The Commerce Commission ruled that the terms of trade defined by the International Chambers of Commerce (known as Incoterms) are not conclusive in New Zealand. The Commission said, “In the absence of any sales agreement between the NZ importer and the Chinese seller, it is difficult to establish what exactly was agreed upon”.
Wikipedia says “The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce or remove altogether uncertainties arising from different interpretation of the rules in different countries.” The Incoterms definition of CFR (and CIF) is that the “seller must pay the costs and freight to bring the goods to the port of destination.”
In New Zealand, the Commerce Commission decided not to act against forwarders who charged both exporters and importers for freight on shipments with CFR terms.
The decision to take no action was made in response to a complaint under the Fair Trading Act made by an importer against QUBE Logistics NZ Ltd (formerly POTA Global), ABBA Logistics Limited and Access Freight Forward Company Limited.
The complaint also alleged that the forwarders in question charged fictitious fees, such as ‘Forestry’ and ‘Port Security Fees’, which simply do not exist. The Commission found that “there is no clear evidence to prove or disprove that the services and related charges shown in the invoices were fictitious.”
Forwarders charging importers freight on supposedly prepaid shipments and making up outrageous destination ‘fees’ can continue to do so, sure in the knowledge that the New Zealand Commerce Commission will not act against them. Importers in New Zealand are now fair game for those operators.
Importers should note that, in some cases, the forwarders collude with exporters in China to transfer freight costs to importers. We described earlier the operation of The China Scam.
The corrupting influence of these practises is already evident. What started as a scheme by a Shanghai-based forwarder (Amass) to overcharge New Zealand importers by setting up a local subsidiary (Abba), has now spread to other local forwarders, some of which have been in business for decades. Those companies are jumping on the overcharging bandwagon, bringing the entire sector into disrepute, as predicted by the Importers Institute.
Importers bringing in LCL (less than a container load) shipments, should change their terms from CFR (or CIF) to FOB and obtain binding quotes from local forwarders. The quotes should include the freight and all the destination charges. Importers who leave the selection of the forwarder in the hands of their suppliers run an increasing risk of being ripped off.
13 February 2013
18 April 2012
Port of Auckland: What Happens Next
Some comment for importers wondering what happens next in the long running dispute between the Port of Auckland and about 200 members of the Maritime Union.
In most modern ports, stevedoring is done by contractors who compete with each other to load and unload vessels. The Port companies are in charge of planning, charging shipping companies and managing the contractors through KPIs. The contractors then employ stevedores.
In Auckland, however, a model developed where the Port itself employs the stevedores, who belong to a single union – MUNZ, or Maritime Union of New Zealand.
Until 2006, the Port was majority-owned by local government, but was also quoted in the stock exchange and was run as a commercial operation. In the previous decade, when it operated as profit-making organisation, the Port made substantial improvements in productivity and rose to the top of regional port performance league tables.
In 2006 the Council decided to buy out all the remaining private shareholders and become 100% owner. The purpose of this was to capture a high dividend stream in order to fund some rail and other deferred infrastructure projects. Soon after, the dividends became smaller, some would say in line with the removal of commercial disciplines. The Union became increasingly militant and extracted better and better conditions from management.
The average salary of a wharf worker in Auckland is over $90K and they work on average 26 hours for every 40 that they get paid. These figures were published by management and disputed by the Union, but were subsequently audited and confirmed by Ernst & Young. As you would expect, the stevedores don’t really enjoy much sympathy from the public for their ‘plight’.
The Council realised that they were not getting anything near their expectations and appointed a new management, with an instruction to double the return on investment (R.O.I.) to 12%. The new management came to the conclusion that the only way they could achieve this was by taking control of the roster and pay something like 40 hours for 40 hours worked. This was also needed to stem the flow of business lost to Tauranga.
The Union was in effect running the roster and doing the usual tricks - that’s how they managed to get paid 40 hours for 26 hours work. The Union bosses simply could not contemplate losing the power to run the roster for their own benefit, even though they were offered 160 guaranteed work hours every 4 weeks, rosters fixed one month in advance and a sweetener of a 10% pay rise. Each offer from the Port was met with an announcement of yet another strike, culminating in the last one that went on for five weeks.
At that stage, the Port decided that they couldn’t do business with this Union and moved to a sub-contracting model. The 200 Union members (from the original 300) who had not by then left the Union, were served with notices of redundancy.
The Union went to the Employment Court and got a stay of execution. The Port and the Union were ordered by the Court to go back into bargaining and to pursue a collective contract in ‘good faith’. The Port was ordered to stop work on appointing subcontractors during this period. The substantive issue of whether the Port can be allowed to sub-contract will be heard in May, unless an agreement is reached before that date.
Initial negotiations have not produced results. The parties have decided to refer the issue to a process of “facilitated mediation” overseen by senior Labour Department officials. Those officials do not have the power to make an award, but can publish their decisions which would have the effect of undermining the credibility of the losing party.
It is unlikely that the Court would make a decision that would in effect prevent a company from deciding on how it should run its business, i.e. by issuing an order that “you cannot subcontract, you must deal exclusively with MUNZ even though you can’t reach agreement with them”. It is therefore likely that a sub-contracting model, which is used by direct competitor Tauranga and most other ports in Australia, will prevail, sooner or later.
The Union’s best hope of preventing this is by accepting roster flexibility. They are coming into increasing pressure from their political supporters to do so, but you can never rule out the obstinacy of some people when they get into a die-in-the-ditch mode, where some of the ‘comrades’ in the Union appear to be.
There are, in our view, two likely scenarios:
(1) The Union will accept the offer from management, perhaps with an additional face-saver thrown in, and the Port will limp along as before. Shipping companies will continue to play off Auckland against Tauranga and Auckland will not reach its 12% R.O.I. target, but that will not affect importers that much.
