Daniel Silva, sec­re­tary of the Im­porters In­sti­tute, re­views the lat­est news and com­ments on the trends, im­pact­ing New Zealand’s im­port and ex­port com­pa­nies.

Exporter - - CONTENTS -

A roundup of news and views for New Zealand’s trad­ing com­pa­nies, com­piled by Daniel Silva of the Im­porters In­sti­tute.

Who ben­e­fits from ship­ping car­tels?

The an­swer to the ques­tion of who ben­e­fits from ship­ping car­tels ap­pears, at first sight, ob­vi­ous: the pro­ducer mem­bers of the car­tels ben­e­fit at the ex­pense of those who con­sume their goods and ser­vices, through re­duced com­pe­ti­tion.

But it is not that sim­ple. Some of the ma­jor ben­e­fi­cia­ries turn out to be the largest buy­ers, at the ex­pense of their smaller com­peti­tors. Take in­ter­na­tional ship­ping, as an ex­am­ple. For many years, ship­ping ex­ec­u­tives met in price-fix­ing ‘con­fer­ences’ that went so far as to pub­licly advertise their col­lec­tive agree­ments to jack up freight prices.

For any other in­dus­try, this type of con­duct would nor­mally re­sult in a prose­cu­tion un­der the Com­merce Act, but ship­ping was ex­empt from anti-com­pet­i­tive laws. This was jus­ti­fied as be­ing nec­es­sary to counter the ‘per­ils of the seas’. If price col­lu­sion was not al­lowed, then the large ship­ping multi­na­tion­als would cease to come to New Zealand and milk would be left over­flow­ing from farm tanks.

The Pro­duc­tiv­ity Com­mis­sion saw this for the self-serv­ing non­sense it patently is and rec­om­mended a law change to bring that in­dus­try into line with oth­ers. The Govern­ment ac­cepted this ar­gu­ment and in­tro­duced leg­is­la­tion, in the face of de­ter­mined op­po­si­tion from ship­ping com­pa­nies. The leg­is­la­tion al­lows for a pe­riod of tran­si­tion and pre­serves the abil­ity for the com­pa­nies to en­ter into op­er­a­tional co­op­er­a­tive agree­ments, such as

ship shar­ing, as long as those agree­ments are not es­sen­tially de­signed to re­duce com­pe­ti­tion.

A group of Min­istry of­fi­cials and the Com­merce Com­mis­sion called a meet­ing of in­dus­try groups, large im­porters and freight for­warders to dis­cuss the prac­ti­cal­i­ties of the tran­si­tion. Much to our sur­prise (and prob­a­bly that of the of­fi­cials), some of the largest im­porters and for­warders present used that op­por­tu­nity to re­lit­i­gate the leg­is­la­tion, us­ing the ar­gu­ments made ear­lier by the ship­ping com­pa­nies. When the ab­sur­dity of ship­ping com­pa­nies be­ing al­lowed to sim­ply pub­lish ‘gen­eral rate in­creases’ af­ter their price­fix­ing meet­ings was pointed out, the re­tort was that it made no dif­fer­ence, as those agree­ments were sel­dom en­forced. That is prob­a­bly true for those for­warders, im­porters and ex­porters who move thou­sands of con­tain­ers ev­ery year and have a de­gree of ne­go­ti­at­ing power. For the rest of us, we had no op­tion but take the price in­creases col­lec­tively im­posed by the ship­ping com­pa­nies.

It be­came ap­par­ent to us that the ma­jor ben­e­fi­cia­ries of these car­tel ac­tiv­i­ties were not only the ser­vice providers, but also their ma­jor clients who ben­e­fited from costs lower than those of their com­peti­tors, help­ing them to con­sol­i­date their po­si­tions of mar­ket dom­i­nance.

We con­grat­u­late the govern­ment on ac­cept­ing and im­ple­ment­ing the sug­ges­tions of the Pro­duc­tiv­ity Com­mis­sion to bring the ship­ping in­dus­try into line.

