MMA confirm port cost reductions
The Malta Maritime Authority has analysed port costs to give what will hopefully be the final word on the impact of reform: Overall regulated and terminal operator costs have gone down by as much as 23 per cent. Over the past months, there were a...
The Malta Maritime Authority has analysed port costs to give what will hopefully be the final word on the impact of reform: Overall regulated and terminal operator costs have gone down by as much as 23 per cent.
Over the past months, there were a variety of figures put forward, showing different reductions. The government had claimed that costs would go down by 25 per cent but the Federation of Industry (FOI) recently released figures based on a survey of some of their members, which showed much smaller reductions.
When ship agents' fees are factored in, the reductions are slightly lower, ranging from 5 per cent to 19 per cent.
The MMA figures show that in fact there is not that much discrepancy between the various amounts; the problem was that no one was looking at all the factors that go into the final price. Just as importantly, the FOI survey had not gone back far enough, comparing August this year to August last year.
"The figures that they should have started off with would have been those in force until June 30, 2006, as the changes that came into force in July 2006 were not picked up in their survey," MMA chairman Marc Bonello said. Another factor to bear in mind is that the FOI survey was based on the Freeport, where different systems apply for the handling of empty containers, and which was already cheaper than Grand Harbour before the reforms started.
The complexity of the system in force until June 30, 2006 explains why it has been so hard to come up with a holistic picture. In a nutshell, the old system was split between cargo handling on shore and cargo handling on the ship.
The ship agent handled not only the ship but also acted as the agent for the cargo. This meant the ship agent appointed a foreman, who would in turn engage the port workers required for that particular vessel.
A tally clerk was also engaged who would ostensibly reconcile the cargo manifest with the actual cargo, a function that was in fact no longer required.
A vessel's invoice would therefore be made up of the ship agent's fee, the foreman's, the port workers' and the tally clerk's, known in all as the FIOS. The land arrangements were handled by the terminal operators, which at that time were Cargo Handling Co and Malta Freeport Terminals (MFT) for Valletta and the Freeport respectively. The operator would engage a foreman for the shore operations, who would in turn engage the landside port workers. Therefore the invoice for the landside would include the fees for the foreman, the port workers and the terminal operator.
This system was in use until June 30, 2006 when it was simplified by having a ship agent and a cargo agent who would handle both the cargo on the ship and on the shore. By then, Grand Harbour had been entrusted to a new operator, Valletta Gateways Terminal (VGT).
Under the new system, VGT and MFT engaged both the ship and shore foremen, resulting in cost savings of 5 per cent. This reduction between June 2006 and July 2006 was therefore not picked up in the FOI survey, which compared prices to August 2006.
The next step was to tackle the regulated costs (foremen, port workers and tally clerks). The port workers' rates were revised and the tally clerks were absorbed into the MMA as employees, doing away with the relevant charge, while the foremen's agreement is close to being finalised.
Since the terminal operators' fees are established as part of their contract with the government, the only fees that are liberated are those of the ship agents, who charge a service document and processing fee (SDP).
This was discussed between the Association of Ship Agents and the MMA and resulted in guidelines being approved which would result in reductions of up to 5 per cent, different for various sizes of container.
Since this is a liberated, unregulated area, these are just guidelines. In fact, ship agents' fees indicated in the FOI survey were on the whole higher than the guidelines, which caused some ripples of concern.
"The Association of Ship Agents met the FOI to discuss this and found that it had taken not only the ship agents' fees but also some third party charges. We will therefore be meeting again to help them get to the relevant figures," association chairman Ernest Sullivan said.
"Overall, ship agents are sticking to the guidelines. This is a competitive environment and if the agent is expensive then there is nothing to stop a client from going to someone else."
Over the past months, there were a variety of figures put forward, showing different reductions. The government had claimed that costs would go down by 25 per cent but the Federation of Industry (FOI) recently released figures based on a survey of some of their members, which showed much smaller reductions.
When ship agents' fees are factored in, the reductions are slightly lower, ranging from 5 per cent to 19 per cent.
The MMA figures show that in fact there is not that much discrepancy between the various amounts; the problem was that no one was looking at all the factors that go into the final price. Just as importantly, the FOI survey had not gone back far enough, comparing August this year to August last year.
"The figures that they should have started off with would have been those in force until June 30, 2006, as the changes that came into force in July 2006 were not picked up in their survey," MMA chairman Marc Bonello said. Another factor to bear in mind is that the FOI survey was based on the Freeport, where different systems apply for the handling of empty containers, and which was already cheaper than Grand Harbour before the reforms started.
The complexity of the system in force until June 30, 2006 explains why it has been so hard to come up with a holistic picture. In a nutshell, the old system was split between cargo handling on shore and cargo handling on the ship.
The ship agent handled not only the ship but also acted as the agent for the cargo. This meant the ship agent appointed a foreman, who would in turn engage the port workers required for that particular vessel.
A tally clerk was also engaged who would ostensibly reconcile the cargo manifest with the actual cargo, a function that was in fact no longer required.
A vessel's invoice would therefore be made up of the ship agent's fee, the foreman's, the port workers' and the tally clerk's, known in all as the FIOS. The land arrangements were handled by the terminal operators, which at that time were Cargo Handling Co and Malta Freeport Terminals (MFT) for Valletta and the Freeport respectively. The operator would engage a foreman for the shore operations, who would in turn engage the landside port workers. Therefore the invoice for the landside would include the fees for the foreman, the port workers and the terminal operator.
This system was in use until June 30, 2006 when it was simplified by having a ship agent and a cargo agent who would handle both the cargo on the ship and on the shore. By then, Grand Harbour had been entrusted to a new operator, Valletta Gateways Terminal (VGT).
Under the new system, VGT and MFT engaged both the ship and shore foremen, resulting in cost savings of 5 per cent. This reduction between June 2006 and July 2006 was therefore not picked up in the FOI survey, which compared prices to August 2006.
The next step was to tackle the regulated costs (foremen, port workers and tally clerks). The port workers' rates were revised and the tally clerks were absorbed into the MMA as employees, doing away with the relevant charge, while the foremen's agreement is close to being finalised.
Since the terminal operators' fees are established as part of their contract with the government, the only fees that are liberated are those of the ship agents, who charge a service document and processing fee (SDP).
This was discussed between the Association of Ship Agents and the MMA and resulted in guidelines being approved which would result in reductions of up to 5 per cent, different for various sizes of container.
Since this is a liberated, unregulated area, these are just guidelines. In fact, ship agents' fees indicated in the FOI survey were on the whole higher than the guidelines, which caused some ripples of concern.
"The Association of Ship Agents met the FOI to discuss this and found that it had taken not only the ship agents' fees but also some third party charges. We will therefore be meeting again to help them get to the relevant figures," association chairman Ernest Sullivan said.
"Overall, ship agents are sticking to the guidelines. This is a competitive environment and if the agent is expensive then there is nothing to stop a client from going to someone else."