Consumers may have last word as transport costs rise

PUBLISHED : Friday, 02 September, 2005, 12:00am
UPDATED : Friday, 02 September, 2005, 12:00am

With oil prices on a long upward trek that would make Sherpa Tenzing Norgay proud, it seems Asia's exporters are being greeted each week with a new surcharge or fee to boost the cost of transporting their goods.

But, as those costs are largely hidden, the average consumer remains blissfully unaware he is footing the bill until he pulls his car up to the pump.

As consumers, we tend to shrug off individual fees or surcharges, no matter how visible.

Take the escalating fuel surcharges on airline tickets. Last month, the fuel-related levies on each passenger grew to about 10 per cent of the ticket price to most European cities. Yet, travellers have not baulked at the cost.

International passenger volumes grew a comparative 7.8 per cent in the first seven months of this year, says Airports Council International (ACI), which monitors airport activity around the globe.

But there are signs that demand is falling for the high-value goods we transport by air.

The demand for air cargo transport has been fading for the past quarter, exacerbated in some markets by the airlines' weight-based fuel surcharges that almost equal the cost of transporting the goods themselves.

The growth of international cargo volumes handled at the world's airports slowed to 0.3 per cent in July, down from 3.3 per cent in the first seven months and the 6.6 per cent rolling average for the year to July, ACI said. In May, global volume actually contracted.

Given that air cargo volumes are widely used as a six-month leading indicator of economic trends, the slowdown should be raising a few eyebrows. We are starting to think twice before buying that second boutique watch or Gucci handbag.

It is logical that the dampening effect of higher oil prices would first become visible in a fall-off in demand for the luxury items that move by air transport.

What would be more worrying is if the layers of levies the maritime shipping industry has piled on the transport of the basic and often essential manufactured goods also started to affect demand.

Impossible, you say? Maybe. But the list of levies on moving a container of goods on the world's trade lanes is growing as fast as the price of a barrel of oil.

Yesterday, local truckers took their first stab at applying a fuel tax to each box they moved in a bid to ease the burden of higher-priced diesel. Exporters have not exactly embraced the idea but, if accepted as written, it would tack an additional 5 per cent, or $120, on to the cost of trucking a box of cargo to the port from Dongguan.

Since September 11, 2001, the increasingly security-conscious trade transport industry has added a number of charges.

On top of four-figure peak season surcharges and terminal handling fees, exporters shipping to the United States are now saddled with a US$25 per document electronic manifest charge (add US$40 for any amendments), bunker adjustment fees (BAF) and a $125 per box documentation levy. This is by no means a comprehensive list and 'security fees' brought by the terminal operators are just around the corner.

To Europe, the BAF will be US$438 per 40-foot box this month. You can add 6.2 per cent to the overall freight rate in the form of a currency adjustment fee.

In all, the basket of fees over and above the standard freight rate will boost the cost of moving Asian goods to overseas markets by about 25 per cent.

Those upstream in the supply chain - service providers such as terminal operators and shipping lines - casually pass on those costs to the exporters.

With only consumers downstream, exporters raise the cost of products that ultimately end up on the shelves of your favourite department stores.

With no one downstream for the consumer to pass the cost on to, they just stop spending.



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