Ports: Exploring Strategic Collaboration for Regulatory Effect
By Eugene Nweke
By professional inclinations and involvement in the international trade and security supply chain, the Freight Forwarder expertise confers and earns the Forwarders, the Industry status as the “Go in between” the shipper and other critical stakeholders within the international trade and safety supply chain.
The Freight Forwarder by training is duly equipped to interface with several trade concerns on behalf of his principal, and as such can best be appreciated as a core strict Information manager. He/She is a source and custodian of primary and secondary trade datas. Equally, a Forwarder stands in as the sources of revenue generations to different actors in the port/shipping Industry value adding supplychain.
The Freight Forwarder is critical in determining the regulatory policies effectiveness and competitiveness, especially in the port industry.
Professional Training of the Freight Forwarders will drive a sound, firm regulatory regime, which in turn promotes professional ethics, code of conducts and thereby upholding and preserving the integrity of the profession in line with international best practices, boost industry sanity.
However, in a corrupt port environment, the Freight Forwarder if left unregulated, could also become a veritable tool, retarding both professional and industry advancement and general economic growth. The Forwarder has the professional capacity to explore further a given corrupt port system, by deploying his knowledge and skills acquisitions in the negative, hence, the prevalence regulatory and operational compromises, connivance and abuses, which heightens malpractices, breeding cartelship, arbitrariness and non compliance to trade laws.
Permit to buttress this position, by citing the regulatory quests of the Austria Competition Authority, Austria Freight Forwarding Group , State Rail Firm, Central Freight Forwarders Association and the Viennese Court, as a case study:
In Austria, the Austrian Competition Authority ( Bundeswett – Bewerbsbehorde – BWB) observed a gathering of black sheeps ( a cartel) called the Austrain Forwarder’s groupage conference, this sets of Forwarders in connivance with a core State privatised Service Provider are involved into price fixing arrangements for transport services within the States.
The Authority under took an extensive investigation on this group’s price fixing activities from 2002 onwards to 2010, when it filed a case in the Viennese Antitrust Court, for the imposition of fines on the members of the group, for agreeing to act in a manner which sought to minimize competition in the Sector.
The Authority in a 36,000 pages of documents accused the Forwarders of not only coordinating prices but also of dividing up groupage customers according to regions, in order not to interfere with each other’s interests. The Authority (BWB) established that the cartel agreed to coordinate diesel fuel surcharges, dangerous goods surcharges, fees for bulky goods, HGV tools surcharges and pallet fees, and levied all this extra amounts on the Shippers.
The legal fireworks ensued, in the year 2011, the Austrian Antitrust Court rejected the request of the Competition Authority to impose fines. The Court ruled that minor cartel was permissible in Austrain laws.
The Competition Authority (BWB), knowing the implications of losing its relevance in the industry, stuck to its gun, it proceeded a step further and submitted the matter to the European Court of Justice, which took up the case and ruled in 2013 that, the cartel was in breach of the EU Competition rules. As a result the Austrian Antitrust Court reopened the case, requested the Authority to produce a principal witness.
It is at this point, that the Authority knowing that it must prove its case logically, deems it necessary and resorts to obtain the buy in of a reputable professional (insiders collaborations) in other to win its case and established itself as a functional, active and respected Authority.
In this particular case, the Authority main target is the Freight division of the Austria’s State railway enterprise ( Osterreichische Bundesbahnen – OBB), which played a particular prominent roles in the cartel, its subsidiary, Rail Cargo Logistics was deeply involved too.
After an in house discussion, DB Schenker, an Austrian firm testifed as a principal witness., He attested thus:
“That, the axis for the agreements has been the Country’s Central Forwarding and Logistics Association ( Zentralverband Spedition & Logistik), a private Association representating the interests of Austrian Forwarders.
The arrangement were agreed in a body known as the Forwarders groupage conference ( Spedition Sammelladungskonferenz – SSK), on the basis of which Forwarders conducted their Austrian groupage activities”.
In 2014, the Court passed judgement in favor of the Authority, and the Authority, as was agreed, penalized the 30 Freight Forwarder firms involvied, including DB Schenker, with fines ranging from EUR2500, OBB was fined EUR7million and Rail Cargo Logistics (subsidiary of OBB) was fined EUR 1.3million. Total fines recovered for the Treasury (with an undertaking never to engage in such act) was EUR17million.
By 19th of December, 2014, the Authority published the court ruling, the outcome of its enforcement, and giving breakdown of recoveries made, the rest is now a success story for regulatory effectiveness in Austria Forwarding Industry.
Notable among the Freight Forwarding firms involvied are : DHL, Express Austria, Logwin Road & Rail, Kuehne + Nagel, Wildenhofer, ABX Logistics, Englmayer, Lagermax and Schneckenreither, etc.
HOME FRONT SCENE :
To date, in the Nigeria Port System several unwholesome practices, cartels, price fixing or arbitrariness, etc, persist.
The Nigeria Shippers Council saddled with the obligation of protecting the interests of the Shippers, had over the years, even before its elevation status as the port economic regulator, partnered with both Freight Forwarding Associations and other concerned bodies to achieve a firm regulatory regime that will usher a competitive and business friendly port industry, but still suffers sets back, with regards to this quests.
Like the Austrian Competition Authority, the Council painstakingly collaborated the supports of the Trading and Freight Forwarders Associations, went through legal fireworks, and eventually secure a Court judgement against the Shipping Lines and the Terminal Operators over acts of arbitrary price fixing.
Almost three years down the line, the NSC is yet to publish the outcome of its enforcement and recoveries thereof to the public.
MATTERS ARISING FROM THE CASE STUDY:
In the matter of inadequate professional regulation of the Freight Forwarders in an untrained and non economic regulatory authority in the industry, the case study under reference shows that the Freight Forwarding, Shipping Lines, Terminal Operators, Haulage Associations, Firms, etc, may actually lacks the professional capacity and administrative will to effectively regulate their members on matters of professional, arbitrary price fixing and connivance thereof, at times most of the Freight Forwarding Associations and Firms are actually culpable and are party promoting such trends.
AN ADVICE FOR THE NSC:
The Nigeria Shippers Council has a duty to sustain its relationship with the Association, but has to collaborate with the Council For The Regulation Of Freight Forwarding Practices In Nigeria – CRFFN, in its current bids to evolve a regime of professionally trained, regulatable ( sanctionable) Freight Forwarding Practices In Nigeria. A Freight Forwarding regulatory Council has all it takes to compel the professionals to make their clients comply with trade laws, once there is a level playing field and uniformity of practice. No professional likes living all his or her life giving bribes.
The Council stands to attain a milestone in its economic regulatory functions in the port industry, first it has to review its present approach to collaborations. Collaborations are meant to achieve strategic results in the long run. Again, the need to show enforcement capacity is key. Getting the Forwarders properly regulated is the core step to engendering an effective regulatory regime in the port industry.
* Dr Nweke was former President of National Association of Government Approved Freight Forwarders (NAGAFF).
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