(2) The Union will refuse all offers and the Court will authorise the Port to engage sub-contractors. The Unions will continue to protest for weeks or even months, but that will be largely ineffective as the law in both Australia and New Zealand prevents sympathy strikes. There will be a period of 4 to 6 weeks of further disruption while the new contractors are bedded in.
The only precaution that importers can take at this stage is to allow for a longer transit time in their planning, for the period between mid-May and the end of June. They may also wish to make a provision for some additional container relocation costs during that period. If the disruption increases, they could then look at other plans such as diversions to airfreight – but we do not believe it will get to that.
In the long term, we believe that Auckland will continue to be the main seafreight gateway into New Zealand and will operate at a level of efficiency comparable with other ports here and in Australia.
In most modern ports, stevedoring is done by contractors who compete with each other to load and unload vessels. The Port companies are in charge of planning, charging shipping companies and managing the contractors through KPIs. The contractors then employ stevedores.
In Auckland, however, a model developed where the Port itself employs the stevedores, who belong to a single union – MUNZ, or Maritime Union of New Zealand.
Until 2006, the Port was majority-owned by local government, but was also quoted in the stock exchange and was run as a commercial operation. In the previous decade, when it operated as profit-making organisation, the Port made substantial improvements in productivity and rose to the top of regional port performance league tables.
In 2006 the Council decided to buy out all the remaining private shareholders and become 100% owner. The purpose of this was to capture a high dividend stream in order to fund some rail and other deferred infrastructure projects. Soon after, the dividends became smaller, some would say in line with the removal of commercial disciplines. The Union became increasingly militant and extracted better and better conditions from management.
The average salary of a wharf worker in Auckland is over $90K and they work on average 26 hours for every 40 that they get paid. These figures were published by management and disputed by the Union, but were subsequently audited and confirmed by Ernst & Young. As you would expect, the stevedores don’t really enjoy much sympathy from the public for their ‘plight’.
The Council realised that they were not getting anything near their expectations and appointed a new management, with an instruction to double the return on investment (R.O.I.) to 12%. The new management came to the conclusion that the only way they could achieve this was by taking control of the roster and pay something like 40 hours for 40 hours worked. This was also needed to stem the flow of business lost to Tauranga.
The Union was in effect running the roster and doing the usual tricks - that’s how they managed to get paid 40 hours for 26 hours work. The Union bosses simply could not contemplate losing the power to run the roster for their own benefit, even though they were offered 160 guaranteed work hours every 4 weeks, rosters fixed one month in advance and a sweetener of a 10% pay rise. Each offer from the Port was met with an announcement of yet another strike, culminating in the last one that went on for five weeks.
At that stage, the Port decided that they couldn’t do business with this Union and moved to a sub-contracting model. The 200 Union members (from the original 300) who had not by then left the Union, were served with notices of redundancy.
The Union went to the Employment Court and got a stay of execution. The Port and the Union were ordered by the Court to go back into bargaining and to pursue a collective contract in ‘good faith’. The Port was ordered to stop work on appointing subcontractors during this period. The substantive issue of whether the Port can be allowed to sub-contract will be heard in May, unless an agreement is reached before that date.
Initial negotiations have not produced results. The parties have decided to refer the issue to a process of “facilitated mediation” overseen by senior Labour Department officials. Those officials do not have the power to make an award, but can publish their decisions which would have the effect of undermining the credibility of the losing party.
It is unlikely that the Court would make a decision that would in effect prevent a company from deciding on how it should run its business, i.e. by issuing an order that “you cannot subcontract, you must deal exclusively with MUNZ even though you can’t reach agreement with them”. It is therefore likely that a sub-contracting model, which is used by direct competitor Tauranga and most other ports in Australia, will prevail, sooner or later.
The Union’s best hope of preventing this is by accepting roster flexibility. They are coming into increasing pressure from their political supporters to do so, but you can never rule out the obstinacy of some people when they get into a die-in-the-ditch mode, where some of the ‘comrades’ in the Union appear to be.
There are, in our view, two likely scenarios:
(1) The Union will accept the offer from management, perhaps with an additional face-saver thrown in, and the Port will limp along as before. Shipping companies will continue to play off Auckland against Tauranga and Auckland will not reach its 12% R.O.I. target, but that will not affect importers that much.
(2) The Union will refuse all offers and the Court will authorise the Port to engage sub-contractors. The Unions will continue to protest for weeks or even months, but that will be largely ineffective as the law in both Australia and New Zealand prevents sympathy strikes. There will be a period of 4 to 6 weeks of further disruption while the new contractors are bedded in.
The only precaution that importers can take at this stage is to allow for a longer transit time in their planning, for the period between mid-May and the end of June. They may also wish to make a provision for some additional container relocation costs during that period. If the disruption increases, they could then look at other plans such as diversions to airfreight – but we do not believe it will get to that.
In the long term, we believe that Auckland will continue to be the main seafreight gateway into New Zealand and will operate at a level of efficiency comparable with other ports here and in Australia.
30 March 2012
Port Update
The latest twist in this long saga is that the Port will allow the strikers to return to work next week and continue to go through a mediation process for a few more weeks, until the middle of May.
The Union has not made any public commitment to abandon its wish to keep restrictive work practises and the Port has not abandoned the intention to move to the competitive model used by efficient ports.
There are three scenarios for importers to consider:
1. Shipping companies may not be interested in returning to Auckland until they have assurances that their ships will not be delayed by more industrial action. We expect that they will hold off for a while before making firm commitments.
