“Buckle up. It’s going to be a rough couple of months.”
That is the stark warning from one Barbadian businessman as new increases in shipping costs threaten to drive up the price of goods entering the island, raising concerns among importers and retailers about the potential impact on businesses and consumers.
According to a notice issued by the shipping company Seaboard Marine, a general rate increase on all import and export cargo between the United States and the Caribbean took effect on March 8.
The advisory states that the increase applies to cargo moving between the United States and several Caribbean territories including Barbados, Antigua, Guyana, St Kitts, St Maarten, Suriname and Trinidad and Tobago.
Under the new rates, shipping costs for containers have risen significantly. The notice outlines increases of $250 for a 20-foot dry container, $500 for a 40-foot dry container, $563 for a 45foot container and $300 for a 20-foot refrigerated container, while a 40-foot refrigerated container has increased by $600. Additional charges also apply to less-than-container loads and certain vehicle shipments.
The increases come amid global uncertainty surrounding oil supplies, with businesses already bracing for further hikes in freight costs.
No surprise
Managing director of Abed’s Stores, Eddy Abed, told the Sunday Sun the development was expected given the current geopolitical tensions affecting global oil prices.
“It isn’t surprising that the freight rates are being increased. The moment we saw this war start in the Middle East and the price of oil begin to climb dramatically, we knew this would happen. This morning the news is reporting oil at over US$100 a barrel and we already know that whenever oil spikes, freight rates follow very quickly,” he explained.
“The last time oil went up to those crazy levels of US$140 and US$150 a barrel, freight out of China in a 40foot container approached US$20 000. Just last month in February that same container was costing us about US$3 800. Today, it is already up to around US$5 200 and the freight companies are warning that the rates will continue to rise as long as the flow of oil out of the Middle East remains under threat.”
Abed warned that the impact of rising freight costs would ultimately be felt by consumers because of how import duties and taxes were calculated.
“The knock-on effect is that as freight goes up, it becomes part of the CIF value, which is the cost of the item including insurance and freight. We pay duty and VAT on that entire amount, so when freight starts reaching numbers like $20 000 and you then add duty and VAT on top of that, you could easily be looking at retail price increases of 15 to 20 per cent,” he said.
“None of us are looking forward to that situation but, frankly, we have no choice because this affects every importer whether you bring goods from Miami, Europe or the Far East. And when you start talking about refrigerated cargo, the situation is even worse because there are fewer companies transporting those containers and the energy required to keep them cold also depends heavily on oil.”
Cheaper suppliers
Abed said while importers were trying to source goods from cheaper suppliers to soften the blow, the outcome would largely depend on how long the geopolitical conflict continues.
“We are all trying to be responsible importers by sourcing goods from the cheapest locations wherever we can in order to mitigate some of the freight increases but the truth is none of us has a crystal ball to know how long this war will last or what will happen to oil supplies. All I can say right now is buckle up because it’s going to be a rough couple of months.”
Meantime, chairman of the Customs and Trade Facilitation Committee of the Barbados Chamber of Commerce and Industry, Lalu Vaswanic also acknowledged that the increase reflected wider global pressures affecting shipping and energy markets. He said: “At the present time we are dealing with a very acute geopolitical situation which has caused oil prices to spike. Everyone who uses oil, whether it is a shipping line or an energy company, relies on that as a raw material to provide their service. So, naturally, when oil prices move sharply upward, shipping costs are going to follow,” he said.
“It is a difficult time because the situation is uncertain and unpredictable. The most important thing right now is for businesses to remain calm, monitor the facts as they unfold and anticipate what adjustments can be made to mitigate the effect on the final customer.”
Vaswani said businesses would have to focus on efficiency to protect consumers as much as possible.
Up to the customer
“In the end the customer will decide based on their priorities. If the product being sold is not considered essential, then that business could be impacted. That is why it is important for all businesses to purchase as efficiently as possible and control their costs so they can shield customers as best they can,” he said.
“But the reality is that when the rain falls, it falls on everyone. We are engaging with the Government on possible options that could help mitigate the impact across the economy and we expect that in the coming days we may learn what decisions will be taken.”
He added that businesses remained hopeful that national economic policies would help soften the impact of the global developments.
“We are fortunate to have a Government that is proactive in protecting the vulnerable and the wider economy. They are aware that this situation is beyond the control of the local population and we anticipate that calm heads will prevail and sensible adjustments will be made to protect both businesses and consumers.”
Meanwhile, a manager at a Bridgetown clothing store, who asked not to be identified, said small retailers were already closely monitoring shipping and customs charges to determine how the increases will affect their operations.
“What we normally do is compare the bills month by month. So when the next shipment comes in March, I will compare it to what we paid in February to see how much of an increase there is.”
The manager said those adjustments could include reducing energy usage in the store and carefully planning shipments.
“Right now, we are preparing for upcoming festivals, so more stock will be arriving and that means more shipping costs.”
She added that customers often did not see the hidden costs businesses faced before products even reached store shelves.
“People might come in to the store and say the items are expensive but they don’t see what we have to pay to clear those goods through Customs or to bring them here in the first place. Between the freight, the taxes and the customs charges, there are many expenses before we can even put a small mark-up just to recover what we spent and keep the business running.” (TRY)
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