"Even with Extra Payment, No Space Available"... Government Expands Freight Support and Shipping Capacity for Exporting SMEs

Ministry of Industry Holds 'Export-Import Logistics Issues Review and Win-Win Council' Meeting
Support for SME Freight Costs and Expansion of Shipping Space Allocation... Investigation of Unfair Practices Such as Contract Breach

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kwon Haeyoung] As the global logistics crisis deepens due to the post-COVID-19 economic recovery and the aftermath of the Suez Canal ship accident, the government is expanding freight support and space allocation for small and medium-sized enterprises (SMEs). It will also investigate cases of unfair practices such as contract cancellations and undisclosed freight rates by some shipping companies. This is to support export companies struggling with ship shortages and soaring maritime freight rates and to back economic recovery.

On the 27th, the Ministry of Trade, Industry and Energy held a meeting of the 'Export-Import Logistics Issues Review and Win-Win Council' chaired by Moon Dong-min, Director of the Trade and Investment Office, at the Korea Trade Insurance Corporation to discuss these measures. The Export-Import Logistics Win-Win Council is an organization established to strengthen policy coordination related to export-import logistics, consisting of relevant government ministries, private experts, and companies.

Recently, as maritime freight rates have surged, export companies have been complaining about damages caused by the logistics crisis. The Shanghai Containerized Freight Index (SCFI), which aggregates freight rates for 15 container shipping routes, soared from 1023 in January 2020 to 2762 this month. Maritime freight rates to Europe are $4,325 per TEU, and to the U.S. West Coast are $4,967 per FEU. This is due to delayed departures following the Suez Canal ship accident and logistics congestion at overseas ports such as the U.S., which have intensified freight rate increases and space shortages.

The problem is that while global cargo volume is increasing due to economic recovery and vaccine distribution, the supply of ships and aircraft remains insufficient, so freight rate hikes and space shortages are expected to continue.

The government will first address the space shortage by deploying two vessels monthly on the U.S.-China route. It will also deploy temporary vessels on major routes to Europe and Southeast Asia, considering logistics conditions. Weekly provision of 350 TEU space on the U.S. route for small and medium shippers will be implemented until the end of the year, and 50 TEU weekly will be provided on the Europe route starting in May. Freight support budgets for small and medium-sized and mid-sized shippers will also be promptly executed. The government plans to recruit SMEs and mid-sized companies eligible for international transport cost support early next month, providing up to 10 million KRW per company.

Additionally, through consultations with domestic shipping companies and support agencies, the government will expand the scale of priority space allocation and freight support. It also plans to investigate damage cases related to unfair practices such as unilateral contract cancellations and undisclosed freight rates by some shipping companies.

Furthermore, through the export council, long-term contract expansion, introduction of a win-win standard trading contract to prevent unfair trade, and transition to CIF trading terms have been selected as priority tasks to prepare future measures.

Moon Dong-min, Director of the Trade and Investment Office at the Ministry of Trade, Industry and Energy, said, "We plan to prepare additional support measures such as freight support and expanded space allocation for SMEs to prevent disruptions in exports caused by the recent continuous surge in maritime freight rates and space shortages. Through the Export-Import Logistics Win-Win Council, we will gather opinions from all sectors to seek mid- to long-term measures to overcome the current difficulties."

This content was produced with the assistance of AI translation services.