Chief executive officer (CEO) of the Jamaica Chamber of Commerce (JCC) Larry Watson has cautioned local consumers to expect higher prices for goods and services soon, due to the dramatic rise in shipping costs.

He said the shipping dilemma is likely to continue for the rest of the year, with more increases expected to come in the second half of 2021.

This, he expects, will likely lead to a decline in consumption patterns.

Speaking on Taking Stock with Kalilah Reynolds, Watson confirmed that JCC members have been getting quotations for containers totalling over US$14,000. That’s a 300 per cent jump when compared to the US$3500 it would cost to move a container in 2019 and early 2020 before the onset of the pandemic.

Furthermore, another local manufacturer recently told Kalilah Reynolds Media that his company last week received a quotation for as much as US$25,000.

Watson said the situation has been causing challenges for all importers, with rates going up significantly for shipmemts coming particularly from China and the far east.

“It cuts across all areas,” he said.

Watson explained that lockdowns and border closures across the world have been influencing the increases in shipping rates. He said the pandemic has resulted in a disequilibrium in the flow of goods and the movement of containers.

Further to that, he said competition has been forced in the space from the reduction in shipping capacity, with shipping lines putting their vessels into dry dock for maintenance while import levels fell off during the early stages of the health crisis. Some also conducted blank calls over the period in search of open ports.

“One member indicated that the last time they were to bring in a container they paid US$10,500, but the ship left and their container was not put on the ship. When they asked what happened they were told there were higher bids and people were paying US$13,000 – US$14,000 so they left their container. The member then took a decision not to bring in the goods. It’s a challenge and it’s gonna cause a disruption in the supply chain coming into Jamaica,” reasoned Watson.

The JCC CEO argued that while there are few alternatives to ocean freight, import duties being applied inland are an added challenge.

Call for adjustment of CIF

“When a container lands at the port in Jamaica, remember that our import duties and other things are classed on the CIF (cost, insurance, freight), so before if you had a container costing you US$30,000 coming into Jamaica, with the increased rate that figure now becomes US$40,000, so your duty exponentially increases. So it does have a multiplier effect coming through the prices, both for manufacturers and importers,” he explained.

Based on the Jamaica Customs Agency’s website, the CIF duty takes into account the total cost of the goods abroad, an insurance charge in the event of the loss or damage of the goods, and money paid or payable to the shipping agent or the airlines for the goods to be shipped or transported to Jamaica — including inland freight, packaging and handling charges.

Watson said the chamber would love to have the CIF duty temporarily adjusted due to the current circumstances. However, he said they are cognisant that the Government also has its own challenges in their budget. He noted that during the recent budget debate, Finance Minister Dr Nigel Clarke said the Administration was not in a position to even increase the duty-free import rate for individual consumers from US$50 to US$100.

“We could lobby but, truth be told… the Government has significantly increased spending because of COVID-19 and they have a very tight budget this year, so when you say to them, ‘Change this,’ that decision may cost them billions of dollars. Yes, freight wasn’t at this [higher] level last year but import volumes have declined significantly also, so they are looking to balance their budget,” he said.

Relief possible for 2022

According to Watson, importers may not get some relief until 2022.

“Part of the good news is that the orders for containers and for new ships to be put en route have been pretty good and from the figures I have read, there are some 200-300 ships on order, but the problem is they take two to three years to be put into service. I think 2021 is going to be a very tough year,” said Watson.

Watson said some importers have been rationalising their operations to ensure they make it through the pandemic. He added that members have started seeking alternatives in other markets as well locally to cope with the challenges.