Hyundai GLOVIS, Korea's largest car carrier, has notified clients that it will add a surcharge to freight rates due to the United States' port entry fee. The specific sharing ratio is expected to be set considering competitors' moves and market competitiveness. The industry practice is that force majeure expense is borne by the shipper, not the carrier.
According to the industry on the 2nd, Hyundai GLOVIS CEO Lee Gyu-bok said on a third-quarter earnings conference call recently that "we have notified clients of the adjusted surcharge freight rate in line with the $46 (per net ton) standard announced on Oct. 10." The Office of the United States Trade Representative (USTR) has been imposing a $46 fee per net ton (t) on car carriers built overseas since on the 14th of last month, and the intent is to pass this on to clients as an expense through higher freight rates.
Lee said, "From the carriers' standpoint, this measure is recognized not as a simple ship regulation but as having the nature of an additional tariff on imported vehicles, and the shipping industry as a whole is accepting it as a force majeure industry expense," adding, "European and Japanese carriers are also notifying shippers that they will impose a surcharge (additional fee) for the extra port entry fee."
With this freight surcharge measure, Hyundai GLOVIS will be able to avoid the profitability deterioration it initially feared. Considering that a fee of about 6.4 billion won arises for five entries for a vessel of 19,322 net tons, the industry estimates the annual fee could be up to 200 billion won.
Hyundai GLOVIS is known to make 160 to 170 U.S. port calls a year. As of the second quarter this year, it operates a total of 96 car carriers, including 35 owned vessels and 61 chartered vessels.
The expense sharing is expected to be flexibly reviewed, taking into account shipping industry trends and client relationships. As high U.S. tariffs are worsening global automakers' profitability, excessive expense pass-through may face resistance, and if other competitors move to share the expense, Hyundai GLOVIS' market competitiveness could weaken. In fact, the additional amounts that other competing carriers charged shippers as U.S. port entry fees are said to vary by company.
Lee said, "Based on long-term partnerships, we will proceed with consultations to reach an acceptable, reasonable conclusion by comprehensively considering market conditions and competitors' moves."
At the same time, Hyundai GLOVIS plans to minimize the occurrence of port entry fees themselves through operational optimization, such as deploying fixed shuttle vessels, given that there is an annual cap on fee imposition (five times).
Meanwhile, as the USTR is accepting opinion letters regarding adjustments to the entry fee, Hyundai GLOVIS also plans to submit related views in consultation with the government and the industry. On July, the Korean government submitted a letter to the USTR requesting that the entry fee be imposed only on China and that Korea be excluded.