Red Sea tension sees shippers price gouging: exporters

At the recent meeting to discuss solutions to alleviate difficulties for export businesses, Tran Thanh Hai, deputy director of the Import-Export Department under the Ministry of Industry and Trade, noted that Red Sea tensions had led to much higher shipping costs, a shortage of shipping containers and extended transportation times.

Data from the Ministry of Transport’s Vietnam Maritime Administration shows that shipping rates from Vietnam to the U.S. and Canada have increased by 55-73% from the end of 2023.

Meanwhile, rates to Europe have increased three to four times to US$4,350-4,450 per container. Some major shipping companies have also applied peak season surcharges on top of the freight hikes, making shipping even more expensive for cargo owners.

"Vietnamese cargo owners who do not negotiate their own transportation contracts face additional difficulties due to unannounced high fees and surcharges," Hai said.

The issue has also been reported by exporters.Hoang Thi Lien, president of the Vietnam Pepper Association, which represents pepper businesses, recounted an instance in which a pepper exporter was only notified of an additional charge of $2,000 per container 15 days after it had loaded its goods onto a vessel.

Considering each container carries only $1,000-1,200 worth of pepper and cashew nuts, the additional fee amounted to twice the value of the cargo.The surcharges imposed by shipping firms also comes with late payment penalties that are typically enforced one week after notification, Lien added.

Le Quang Trung, vice president of the Vietnam Logistics Business Association, which represents the logistics services industry, acknowledged these concerns, and suggested that regulators should issue policies and rules to manage prices, fees, and surcharges, he suggested.

While the garment industry, one of Vietnam's billion-dollar export sectors, has not been affected as most of its current orders are exported free on board, meaning the buyer covers the shipping costs, the prolonged tension in the Red Sea might prompt buyers to reconsider this arrangement for upcoming orders, according to Truong Van Cam, vice chairman of the Vietnam Textile and Apparel Association.

In such cases, requiring shipping firms to provide transparent information on freight rates, surcharges, and additional fees will provide a basis for exporters to negotiate shipping with their customers, he said.

Trung advised exporters to add clauses regarding risk exemptions, insurance, and delivery times to their commercial and transportation contracts, and consider alternatives like air or rail freight.

In the long term, Vietnam needs to establish long-distance shipping routes and develop its own air cargo company as most domestic shipping firms are mainly operating within Asia, he added.

Meanwhile, representatives from the Import-Export Department and the Vietnam Maritime Administration urged shipping firms to adhere to regulations on freight rates, refrain from imposing unjustified fees or surcharges and maintain enough vessels and containers to meet shipping schedules and import and export demands.