obvious and we now need decisive action".

FTA / APSA will continue the lead in advocating for reforms and will keep members informed of developments.
Paul Zalai -  Director and Co-Founder, FTA / Secretariat, APSA