Slow boats from China
There is movement on the Eastern front, or to be more precise, a distinct lack of it. Several garment sales organisations I’ve spoken to recently note that the sales/delivery cycle for goods imported from China has been stretched, like a piece of chewing gum, by a month.
This has nothing to do with Chinese New Year, they add. If you want deliveries for opening summer in July you now have to have sell in February and March for orders to be tied up and passed to Chinese factories during the first week of April. Definitely not in response to China’s demands, but fitting in with the new cycle, Fashion Exposed is running earlier this year than last.
What effect does this new timeline have on the trade?
For a start, those returning from Christmas holidays found themselves boarding a moving vehicle. The former couple of weeks of gentle reorientation was gone. Buyers also had to reschedule their programs for leaving the retail nest in search of food for the coming summer.
Is there any harm in doing things earlier, we might ask? That depends on how you look at the numbers. If selling costs are incurred a month earlier, but deliveries are not made correspondingly earlier, then companies are going to have to fund their sales overheads for an additional month before they get paid.
The month stretch is also going to produce a longer hiatus period between the end of summer selling and the beginning of winter selling. Yes, I know there are plenty of goodly works you can do in that period, like taking off around the country to visit your customers, but it does require planning.
The stretch will especially affect fashion agents because they run their businesses on critical schedules. It will also affect the volume end of the trade where interface suppliers must take their retail buyers on fact-finding trips, to say nothing of the growing number of major store groups that have shunned the use of middle persons. All these organisations will be caught up in the panic to tie down summer deliveries from China.
Adding up AADA
AADA stands for the Asia Australia Discussion Agreement. Now there’s a wired title for a start. Either it’s a discussion or it’s an agreement, but an agreement to discuss seems cockeyed to me. Anyway, this body is a collection of 12 ocean carriers serving the trade from North and East Asia to destinations in Australia. Its members are ANL Singapore, CSCL, Cosco, Hamburg Sud, Hanjin, Hyundai Merchant Marine, “K” Line, MSC, MOL, NYK, OOCL and Gold Star Line.
Putting it into perspective, most of the apparel coming from China to Australia would be carried by AADA members.
From September of last year, these 12 carriers, supposedly in competition with one another, decided, through their membership of AADA, to increase the cost of a 20-foot container by A$342 (US$300) and a 40-footer by A$684 (US$600). A statement from AADA said the increase “will apply in full on top of existing ongoing market rates and will be subject to accessorial surcharges applicable at the time of shipment.”
The story is that this charge which, by implication, could be removed at some point in the future when the reason for it disappears, will be soon incorporated into the base rate for a container. Then it will be up to the AADA wordsmiths to invent another term to enable new temporary charges to be brought into play when the lads feel like topping up their pockets.
AADA perfectly fits the definition of a cartel. If any group of competitive traders in Australia banded together to increase charges or meddle in any way with the free market, the Australian Competition and Consumer Commission (ACCC) would have them for breakfast. I wonder why there haven’t been howls of protest from our garment importers – or all importers for that matter.
When you compare the consequences for shipping companies acting in collusion with that of airlines, you’re looking at chalk and cheese. The airlines carry plenty of freight too, yet they are watched by the ACCC and punished, often to the tune of many millions of dollars, for collusion. Why the difference?
One importer suggests that shipping companies are much harder to nail than airlines. Ships are usually registered in relatively remote places like Panama, while the operating entity (AADA) stations itself in Hong Kong where, apparently, cartels are a joy to behold.
Two issues emerge from this.
One of the ‘As’ in AADA stands for Australia, so there’s no point in pleading that the cartel-tolerant countries of the world have imposed themselves on helpless Australia.
The other is that, in Australia, we have never been willing to import illegal behaviour, be it cultural or commercial. We impose standards on all the goods we buy from overseas suppliers. But when it comes to ocean freight, we shrug our shoulders, grizzle, and move on.