Shippers rock boat with security fees

PUBLISHED : Monday, 31 October, 2011, 12:00am
UPDATED : Monday, 31 October, 2011, 12:00am


Hong Kong's exporters have urged container lines to explain the level of security surcharges imposed to pay for armed guards and other anti-piracy paraphernalia on ships transiting the Indian Ocean and other nearby pirate-infested waters.

Surcharges imposed by Maersk Line, the world's biggest container-shipping company, could almost double the freight rate for Asia- Europe services shipments, although it is also applied to Middle East and Africa trades.

'Shipping lines have to justify the charge before the market will really accept it,' said Sunny Ho Lap-kee, executive director of the Hong Kong Shippers' Council.

The council's members include trade associations representing manufacturers, freight forwarders and chambers of commerce, plus individual retailers, logistics companies, manufacturers and law firms.

Ho was commenting after a top Maersk Line executive confirmed the carrier had increased its security surcharge by 20 to 50 per cent to US$200-US$500 per 40-foot container on shipments through the Indian Ocean, Arabian Sea and Gulf of Aden.

Erik Rabjerg Nielsen, director and head of operations and deployment for Maersk Line, said the surcharge, which is on a sliding scale depending on the risk, was intended to offset the higher cost of providing armed guards and other measures to protect its ships. He added that Maersk Line ships made about 2,000 transits a year through the high-risk area, but the extra levy did not cover the entire cost of these security precautions.

Military and some security experts say there could be a resurgence of pirate activity as the monsoon eases in the western Indian Ocean.

Rear Admiral Duncan Potts, the Royal Navy commander in charge of the anti-piracy European Union Naval Force (EU Navfor), said, 'We are near the beginning of the intra-monsoon period.' Attacks on eight ships in the space of three days in mid-October had already been disrupted by naval forces and armed guards.

Captain Keith Blount, EU Navfor chief of staff, said that based on the number of successful hijackings, pirate activity generally increased around November and continued through the winter months before easing again in April or May.

Current freight rates from China to Europe are about US$1,300 per 40-foot container, although eastbound rates from Europe to Asia are less than US$700. Ho said a US$500 security surcharge represented an 80 per cent premium on top of the existing eastbound freight rates and was 'far too high'.

Ho added: 'US$500 is not a small sum. Indeed, it is a very, very significant sum.' He pointed out that exporters and importers understood that shipping lines used armed guards to protect their ships, but he said navies, including the PLA Navy, 'offered escort services without charge'.

'If shipping lines are relying on the navies' free-of-charge service, it is really hard to justify the extra security charge,' Ho said.

Hong Kong and foreign shipping lines and security consultants said it cost US$200,000-US$250,000 to employ a team of reputable four ex-marines or special-forces armed guards for a five- or six-day transit from Sri Lanka to the Gulf of Aden.

Rabjerg Nielsen confirmed that Maersk Line would spend about US$200 million this year on anti-piracy security measures, double the amount spent in 2010. This included the cost of additional security measures such as more armed guards and strengthening ships against attack, together with crew training, extra fuel as ships sailed at higher speeds, and securing ports and anchorages against attack.

He added that armed guards were continuously employed on 20 container ships that were registered in the United States and used to carry military equipment plus a number of container ships serving ports in East Africa. He said the US Department of Defence stipulated that armed guards must be employed on US-flagged ships after the hijacking and subsequent rescue of the Maersk Alabama in April 2009.

But Rabjerg Nielsen said there were no plans to extend Maersk Line's existing co-operation with two other container lines, CMA CGM and Mediterranean Shipping, to cover the engagement of a pool of armed security guards that would be used to protect the three carriers' ships.

He was responding to industry speculation that a group of container lines, including Hong Kong's Orient Overseas Container Line (OOCL), were discussing the possibility of using armed security teams that would be dedicated to protecting the carriers' ships. One source said that among the proposals was that armed security teams would be used in a shuttle, transiting between Sri Lanka and Gulf of Aden or Red Sea on board any of the ships operated by the container lines in the group.

One shipping-industry insider said that by using security teams dedicated to the container lines' ships instead of using a different team from separate security companies on each transit, it was thought the carriers would achieve cost savings and avoid potential delays if the armed guards were delayed or failed to appear.

But Rabjerg Nielsen said he was unaware of such talks and thought the proposal would be complicated to implement.

Stephen Ng Siu-kow, director of corporate planning at OOCL, declined to give direct answers to questions about the company's anti-piracy measures.