2. The Union may come to its senses under pressure from political supporters and its own members (who have now lost more than one month’s wages) and agree to the conditions offered earlier by the Port. If that happens, the Port’s plans to move to a competitive model may go on hold for a while and normal service could be resumed.
3. On the other hand, the Union could well continue to do what it does best, which is to push ahead with strikes and hope for support from sympathetic politicians (this Government’s inaction is pretty much a given). If that happens, by mid-May we will be precisely where we are now.
Our main concern is that, after four weeks on strike, other ports in New Zealand are coming to their cargo handling limits, as is our sub-standard road and rail infrastructure. We are perilously close to ships bypassing New Zealand altogether.
Within the next week or two, we expect to have more clarity. We will need to keep an eye on which ships will come back to Auckland. The best source for that information is here.
The Union has not made any public commitment to abandon its wish to keep restrictive work practises and the Port has not abandoned the intention to move to the competitive model used by efficient ports.
There are three scenarios for importers to consider:
1. Shipping companies may not be interested in returning to Auckland until they have assurances that their ships will not be delayed by more industrial action. We expect that they will hold off for a while before making firm commitments.
2. The Union may come to its senses under pressure from political supporters and its own members (who have now lost more than one month’s wages) and agree to the conditions offered earlier by the Port. If that happens, the Port’s plans to move to a competitive model may go on hold for a while and normal service could be resumed.
3. On the other hand, the Union could well continue to do what it does best, which is to push ahead with strikes and hope for support from sympathetic politicians (this Government’s inaction is pretty much a given). If that happens, by mid-May we will be precisely where we are now.
Our main concern is that, after four weeks on strike, other ports in New Zealand are coming to their cargo handling limits, as is our sub-standard road and rail infrastructure. We are perilously close to ships bypassing New Zealand altogether.
Within the next week or two, we expect to have more clarity. We will need to keep an eye on which ships will come back to Auckland. The best source for that information is here.
10 March 2012
Port of Auckland - Background
The Maritime Union drove a group of its members to redundancy and appears determined to continue the heroic struggle to preserve work practises that the rest of us left behind in the Seventies. How did it come to this?
The Productivity Commission is conducting an in-depth review of the transport sector. Their report noted, “New Zealand’s transport and storage industry experienced strong productivity growth in the 1990s, but virtually no productivity growth in the 2000s.” That’s the problem with lost decades. They come with hefty bills.
Back in 2005, Ports of Auckland was majority-owned by the Auckland Regional Council. The elected chairman of that body at the time, Mike Lee, justified a decision to buy out the private shareholders by saying, ”The Ports of Auckland will be a prized legacy for future generations and the wealth generated will be vital for funding Auckland’s infrastructure for years to come.”
This is what actually happened: the cost of buying out the 20% then owned by other shareholders was $170 million; that transaction effectively valued the whole company at $850 million; but the book value of the company shown in the Auckland Council transition documents in 2010 was just $394 million.
Even after allowing for inflation and differences in valuation methods, $456 million is an awful lot of money to disappear in just five years. We probably haven’t seen destruction of shareholders’ wealth on this scale since Hugh Fletcher. Mr Lee’s vision of the port as a cash cow to fund local government projects appears to have turned very sour, very quickly.
The Productivity Commission seems to understand only too well where the problem lies: “Publicly-owned organisations are also, in effect, spending other [people's] money [and] are not well placed or sufficiently incentivised to monitor performance of such investments.” The Commission went on to say, “To manage conflicts of interest, elected representatives and council staff should be precluded from being a director of port and airport companies.”
The main issue is that ports are an important part of our infrastructure and we can't afford the risk of having their management overseen by local body politicians and town clerks. The Commission said, "To improve the efficiency of ports, councils should consider increasing the degree of private ownership in them. Councils should evaluate whether they can still achieve important community aims with lower ownership stakes." Perhaps, just perhaps, had Auckland had not made the decision to go for 100% ownership in 2005, we would not now be in this predicament.
The Productivity Commission also understands very well the origins of the archaic work practises that the Union is fighting to retain, and management to overcome: "Many of these work practices stem from past management decisions that were pragmatic and relevant to the working of ports before the advent of widespread containerisation and bulk material handling." In the Seventies, that was.
The Productivity Commission is conducting an in-depth review of the transport sector. Their report noted, “New Zealand’s transport and storage industry experienced strong productivity growth in the 1990s, but virtually no productivity growth in the 2000s.” That’s the problem with lost decades. They come with hefty bills.
Back in 2005, Ports of Auckland was majority-owned by the Auckland Regional Council. The elected chairman of that body at the time, Mike Lee, justified a decision to buy out the private shareholders by saying, ”The Ports of Auckland will be a prized legacy for future generations and the wealth generated will be vital for funding Auckland’s infrastructure for years to come.”
This is what actually happened: the cost of buying out the 20% then owned by other shareholders was $170 million; that transaction effectively valued the whole company at $850 million; but the book value of the company shown in the Auckland Council transition documents in 2010 was just $394 million.
Even after allowing for inflation and differences in valuation methods, $456 million is an awful lot of money to disappear in just five years. We probably haven’t seen destruction of shareholders’ wealth on this scale since Hugh Fletcher. Mr Lee’s vision of the port as a cash cow to fund local government projects appears to have turned very sour, very quickly.
The Productivity Commission seems to understand only too well where the problem lies: “Publicly-owned organisations are also, in effect, spending other [people's] money [and] are not well placed or sufficiently incentivised to monitor performance of such investments.” The Commission went on to say, “To manage conflicts of interest, elected representatives and council staff should be precluded from being a director of port and airport companies.”
