TPT postpones new breakbulk tariff structure

Transnet Port Terminals’ (TPT) controversial new breakbulk tariff structure – where all quayside costs are to be thrust upon the cargo owner/agent – has been delayed until at least midyear, as TPT plans to discuss the issue further with private sector interests, according to Don Maclean, TPT’s commercial GM. “This,” he told FTW, “has been on the cards for some time. There’s currently a split tariff, but we want to combine them. “But I don’t think the consultation has been sufficiently in-depth, and we need to have a full engagement with our customers and the shipping lines.” Part of this, Maclean added, is to “achieve some sort of understanding with the lines”, and make sure that they refund the invoicees for any costs that the lines are committed to in the transport contracts. When TPT first made the proposed new tariff structure public (FTW, January 27, 2012) it was met with a mixed response. On the shipping line side, there was a qualified acceptance, although some doubts were expressed. But on the cargo owners/agents side, the response was violently against. As maritime adviser to the SA Association of Freight Forwarders (Saaff) Dave Watts said (speaking on his own behalf): “This is a retrograde step that will result in an overall increase in breakbulk ocean supply chain costs.” The latest objection from the cargo owners’ side is from Doron Friedman, consultant to Clyde Steel, who told FTW that, in 25 years of trading internationally for many large trading companies around the world, he had never seen a similar case of conflict with the internationally accepted trading terms. “The TPT proposal conflicts with Incoterms – which are the internationally accepted trading terms used by all institutions and traders, importers and exporters as well as banks, shipping lines, and insurance companies,” he added. “The conflict lies in the transfer of responsibilities. Under Incoterms CFR – LO (cost and freight – liner out) the responsibility for the cargo lies in the shippers’ hands to discharge the material on to the quay side, and the cost thereto.” Should this TPT proposal be implemented, he added, the result would be that the SA ports would be the only ports in the world, to his knowledge, that would place the responsibility on the shipper – but the costs on the receiver. “As a matter of logic,” Friedman said, “one cannot transfer costs and responsibilities away from each other. This for the obvious reason that they are inextricably linked, and you lose your leverage over the executing party if you do not control the financial flow – which, in turn, controls the actual work.” His second objection is the fact that Incoterms already allows for this type of transaction – that is, the His second objection is the fact that Incoterms already allows for this type of transaction – that is, the receiver being responsible for the charges as well as the responsibility of the discharge of the cargo. This, he noted, falls under the incoterm CFR – FO (cost and freight – free out). This shifts the responsibility and the accountability to the receiver, as opposed to the CFR LO term where it applies to the shipper. “Should one party have the responsibility and another the accountability, then there would be considerable cause for dispute whenever things do not run smoothly,” said Friedman. “This would see the accountable party always carrying the onus – as they would be out of pocket in all instances – and the responsible party always in a position to walk away. And remember that this responsible party is not a local, but an international one – and it would thus be extremely difficult to enforce, given that they are not bound by SA law.” Friedman also highlighted another important point of conflict. When buying on a CFR FO basis, he noted, it is the responsibility and accountability of the receiver to discharge the cargo. However, when there are several receivers on a single vessel, you would have many stevedoring companies all jockeying for position to discharge on time in order not to face penalties. “This, Friedman said, “because the receiver holds their funds and discharge contract terms. “In turn, this places immense pressure on the vessel and its crew to collate all these parties to discharge simultaneously – not to mention the safety issue that this would create.” It would also create confusion and control issues with the ship itself. “This,” Friedman added, “is the reason why shipowners generally do not allow minority shippers to contract on a CFR FO term – because it would cause delays in the port, - ultimately translating into additional costs to the shipowners.” Friedman does not disagree with TPT’s motivation to streamline its operations to become more efficient. “But it cannot achieve this by passing the buck to the receivers without consideration to all the other parties concerned – or considering international trade terms and conditions and practices,” he said. Should such a system be implemented, according to Friedman, the end result would be that breakbulk ships would rather call on other ports – and freight rates to SA ports would increase to allow for these problems and delays.