PORT KLANG (Jan 2, 2011): Freight forwarders are crying foul over the requirement of shipping lines that they deposit up to RM2 billion a year to cover damage; and the Port Klang Authority (PKA) is seemingly powerless to do anything.
The Selangor Freight Forwarding and Logistics Association (SFFLA) is furious that the PKA is allowing the 100 foreign shipping lines that call at our ports to dictate terms to terminal operators and refuse to adopt internationally-accepted rules which protect terminal operators, freight forwarders and shippers.
SFFLA honorary secretary-general Wee Ah Sah said the Equipment Interchange Report (EIR), a document accompanying containers stating the condition of the boxes at each point of exchange, have been replaced by deposit takings of between RM750 and RM1,000 per container.
"The deposits were imposed in early 2010 and have to be paid as insurance to ensure that shippers are protected if the boxes are damaged although this is already covered by the EIR," Wee told theSun.
He claimed that in almost all cases, 10% of the deposit is retained due to damaged containers, although these boxes are prone to wear and tear due to extensive use.
"There have been cases where the deposits were not returned due to rusty containers but the rust could have been there much earlier," said Wee whose association represents 550 active forwarders.
He said as 2.5 million containers came into Port Klang (North Port and Westport) a year, by simply taking 10% of the minimum RM750 deposit, the amount is almost RM187.5 million. And as deposits are not returned immediately, millions of ringgit more in interests are tied up.
"Sometimes it takes up to five months to get our money back! Can you imagine the amount of interest that is lost?" said Wee, adding that the container should be the shippers’ responsibility.
However, he admits that stiff competition led to several terminal operators bending backwards to accommodate shippers' demands.
The European Union (EU) had introduced a charter to prevent shipping cartels which could wreak havoc to world trade by raising the cost of transportation, and by extension, the price of goods and services.
"What they can’t do in the West they are trying it here," Wee claimed.
He blamed PKA for encouraging the practice, which he equates to blackmail.
"The PKA has lost its purpose and is not playing its role as regulator and facilitator of the ports by ensuring fair practices," he said. He also blamed terminal operators for not putting their foot down by refusing to collect the deposits.
Operators are also spoiling these shipping lines by allowing lengthy free storage periods. "Previously used to be seven days, at least now they have brought it down to three days, but why?" said Wee.
He added that while tariff rates were RM140 per (container) lift, undercutting had led some terminal operators to offer shipping lines RM50 per lift.
"The competition between the terminal operators is hurting the ports and the PKA must step in," said Wee.
He cited an example where one shipping line which owed millions to one operator had since moved to another operator due to incentives – without settling the debt to the former.
Westports Malaysia Sdn Bhd chairman Tan Sri G. Gnanalingam agreed that PKA must impose some form of control. "The PKA must be a regulatory body that is run by people who know the port business," he said.
However, he said Wee’s claims must be taken with a pinch of salt.
"There are over 3,500 freight forwarders in the country, while even Japan has only 300.
"Seems that anyone can be a freight forwarder, so this portion of the industry must also be regulated," he said, declining to comment further.