The main issue is that ports are an important part of our infrastructure and we can't afford the risk of having their management overseen by local body politicians and town clerks. The Commission said, "To improve the efficiency of ports, councils should consider increasing the degree of private ownership in them. Councils should evaluate whether they can still achieve important community aims with lower ownership stakes." Perhaps, just perhaps, had Auckland had not made the decision to go for 100% ownership in 2005, we would not now be in this predicament.
The Productivity Commission also understands very well the origins of the archaic work practises that the Union is fighting to retain, and management to overcome: "Many of these work practices stem from past management decisions that were pragmatic and relevant to the working of ports before the advent of widespread containerisation and bulk material handling." In the Seventies, that was.
07 March 2012
Importers Support Port Decision
The Importers Institute supports the decision of Ports of Auckland to outsource stevedoring services. This decision means that about 300 Maritime Union members will be made redundant. Some of them will get jobs with the new contractors, others will move their heavy machinery driving skills to Australian mines and a few will have lots of time to reflect on the consequences of mindless militancy.
This dispute was never about terms and conditions. When the workers demand 2% and the bosses counter by offering 10%, to which the workers respond by going on strike, you could be excused for thinking this was a scene from The Life of Brian. No, the dispute was always about who runs the port. Was it to be management acting for the owners (the City) or the Union?
Importers have already had to bear enormous costs trying to cope with the effects of the strikes. They have had to, at their cost, move containers discharged at other ports around the country. Shipments have been diverted to airfreight. Consumers will ultimately pay for these significant costs, in the form of higher prices.
There will be a period of disruption for several more weeks, until the new contractors are up and running. We expect the Union to try to be as disruptive as possible. Expect to see the 'Occupy Auckland' hippies morph into 'Occupy the Port' protestors. The Maritime Union has not hesitated to deliberately engage in illegal sympathy strikes in Tauranga and Wellington. They cynically forced those ports to go to Court to obtain injunctions before going back to work. All this was taking place as the Union was announcing yet another illegal strike in Christchurch.
This dispute has been prolonged by the absurd requirements for lengthy periods of formal consultations. These requirements are part of the 'good faith' fiction enacted by Margaret Wilson of the last Labour Government. We say it is a fiction, because the Union has never displayed even a trace of good faith. They have lied about the average salaries (over $90,000) and made untrue claims about casualization. They responded to every proposal with a further notice of strike.
The current government does not see the need to amend the industrial legislation that it has inherited from Labour. Except when the victims are Wellington creative types, it seems. In fact, the only Labour excess that they have rectified in the last four years was to reintroduce Sirs and Dames (but not the Privy Council). Not good enough, Mr Key.
This dispute was never about terms and conditions. When the workers demand 2% and the bosses counter by offering 10%, to which the workers respond by going on strike, you could be excused for thinking this was a scene from The Life of Brian. No, the dispute was always about who runs the port. Was it to be management acting for the owners (the City) or the Union?
Importers have already had to bear enormous costs trying to cope with the effects of the strikes. They have had to, at their cost, move containers discharged at other ports around the country. Shipments have been diverted to airfreight. Consumers will ultimately pay for these significant costs, in the form of higher prices.
There will be a period of disruption for several more weeks, until the new contractors are up and running. We expect the Union to try to be as disruptive as possible. Expect to see the 'Occupy Auckland' hippies morph into 'Occupy the Port' protestors. The Maritime Union has not hesitated to deliberately engage in illegal sympathy strikes in Tauranga and Wellington. They cynically forced those ports to go to Court to obtain injunctions before going back to work. All this was taking place as the Union was announcing yet another illegal strike in Christchurch.
This dispute has been prolonged by the absurd requirements for lengthy periods of formal consultations. These requirements are part of the 'good faith' fiction enacted by Margaret Wilson of the last Labour Government. We say it is a fiction, because the Union has never displayed even a trace of good faith. They have lied about the average salaries (over $90,000) and made untrue claims about casualization. They responded to every proposal with a further notice of strike.
The current government does not see the need to amend the industrial legislation that it has inherited from Labour. Except when the victims are Wellington creative types, it seems. In fact, the only Labour excess that they have rectified in the last four years was to reintroduce Sirs and Dames (but not the Privy Council). Not good enough, Mr Key.
23 February 2012
Importers Ask Government to Break Strike
The Importers Institute has today asked the government to pass urgent legislation empowering the Port of Auckland to dismiss striking port workers and contract out the work to private operators.
The Union today threatened to extend a two-week strike into three weeks. During that period, importers and exporters will have to spend many millions of dollars diverting cargo to other ports and airfreight, to keep shops and industry supplied. The exodus of shipping services from Auckland to other ports will accelerate.
This is not a genuine labour dispute for better pay and conditions. What the Union is demanding is quite simply a monopoly on wharf work, usurping the right of management to manage the Port. In effect, they are striking for the right to run the Port for the benefit of the Union. Their members will get nothing from this action, except for one month's lost wages and most probably redundancy.
The Importers Institute asked the Port management what the cost would be of moving the work over to private contractors without delay. We were told that is not possible. Under current legislation, a Court would probably force the Port to take back the striking workers. This is apparently something to do with the 'good faith' nonsense legislated by Margaret Wilson a few years ago.
We call it nonsense because the Union has been guilty of the utmost bad faith. They have lied through their teeth concerning the average remuneration of their members (over $90,000) as well as pretty much about everything else concerning this dispute.
The current government has had plenty of time to reverse the legislative excesses of the last government, but chose instead to smile and wave. The time has now come for the government to assume its responsibilities and prevent a bunch of industrial thugs from holding New Zealand to ransom.
We already have legislation that prohibits some forms of industrial action, for example sympathy strikes. That has not stopped the managers of the Union from going off to Sydney to ask their comrades in other countries to boycott New Zealand. The government's obligation is clear and urgent.
