The Vietnam Maritime Administration has just reported to the Ministry of Transport the results of an interdisciplinary inspection team on shipping rates and surcharges at a number of foreign shipping lines operating in Vietnam.

Unloading goods at Quy Nhon port. Photo: T.Tung/TTXVN

Loading and unloading surcharges account for the largest proportion

According to the Vietnam Maritime Administration, sea freight rates by containers began to increase sharply from October 2020, especially on routes to Europe and North America. In April 2021, the freight rate from Vietnam to Europe is US$6,500 - 8,000 per 40ft container and to America is US$6,000 - 7,000 per 20ft container, an increase of 5 to 7 times compared to last year.

The reason for the increase in freight rates is that the Chinese market recovered after the pandemic, so a large number of empty containers were sent to China, causing demand to outstrip supply, pushing up container shipping prices, affecting the whole Asian region, including Vietnam.

The inspection results of the Inter-sectoral Inspection Working Group established by the Vietnam Maritime Administration showed that the shipping lines all listed freight rates on the website but did not show the listing time, so it was impossible to know exactly if these businesses have complied with the regulations of listing 15 days before the price change.

Listed freight rates are ceiling prices, but contracts with customers are not disclosed by shipping lines. For small shippers without long-term contracts, the freight rates are set according to the market.

In addition to increasing freight rates, each shipping line also imposes 3-5 types of surcharges such as loading and unloading fees at ports, container cleaning, documents; in which, the loading and unloading surcharge accounts for the largest proportion, ranging from US$100 - 170 per container and is being imported by all nine shipping lines. There are irregular fees applied by each shipping company such as fuel surcharges, service charges for import and export goods only applied by Maersk.

These types of surcharges are introduced by the shipping line without an agreement with the customer, without stating the reason for collection and the time of termination. Some fees such as Verified Gross Mass (VGM) cost US$30-50, while shipping lines do not charge for this service. The shipping lines' surcharges do not have to be registered with the state agency, so it is difficult to monitor them.

Proposing service price management solutions

Vietnam currently has about 40 foreign shipping lines operating regularly, making up 95% of Vietnam's import and export freight transport market share. For routes to Europe and North America, because the Vietnamese fleet is not yet powerful enough to exploit them, the entire transportation market share is under the control of foreign shipping lines.

However, it is worth noting that all nine foreign shipping lines have representatives in Vietnam in the form of 100% foreign-owned enterprises, performing business activities on behalf of shipping lines and acting as contract agents. Revenue from freight rates and other surcharges according to the price is transferred to the parent company in foreign countries. Shipping lines pay contractor taxes and other taxes and fees in accordance with Vietnamese law. The right to decide on freight rates belongs to the parent company abroad, the representative companies in Vietnam only play the role of collecting, paying and consulting, not deciding the rates and the increase or decrease of freight rates.

For routes to Europe and America, the percentage of containers directly booked from Vietnam with shipping lines is very low (only 10% for routes to North America, 20% for routes to Europe) and mostly done through forwarding companies, agents, logistics. Contracting for transport and paying for freight is usually undertaken by a foreign partner (buyer or seller). Only a few large shippers in Vietnam sign direct contracts with foreign firms due to the stable volume of import and export goods.

According to the report of the inter-industry inspection team, the market share of Vietnam's freight exports to Europe and North America depends entirely on foreign shipping lines. The policies on freight rates and surcharges are also decided by shipping lines. Vietnamese shippers are small in scale, with seasonal demand, so they do not have plans to sign long-term transport contracts, leading to many risks when the transportation market fluctuates.

Under this situation, the Vietnam Maritime Administration proposed the Ministry of Finance to consider amending regulations on freight rates and other surcharges in addition to freight rates of shipping lines for shippers at Vietnamese ports to suit reality.

At the same time, it is proposed to the Ministry of Transport to supplement regulations, such as foreign shipping lines must register transport routes, schedules, and cargo volumes in Vietnam to avoid the shipping lines arbitrarily delaying or cancelling the reservation causing damage to the exporter. Adding penalties for violations of regulations on price declaration and listing.