With surcharges left to float freely, are shipping companies free to raise them as they please?

Surcharges have become the main source of revenue for shipping companies.

Speaking at the meeting, Phan Thong, Secretary General of the Vietnam Shippers Association, said that surcharges charged by shipping companies to import and export shippers, such as THC (Terminal Handling Charge), have changed quite abruptly, significantly affecting shippers.

According to Le Do Muoi, Director of the Vietnam Maritime Administration, currently, the fees and surcharges of shipping companies are "unregulated," with shipping companies independently determining the prices.

Emphasizing that import and export activities have faced many difficulties due to global political instability hindering transportation routes and cutting off many international shipping lines, Mr. Thong said that both costs and shipping times have increased sharply.

Difficulties piled upon difficulties when, in February, shipping companies increased THC prices after Circular 39/2023 of the Ministry of Transport came into effect, resulting in a 10% increase in container handling service fees.

Notably, while the increase in port fees was not significant compared to port costs, THC fees increased sharply.

"The shipping companies' fee increase announcements have many shortcomings. In some places, the information is not updated, leading to a lack of communication between shipping companies and shippers. Shippers are almost under pressure because Vietnamese shippers are small-scale and have no voice," said the General Secretary of the Vietnam Shippers Association, adding that shipping companies need to set reasonable prices so that all parties can make a profit while still supporting each other.

Besides freight rates and surcharges, Mr. Thong believes that shipping companies also have unreasonable increases in fees. Some surcharges, which are usually only collected occasionally, such as container imbalance fees and emissions surcharges, are now being added to freight rates.

The General Secretary of the Vietnam Shippers Association, Phan Thong, affirmed that the increase in THC surcharge by shipping companies has many unreasonable aspects.

"I believe the government needs to review and adjust relevant legal regulations, including including surcharges in the list of items that must be declared," Mr. Thong emphasized.

Sharing the same view, Pham Quoc Long, Vice President of the Vietnam Shipowners Association, informed: According to international practice, 80% of the THC fee is allocated to port handling fees, but in Vietnam, only about 40% is currently being used.

"Surcharges are a source of revenue for shipping companies, sometimes even the main source of revenue because on some highly competitive routes, freight rates can be negative, so surcharges such as THC, imbalance fees, fuel fees... will be a source of revenue during fluctuations in freight rates," Mr. Long said, adding that when Circular 39 was passed with an adjustment of about 10%, shipping companies also increased surcharges.

However, shipping companies increased loading and unloading fees by about three times compared to the adjusted rates, causing significant losses for shippers.

According to Mr. Le Quang Trung, Deputy General Director of Vietnam Maritime Corporation ( VIMC ), nearly 100% of Vietnam's import and export goods are transported by foreign shipping companies, mainly 10 major shipping lines.

According to Mr. Trung, there are many reasons why shipping companies increase surcharges, including the fact that some shipping companies have to try to maintain and ensure delivery times under conditions where ships cannot pass through the Suez Canal, affecting trade commitments.

However, the situation of "taking advantage of a falling fence" still persists. The price increases seem to lack a transparent and clear mechanism. From this, Mr. Trung agreed that a legal framework needs to be considered to establish a mechanism for managing shipping companies' surcharges appropriately.

Furthermore, Mr. Trung stated: According to current regulations, shipping companies only need to list prices 15 days in advance of any adjustments. Simply listing and declaring prices makes it difficult to obtain a basis for accurate calculations.

"It is necessary to consider the legal mechanisms of Vietnam fairly and transparently, comparing them with international ones, paying attention to the subjects that need to be considered and how to manage them appropriately. At the same time, it is necessary to increase the competitiveness of the shippers themselves and the businesses participating in the logistics chain to come up with comprehensive solutions, as well as develop an international maritime transport fleet, ensuring self-reliance and not being dependent on foreign shipping companies," Mr. Trung emphasized.

Strictly control the increase in surcharges by shipping companies.

The meeting was attended by numerous domestic and international businesses and shipping companies to find solutions and reduce logistics costs.

Regarding the shipping company that saw a THC fee increase of approximately 15%, Mr. Nguyen Trung Dung, representative of Yangming Shipping Company in Hanoi, explained: "In recent times, shipping companies have faced many difficulties, operating below the break-even point. Meanwhile, the world has experienced many fluctuations, creating challenges for shipping companies. Vietnam is also a net exporter, so there is always a shortage of containers."

Financial difficulties are the reason shipping companies are increasing surcharges to balance the budget. However, Mr. Dung said that the factor of increased fees needs to be viewed objectively, because on some routes customers have to pay the full surcharge, and on some routes they don't have to pay any fees at all.

Meanwhile, a representative from MSC explained that shipping companies have experienced years of losses, so when the market rises, they also increase prices.

"Shipping companies are also under significant cost pressure due to market conditions. The price increase follows the increase in port service fees, and this is entirely fair. Of course, some agents are taking advantage of the situation by raising prices before shipping companies have increased them to that extent," an MSC representative said.

Ms. Hoang Thi Hong, manager of CU Lines' Hai Phong office, confirmed that each shipping line has a different mechanism for adjusting surcharges. CU Lines has recently increased the THC surcharge by about 10%.

The increase is based on the services provided by the shipping company, and the price increase is decided by the parent company overseas after considering and researching market factors.

According to Ms. Hong, CU Lines has never intended to exploit Vietnam for profit. "The company has always considered Vietnam a top priority market. We are committed to always working alongside businesses, monitoring and enforcing government regulations," Ms. Hong emphasized, and pledged to review issues related to fees and surcharges to ensure reasonable adjustments.

As one of the few shipping companies that hasn't increased THC fees recently, a representative from Maersk Lines in Vietnam stated that the company is still reviewing and researching the market, customer demand, and supply and demand. All of the company's surcharges are decided at the regional level.

A representative from Maersk Lines expressed a desire to stabilize the market, but affirmed that if there are plans to increase THC fees, the airline will ensure compliance with all legal regulations, sending notifications to the Vietnam Maritime Administration and other relevant agencies and units.

According to Mr. Le Do Muoi, Director of the Vietnam Maritime Administration, the fees and surcharges of shipping companies are currently floating according to market conditions. The price and fees are determined by the level of business of each shipping company.

From this, Mr. Mười suggested that shipping companies need to reconsider and make adjustments to balance, suit, and support Vietnamese businesses.

At the same time, the leaders of the Vietnam Maritime Administration called on shipping companies to work together to reduce surcharges to support Vietnamese businesses, encouraging shipping companies to find solutions to reduce surcharges as much as possible, or to collect them at a moderate level to ensure the profitability of the shipping companies.

Furthermore, Mr. Mười suggested that shipping companies and businesses/shippers need to exchange information and negotiate to find the most harmonious solutions, as the regulatory agency currently lacks regulations and a legal framework for management. The listing of surcharges by shipping companies also needs to be transparent and publicly available.

"Most shipping companies that increase surcharges are small, independent companies. Larger shipping companies are better able to balance their costs, so they may not increase or may only increase THC surcharges slightly," Mr. Mười commented, emphasizing that in the future, the Vietnam Maritime Administration may organize inspection teams to strictly control brokerage and agency companies using Vietnam's legal mechanisms and frameworks. Violations will be dealt with accordingly.

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