The Union today threatened to extend a two-week strike into three weeks. During that period, importers and exporters will have to spend many millions of dollars diverting cargo to other ports and airfreight, to keep shops and industry supplied. The exodus of shipping services from Auckland to other ports will accelerate.
This is not a genuine labour dispute for better pay and conditions. What the Union is demanding is quite simply a monopoly on wharf work, usurping the right of management to manage the Port. In effect, they are striking for the right to run the Port for the benefit of the Union. Their members will get nothing from this action, except for one month's lost wages and most probably redundancy.
The Importers Institute asked the Port management what the cost would be of moving the work over to private contractors without delay. We were told that is not possible. Under current legislation, a Court would probably force the Port to take back the striking workers. This is apparently something to do with the 'good faith' nonsense legislated by Margaret Wilson a few years ago.
We call it nonsense because the Union has been guilty of the utmost bad faith. They have lied through their teeth concerning the average remuneration of their members (over $90,000) as well as pretty much about everything else concerning this dispute.
The current government has had plenty of time to reverse the legislative excesses of the last government, but chose instead to smile and wave. The time has now come for the government to assume its responsibilities and prevent a bunch of industrial thugs from holding New Zealand to ransom.
We already have legislation that prohibits some forms of industrial action, for example sympathy strikes. That has not stopped the managers of the Union from going off to Sydney to ask their comrades in other countries to boycott New Zealand. The government's obligation is clear and urgent.
21 December 2011
Time to Break Port Strike
The time has come to break the strike at the port of Auckland. The Maritime Union is negotiating in bad faith and is bent on doing maximum damage to importers, exporters and everyone else in Auckland.
The Importers Institute does not, for obvious reasons, like this strike. But we would like it even less is we lived in a country where people are not allowed to strike. That is why we have consistently urged the parties to resolve their differences and have not taken sides. Until now.
The Union is not striking for better conditions for its members. It is protesting that the Port gave even better conditions to people who do not belong to the Union. Quite simply, it wants to retain a total monopoly on stevedoring and snuff out any possibility of the Port becoming more flexible and productive.
This is not a strike to protect Port workers. It is a strike to save the jobs and influence of the old geezers who make a living as union officials.
Both sides have engaged in spin. Shipping company Maersk came out and said its decision to move a service to Tauranga was influenced by the current disruption. This is simply not true. Decisions on port rotations have to be made months in advance. Maersk's contribution, eagerly seized on by the Port, was union-bashing, pure and simple. The fact that this particular union may deserve to be bashed does not change that fact.
The Port made it plain the union members have salaries in excess of $90,000, enjoy premium medical insurance and get paid for reduced hours. So what? Driving those container-straddling machines is a very skilled job and they have to work round the clock shifts. The pay does not seem excessive to us.
The Union complained bitterly that the Port had the temerity of writing to the workers direct pointing out the obvious: unless the operation becomes more flexible and productive, there could be redundancies. The Union called the letters "filthy, reprehensible and repugnant". What bollocks. They are nothing of the kind. Read them here and judge for yourself (h/t Whaleoil).
The Port has now offered a 10% pay increase. The Union responded by giving notice of yet another strike. It is not clear what the Union actually wants, except to ensure that it retains a total monopoly of stevedoring.
So, how do we go about breaking this strike? One option would be to do what President Regan did to striking air traffic controllers in the US thirty years ago. Sack the lot of them and employ new people. Unfortunately, John Key is no Reagan. He could, however, promote a law change to have union officials, who act in bad faith, held personally liable for the damage that they cause to others. We already have provisions to outlaw sympathy strikes, so this would merely be an extension.
The best route, however, would be for the Port of Auckland to simply make all members of the Union redundant and, like Tauranga, put its stevedoring out for competitive tender by private operators. The Labour politicians in the Auckland Council won't like it a bit, but will not ultimately have the political courage to stand in the way of management. There will be a period of disruption, no doubt, but as Qantas discovered, that is far preferable to a slow death at the hands of self-serving unionists. The Port can count on our support.
The Importers Institute does not, for obvious reasons, like this strike. But we would like it even less is we lived in a country where people are not allowed to strike. That is why we have consistently urged the parties to resolve their differences and have not taken sides. Until now.
The Union is not striking for better conditions for its members. It is protesting that the Port gave even better conditions to people who do not belong to the Union. Quite simply, it wants to retain a total monopoly on stevedoring and snuff out any possibility of the Port becoming more flexible and productive.
This is not a strike to protect Port workers. It is a strike to save the jobs and influence of the old geezers who make a living as union officials.
Both sides have engaged in spin. Shipping company Maersk came out and said its decision to move a service to Tauranga was influenced by the current disruption. This is simply not true. Decisions on port rotations have to be made months in advance. Maersk's contribution, eagerly seized on by the Port, was union-bashing, pure and simple. The fact that this particular union may deserve to be bashed does not change that fact.
The Port made it plain the union members have salaries in excess of $90,000, enjoy premium medical insurance and get paid for reduced hours. So what? Driving those container-straddling machines is a very skilled job and they have to work round the clock shifts. The pay does not seem excessive to us.
The Union complained bitterly that the Port had the temerity of writing to the workers direct pointing out the obvious: unless the operation becomes more flexible and productive, there could be redundancies. The Union called the letters "filthy, reprehensible and repugnant". What bollocks. They are nothing of the kind. Read them here and judge for yourself (h/t Whaleoil).
The Port has now offered a 10% pay increase. The Union responded by giving notice of yet another strike. It is not clear what the Union actually wants, except to ensure that it retains a total monopoly of stevedoring.
