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  28th July 2008 - STAR MARITIME

MASA outlines causes of high freight rates

HIGH freight rate of moving goods between Peninsular and east Malaysia is not due to ocean shipping cost alone, said Malaysia Shipowners Association (MASA).

Chairman Nordin Mat Yusoff said there were other cargo intermediaries involved in the total transportation chain, which contributed to high freight rate.

“It is important to distinguish what constitutes as ocean shipping charges before any scurrilous criticism is made against us,” he said in a statement.

Last Monday, the National Logistics Council requested that the Transport Ministry set up an independent body to review the Cabotage policy and address complaints about the high shipping freight rate.

This was following shippers' complaints against the high charges made by the small group of local vessels that serve the route.

The Cabotage policy reserves the domestic sea trade to only Malaysia-flagged shipping lines since 1980.

The ministry, however, via the Domestic Shipping Licensing Board, can make exemptions for foreign shipping lines if national-flagged vessels were underperforming.

“The ocean shipping charges to transport a 20-foot container in this specific route constitute about 46 % of the total supply chain costs paid by the shippers and consignees,” said Nordin.

The remaining 54% are from eight other cargo intermediaries, which are involved in the transport chain in the shipment of cargo from the shipper to the consignee.

“The other intermediaries in the transportation chain include the forwarding agent, shipping agent, trucking and ports before the cargo is loaded into a vessel.

“Under such circumstances, MASA fails to see the rationale of the blatant accusations that completely disregard the involvement of the other intermediaries,” Nordin said.

Ocean shipping charges have two components – the basic charges for the ocean carriage of cargo and the surcharge paid for bunker (ship fuel) due to price fluctuation.

“A review of the last 10-year trend of the average basic charges for the ocean carriage of cargo reveals that ocean shipping charges have actually declined by as much as 40% to 50%,” he said.

Nonetheless, MASA supported the suggestion for the Government to conduct an independent study on the matter, he said.

The association is confident that the high freight rates could be reduced immediately by as much as 25% if, for instance, preferential port tariff is introduced for the handling of domestic containers.

The rates could also be reduced via the distinction made between the handling of laden and empty containers, he said.

“The ports in Sabah and Sarawak can also improve and sustain higher level of productivity, which will contribute positively in solving the matter,” Nordin added.


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