Inter-ministerial working group proposed to solve difficulties in logistics and lack of containers from VCCI

The shortage of empty containers causes congestion both for exported shipments and for imported raw materials.

The Vietnam Chamber of Commerce and Industry (VCCI) has just sent a document to the Ministry of Planning and Investment proposing policies and solutions to build a scheme to promote Vietnam's economic growth in the current situation.

In this document, as reflected by businesses, logistics costs have increased sharply from 2020 until now in terms of freight, and container shortages have occurred. In several ports, prices have doubled compared to a few months ago and nearly six times compared to the beginning of 2020.

Typically, the price of container transportation from Vietnam to Southampton Port (UK) in early 2020 was US$1,600 per container, US$5,000 per container in December 2020, and US$9,100 per container in May 2021. Similarly, the price of container transportation from Vietnam to Los Angeles Port (USA) has also increased from US$1,800 in early 2020 to US$8,000 per container currently; and to Jacksonville Port (USA) also increased from US$3,900 to US$12,000 per container.

Despite high rental prices, it is still difficult for businesses to book containers, due to shortages at ports and routes. According to the businesses, even though containers were booked one month in advance, many companies still could not rent them. Businesses are competing to rent containers.

Even if enterprises successfully booked a container to pack goods for export, due to the shortage of containers, shipping lines constantly postpone trips, many ships must delay 4-5 times (equivalent to about 10-15 days) per trip. This caused interruptions in export orders, especially those that must be delivered to meet the quota. This delay caused the delivery to be canceled, resulting in the cost of storing containers at the port also doubling.

According to businesses, units that pay higher freight will receive containers. Because the container rental fee increases daily, even after getting a container booking, shipping lines are ready to cancel the booking and transfer it to another unit if they pay a higher fee. The situation became more difficult after the blockage of the Suez Canal at the end of March 2021 and congestion at seaports.

The lack of containers has been leading to congestion both for export shipments and for imported raw materials of enterprises; and has increased the cost of renting containers at all seaports.

This causes the risk of disruption to the supply chain of many industries. It also means many businesses have to pay more storage and warehousing costs due to congested shipments at seaports.

These factors have pushed up logistics costs, significantly affecting the competitiveness of enterprises in the global market. Many enterprises’ orders have been canceled, and delivery, or payment delayed. Enterprises could not sign new orders and fell into a difficult situation.

Due to the pandemic, it was very difficult for businesses to sign orders. But even when they sign it, because of the high container rental fee and difficulty in rent containers, enterprises are facing serious losses and production stagnation due to high production costs and the inability to export goods.

Therefore, VCCI proposed to establish a working group of the Ministry of Transport and the Ministry of Industry and Trade to review and remove current difficulties in logistics costs and the lack of containers. This group will work closely with industry associations, seaports, and shipping lines to come up with solutions to limit price manipulation by some parties.

According to VCCI, domestic logistics costs account for too high a proportion of product prices, significantly affecting the competitiveness of Vietnamese goods. The tariff advantage under the FTAs is not enough to offset the increased logistics costs. Although many initiatives and suggestions have been given, the situation has not improved. Businesses and State management agencies continue to raise shortcomings that were mentioned in previous years.

Therefore, logistics solutions, especially logistics infrastructure (in general and according to the characteristics of each industry and each location), require large investment capital from the State and the simultaneous participation of many relevant ministries, sectors, and localities.

Proposals for action and implementation should be reviewed by a sufficiently strong authority.

Thus, VCCI proposed to establish a special working group of the Prime Minister on logistics infrastructure to review the reality, make proposals for the Prime Minister to consider and submit to the competent authority to decide on specific measures to solve logistics infrastructure problems.

The group will act as a focal point to coordinate with ministries, sectors, and localities in implementing specific measures decided by competent authorities, as well as quickly solving problems arising in the implementation process. VCCI also suggested that the group should focus on logistics infrastructure for import and export activities, especially agricultural products, and focus on the southern key economic region (the Mekong Delta).