So, how do we go about breaking this strike? One option would be to do what President Regan did to striking air traffic controllers in the US thirty years ago. Sack the lot of them and employ new people. Unfortunately, John Key is no Reagan. He could, however, promote a law change to have union officials, who act in bad faith, held personally liable for the damage that they cause to others. We already have provisions to outlaw sympathy strikes, so this would merely be an extension.
The best route, however, would be for the Port of Auckland to simply make all members of the Union redundant and, like Tauranga, put its stevedoring out for competitive tender by private operators. The Labour politicians in the Auckland Council won't like it a bit, but will not ultimately have the political courage to stand in the way of management. There will be a period of disruption, no doubt, but as Qantas discovered, that is far preferable to a slow death at the hands of self-serving unionists. The Port can count on our support.
13 October 2011
Fonterra Needs Historians, Not Lawyers
The New Zealand milk cooperative Fonterra wants to form an entity called Kotahi (Maori for "standing together as one") with Silver Fern Farms, a meat exporter, and possibly other exporters and importers, to collude against shipping companies and ports.
That collusion is quite possibly illegal, so Fonterra has applied for a dispensation from the Commerce Commission. Ironically, one of the parties against which they want to collude are cartels of shipping companies, who themselves are still exempt from our anti-competitive laws.
The effect of the proposal is simple: Kotahi will use Fonterra's buying powers, augmented by those of its chosen partners, to get freight discounts from shipping companies. It seems probable that the shipping companies would increase the freight rates they charge smaller exporters and importers to compensate.
So, is this just a scheme to increase the profits of Fonterra at the expense of almost everyone else? And if that is all there is to it, how on earth could anyone think that the Commerce Commission would allow that?
Fonterra says that their real objective is to promote a National Infrastructure Plan. They said, "While Kotahi Logistics will be seeking to drive ocean freight and other transport costs for its limited partners and customers [...] achieving costs savings for the benefit of individual firms is not the primary driver. Rather, the Kotahi proposal is aimed at creating a more efficient freight system for all New Zealand firms by promoting greater consistency and more integrated investment in the transport sector."
Fonterra is New Zealand's biggest exporter. Can't they just use their muscle to achieve those objectives? Apparently not: "Even Fonterra - whose usage of containerised freight services currently dwarfs that of any other users - standing alone cannot expect to drive the necessary change", they said.
The cooperative is itself the product of a dispensation from our anti-competitive laws. They enjoy a virtual monopoly on the export of dairy products from New Zealand. Chinese consumers are desperate for infant milk formula packed in New Zealand - they don't trust local sources after a former Fonterra joint venture there was caught poisoning babies with adulterated milk powder. Some entrepreneurial traders are going around buying infant formula from retailers in New Zealand and shipping it to China. It won’t last. The authorities here will do whatever it takes to preserve Fonterra's monopoly.
The Importers Institute shares some of Fonterra's concerns about the lack of rationality in infra-structure investment. Port companies, like Auckland for example, are regarded as little more than cash cows by the local politicians who 'own' them. The usual business accountabilities are absent, because those companies are not businesses, they are extensions of local government.
The solution is not more bureaucratic control or five-year plans drawn up by technicians employed by central, local or corporate bureaucracies. The solution is to ensure that those assets are sold to the highest bidder and operated as competitive businesses - with no dispensations for anti-competitive behaviour. If, for example, Auckland fails to invest in gear to handle larger ships, they will lose that trade to a competitor who does, say Tauranga or Melbourne.
Fonterra must have spent a few million dollars on this proposal - the corporate litigation specialists of Chapman Tripp and the economists from NERA don't come cheap. They should have consulted less with lawyers and more with historians. Without exception, every economy that has ever attempted to replace markets with central plans devised by experts has ended up in total failure. The 'obvious' efficiencies of central planning never materialised, only shortages, privations and the growth in a class of corrupt planners. As someone said, if you introduce central planning to the desert, nothing much will happen at first, but after a while there will be a shortage of sand.
The Importers Institute urges the Commerce Commission to decline this proposal. We urge the government to take steps to free up our economy (including the break-up of export monopolies), instead of tying it up in the red tape of planning committees staffed by would-be experts. We would expect our largest corporation to share these aims. Sadly, Fonterra has failed to exercise business leadership, in this case.
_________________________________
UPDATE: 19 Dec 29011. The Commerce Commission declined Kotahi's application for immunity from prosecution under the Commerce Act. If their future activities become anti-competitive, Fonterra and its partners can be prosecuted. The Importers Institute applauds this decision.
That collusion is quite possibly illegal, so Fonterra has applied for a dispensation from the Commerce Commission. Ironically, one of the parties against which they want to collude are cartels of shipping companies, who themselves are still exempt from our anti-competitive laws.
The effect of the proposal is simple: Kotahi will use Fonterra's buying powers, augmented by those of its chosen partners, to get freight discounts from shipping companies. It seems probable that the shipping companies would increase the freight rates they charge smaller exporters and importers to compensate.
So, is this just a scheme to increase the profits of Fonterra at the expense of almost everyone else? And if that is all there is to it, how on earth could anyone think that the Commerce Commission would allow that?
Fonterra says that their real objective is to promote a National Infrastructure Plan. They said, "While Kotahi Logistics will be seeking to drive ocean freight and other transport costs for its limited partners and customers [...] achieving costs savings for the benefit of individual firms is not the primary driver. Rather, the Kotahi proposal is aimed at creating a more efficient freight system for all New Zealand firms by promoting greater consistency and more integrated investment in the transport sector."
Fonterra is New Zealand's biggest exporter. Can't they just use their muscle to achieve those objectives? Apparently not: "Even Fonterra - whose usage of containerised freight services currently dwarfs that of any other users - standing alone cannot expect to drive the necessary change", they said.