Hard core gar­den­ing

In the aftermath of 9/11, UK Cus­toms im­ple­mented a sys­tem of col­lect­ing additional data from for­warders, un­der the guise of ‘se­cu­rity’. As is usual in these cases, the added bu­reau­cracy did noth­ing that can be em­pir­i­cally shown to have in­creased se­cu­rity, but it did cre­ate an op­por­tu­nity for for­warders to get an ex­tra nice lit­tle earner at the ex­pense of im­porters and ex­porters, who were charged new se­cu­rity fees.

The only dan­ger for for­warders is that one or more of them would fig­ure out ways of re­duc­ing the costs in­volved and pass the re­duc­tions on to their clients.

The so­lu­tion they found was to cre­ate some­thing they called a ‘Gar­den­ing Club’, which had price-fix­ing meet­ings off-site, out­side nor­mal busi­ness hours and com­mu­ni­cated with each other us­ing codes like, “I hear… con­cerns about the price of pro­duce from […], which ap­pears to be op­er­at­ing as a char­i­ta­ble co­op­er­a­tive for the benev­o­lence of veg­etable eaters rather than grow­ers…” Oh, what cun­ning! In the High Court, Jus­tice Ven­ning de­scribed this as “hard core car­tel con­duct” and went on to im­pose a penalty of $3.1 mil­lion plus costs on Kuehne + Nagel, one of the car­tel mem­bers. Oth­ers in­volved were Agility, Schenkers, Panalpina, DHL, CEVA and Exel. In to­tal, they paid fines to­talling nearly $12 mil­lion in New Zealand alone. Kuehne + Nagel had ear­lier paid fines of ap­prox­i­mately $1.3 mil­lion in the US and $8.7 mil­lion in Europe.

The irony is that not a sin­gle cent from those mil­lions was re­turned to the im­porters and ex­porters who were over­charged.

Mea­sur­ing courier per­for­mance

The vol­ume of small parcels be­ing sent around the coun­try and around the world keeps in­creas­ing. Most couri­ers can now pro­vide clients with a data stream that in­cludes the par­cel bar­code and the time stamps for collection and de­liv­ery. In many cases, the couri­ers also col­lect names and sig­na­tures of re­cip­i­ents, which are used as proof of de­liv­ery.

At DSL Lo­gis­tics, we in­clude those data streams into our ware­house man­age­ment sys­tem, which en­able clients to get pick-up and de­liv­ery in­for­ma­tion from our web­site, us­ing their own or­der num­bers or prod­uct codes. As a bonus, we end up with reams of data which come in very handy for the anal­y­sis of courier per­for­mance.

Ev­ery month, we com­pare the times from pick up to de­liv­ery against the KPIs promised by the couri­ers. It is then straight-for­ward to cal­cu­late what per­cent­age of parcels were de­liv­ered within KPI – and what per­cent­age was not. The next step is to re­fer the non-com­pli­ance re­port to the courier for com­ment. This is nec­es­sary, as we can­not hold the courier li­able for de­liv­ery de­lays when snow closes the Desert Road overnight or the odd pro­pel­ler falls off a ship.

Our pol­icy is to re­main strictly neu­tral be­tween the couri­ers selected by our clients and to pass on their rates with­out mark-up. Where the courier can pro­vide an in­di­vid­ual par­cel track­ing data feed, we of­fer per­for­mance anal­y­sis as part of a courier man­age­ment ser­vice. Ex­pe­ri­ence tells us that we should nor­mally ex­pect de­liv­er­ies to be made within 98 per­cent of the KPI. I some­times ask our friends in courier com­pa­nies to ex­plain why our clients should pay 100 per­cent of their bills, when the KPI drops be­low 95 per­cent.

I’ll let you know when I get a sat­is­fac­tory re­ply to that ques­tion.

Port of Tau­ranga

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