The cooperative is itself the product of a dispensation from our anti-competitive laws. They enjoy a virtual monopoly on the export of dairy products from New Zealand. Chinese consumers are desperate for infant milk formula packed in New Zealand - they don't trust local sources after a former Fonterra joint venture there was caught poisoning babies with adulterated milk powder. Some entrepreneurial traders are going around buying infant formula from retailers in New Zealand and shipping it to China. It won’t last. The authorities here will do whatever it takes to preserve Fonterra's monopoly.
The Importers Institute shares some of Fonterra's concerns about the lack of rationality in infra-structure investment. Port companies, like Auckland for example, are regarded as little more than cash cows by the local politicians who 'own' them. The usual business accountabilities are absent, because those companies are not businesses, they are extensions of local government.
The solution is not more bureaucratic control or five-year plans drawn up by technicians employed by central, local or corporate bureaucracies. The solution is to ensure that those assets are sold to the highest bidder and operated as competitive businesses - with no dispensations for anti-competitive behaviour. If, for example, Auckland fails to invest in gear to handle larger ships, they will lose that trade to a competitor who does, say Tauranga or Melbourne.
Fonterra must have spent a few million dollars on this proposal - the corporate litigation specialists of Chapman Tripp and the economists from NERA don't come cheap. They should have consulted less with lawyers and more with historians. Without exception, every economy that has ever attempted to replace markets with central plans devised by experts has ended up in total failure. The 'obvious' efficiencies of central planning never materialised, only shortages, privations and the growth in a class of corrupt planners. As someone said, if you introduce central planning to the desert, nothing much will happen at first, but after a while there will be a shortage of sand.
The Importers Institute urges the Commerce Commission to decline this proposal. We urge the government to take steps to free up our economy (including the break-up of export monopolies), instead of tying it up in the red tape of planning committees staffed by would-be experts. We would expect our largest corporation to share these aims. Sadly, Fonterra has failed to exercise business leadership, in this case.
_________________________________
UPDATE: 19 Dec 29011. The Commerce Commission declined Kotahi's application for immunity from prosecution under the Commerce Act. If their future activities become anti-competitive, Fonterra and its partners can be prosecuted. The Importers Institute applauds this decision.
12 August 2011
Forwarders Get Just Desserts
Abba Logistics, a subsidiary of Chinese forwarder Amass Freight, charged an importer for fabricated and inflated destination charges. The Disputes Tribunal has now ordered Abba to refund all charges - fabricated, inflated and real.
Abba charged the importer a total of $6,535.07 over four shipments. The charges included a port service charge of $100 per cubic metre, a delivery order fee of $55 per shipment and an assortment of fabricated destination fees variously described as 'carrier security fee', 'document fee', 'port security fee', 'handling fee' and 'MAF handling fee'.
Abba also charged the importer US$25 per m3 for 'origin terminal handling charges' on two of the shipments. The terms were CFR (Cost and Freight), with all freight costs to be paid by the exporter.
The importer took the issue to the Disputes Tribunal and submitted that the only charges that Abba was entitled to collect were the delivery order fee of $55 per shipment plus a destination terminal handling charge of $65 per m3. It claimed for the return of the difference of $3,676.79.
Abba came up with two main lines of defence. The first was that when the freight was prepaid by the exporter, they would charge freight of US$25 and destination charges of NZ$100, but when the freight was payable by the importer, then they would charge US$85/NZ$65. They attempted to explain this by saying that "The market seafreight rates are always combined with a reflection ratio of destination port charges rates".
The second line of defence was that Abba was merely an agent for Amass and, if the importer had a problem with the charges it should take the matter up with Amass direct. We have since established that Abba is a New Zealand company, member of CBAFF (Freight Forwarders Federation) and based in Auckland. It has one sole director: Ms Emily SHIH. It has three shareholders, Messrs Shang Gen GE, Rong LING and Zheng Yi WU who all share the same address: 248 Yangshupu Road, Shanghai. That address is also the head office of Amass Freight International.
Nevertheless, the Tribunal took Abba at its word. It found that there was no contractual relationship between the importer and Abba. It ordered Abba to refund the total amount that it had received from the importer within ten days. It will now be up to Amass of Shanghai to pursue any proper destination charges directly with the importer.
The Importers Institute continues to receive a steady stream of complaints against forwarders who fabricate and inflate destination charges. In addition to Abba, an outfit called POTA Global Freight has come to our attention on several occasions. Our advice to importers is that they have no option but to pay the extortionate amounts demanded (or face demurrage charges) but should then refer the matter to the Disputes Tribunal.
Unlike Abba, POTA have refunded importers for the overcharges, when threatened with Court action. The Importers Institute sent a courtesy email to POTA's head office in Australia helpfully pointing out in the subject line that the "New Zealand Office of POTA is disgrace to your company's name". We said we "can't believe that a company with the history and international reputation of P&O has lent its name to [...]". We were surprised to receive an email from a Mr Steven Hussey saying "You rude asshole. I look forward to meeting you face to face real soon!"
Mr Hussey of Melbourne calls himself "Director - International" of POTA Global Management Pty Ltd (a division of P&O Trans Australia). We suspected that there was some sort of cultural misunderstanding so decided to consult with a specialist in these matters. We have now been assured that Mr Hussey's response is considered to be perfectly acceptable business etiquette in some parts of the docks in Melbourne.
The Importers Institute believes that it is high time that the Commerce Commission had a closer look at the totally unregulated forwarding sector. Importers should not have to put up with these rip-offs.
___________________________
UPDATE: 17 Aug 2011. Abba Logistics have appealed to the District Court against the decision of the Disputes Tribunal. We will report on the outcome.
UPDATE 2: 19 Dec 2011. The District Court cancelled the Disputes Tribunal decision and ordered the matter to the District Court for a new hearing.
UPDATE 3: Abba and the importer settled. There will be no hearing in the District Court.
Abba charged the importer a total of $6,535.07 over four shipments. The charges included a port service charge of $100 per cubic metre, a delivery order fee of $55 per shipment and an assortment of fabricated destination fees variously described as 'carrier security fee', 'document fee', 'port security fee', 'handling fee' and 'MAF handling fee'.
Abba also charged the importer US$25 per m3 for 'origin terminal handling charges' on two of the shipments. The terms were CFR (Cost and Freight), with all freight costs to be paid by the exporter.
The importer took the issue to the Disputes Tribunal and submitted that the only charges that Abba was entitled to collect were the delivery order fee of $55 per shipment plus a destination terminal handling charge of $65 per m3. It claimed for the return of the difference of $3,676.79.
Abba came up with two main lines of defence. The first was that when the freight was prepaid by the exporter, they would charge freight of US$25 and destination charges of NZ$100, but when the freight was payable by the importer, then they would charge US$85/NZ$65. They attempted to explain this by saying that "The market seafreight rates are always combined with a reflection ratio of destination port charges rates".
The second line of defence was that Abba was merely an agent for Amass and, if the importer had a problem with the charges it should take the matter up with Amass direct. We have since established that Abba is a New Zealand company, member of CBAFF (Freight Forwarders Federation) and based in Auckland. It has one sole director: Ms Emily SHIH. It has three shareholders, Messrs Shang Gen GE, Rong LING and Zheng Yi WU who all share the same address: 248 Yangshupu Road, Shanghai. That address is also the head office of Amass Freight International.
Nevertheless, the Tribunal took Abba at its word. It found that there was no contractual relationship between the importer and Abba. It ordered Abba to refund the total amount that it had received from the importer within ten days. It will now be up to Amass of Shanghai to pursue any proper destination charges directly with the importer.
The Importers Institute continues to receive a steady stream of complaints against forwarders who fabricate and inflate destination charges. In addition to Abba, an outfit called POTA Global Freight has come to our attention on several occasions. Our advice to importers is that they have no option but to pay the extortionate amounts demanded (or face demurrage charges) but should then refer the matter to the Disputes Tribunal.
Unlike Abba, POTA have refunded importers for the overcharges, when threatened with Court action. The Importers Institute sent a courtesy email to POTA's head office in Australia helpfully pointing out in the subject line that the "New Zealand Office of POTA is disgrace to your company's name". We said we "can't believe that a company with the history and international reputation of P&O has lent its name to [...]". We were surprised to receive an email from a Mr Steven Hussey saying "You rude asshole. I look forward to meeting you face to face real soon!"
Mr Hussey of Melbourne calls himself "Director - International" of POTA Global Management Pty Ltd (a division of P&O Trans Australia). We suspected that there was some sort of cultural misunderstanding so decided to consult with a specialist in these matters. We have now been assured that Mr Hussey's response is considered to be perfectly acceptable business etiquette in some parts of the docks in Melbourne.
The Importers Institute believes that it is high time that the Commerce Commission had a closer look at the totally unregulated forwarding sector. Importers should not have to put up with these rip-offs.
___________________________
UPDATE: 17 Aug 2011. Abba Logistics have appealed to the District Court against the decision of the Disputes Tribunal. We will report on the outcome.
UPDATE 2: 19 Dec 2011. The District Court cancelled the Disputes Tribunal decision and ordered the matter to the District Court for a new hearing.
UPDATE 3: Abba and the importer settled. There will be no hearing in the District Court.
15 June 2011
Forwarders Fined Millions
The High Court of New Zealand approved a set of fines on price-fixing forwarders:
* Schenkers (a German State-owned company): $1.1m
* BAX (now a division of Schenkers): $1.4m
* Panalpina (a Swiss company): $2.7m
Settlements had already been reached for similar conduct with EGL and Geologistics International and the total cartel penalties imposed to date by the courts is $8.85m.
Kuehne & Nagel is still to have its day in Court.
The forwarders got together and conspired to charge agreed amounts for security costs imposed by US and UK authorities and to introduce a currency adjustment factor following a decision by the People’s Bank of China to stop pegging the local currency to the US dollar.
Justice Allan commented that the surcharge agreements were “part of a sustained course of conduct involving covert meetings and communications.” He also noted that the conduct occurred in “a market of fundamental importance to New Zealand.”
Schenkers has spent more than US$55 million worldwide dealing with regulatory authorities and created a mandatory web-based training facility for its employees globally. The Importers Institute hopes that the message will get through and congratulates the Commerce Commission on these successful prosecutions.
* Schenkers (a German State-owned company): $1.1m
* BAX (now a division of Schenkers): $1.4m
* Panalpina (a Swiss company): $2.7m
Settlements had already been reached for similar conduct with EGL and Geologistics International and the total cartel penalties imposed to date by the courts is $8.85m.
Kuehne & Nagel is still to have its day in Court.
The forwarders got together and conspired to charge agreed amounts for security costs imposed by US and UK authorities and to introduce a currency adjustment factor following a decision by the People’s Bank of China to stop pegging the local currency to the US dollar.
Justice Allan commented that the surcharge agreements were “part of a sustained course of conduct involving covert meetings and communications.” He also noted that the conduct occurred in “a market of fundamental importance to New Zealand.”
Schenkers has spent more than US$55 million worldwide dealing with regulatory authorities and created a mandatory web-based training facility for its employees globally. The Importers Institute hopes that the message will get through and congratulates the Commerce Commission on these successful prosecutions.
Subscribe to:
Posts (Atom)