Analysis: Logistics giant suspends operations in Brazil and raises alert in the agricultural sector

RIO DE JANEIRO, BRAZIL – A leader in the international maritime freight market, MSC announced the indefinite suspension of its container stuffing and inland transport operations in Brazil. The decision was made amid record freight costs and difficulties obtaining shipping schedules and containers for export.

Since the beginning of this year, Brazilian exporters have been concerned about the problem, which had already been hampering the loading and unloading of goods and merchandise in Brazilian ports.

In a statement sent to customers, to which Globo Rural had access, dated January 14, the company informs that the decision is effective immediately. And relates the measure to issues related to security in port operations.

“The action of criminals who intercept the transport of containers to promote the illicit drug trade, victimizing, among many, us, our customers, and our partners, has proven to be a major threat to our activities,” says the company in the communication sent to customers.

The company’s measure extends to other South American countries. Globo Rural contacted MSC to understand why the company decided to suspend operations on land, but the company did not comment.

The decision, however, brought concern and more uncertainty among representatives of the logistics and foreign trade sector. “Nobody was prepared for this measure, and we don’t know if there were previous understandings with regard to the security bodies, which is the one in charge of this part,” says the director of the Foreign Trade Association of Brazil Aluísio Sobreira.

This is an “atypical and unexpected situation, about which we don’t have all the information”. “It is a decision that we understand may impact transportation costs since it is public and general knowledge that few players carry out container transportation, usually large carriers,” says Sobreira.

The director of Foreign Trade of the Brazilian Chamber of Commerce, Industry and Services (Cisbra), Arno Gleisner, also foresees impacts on the national logistics chain in the coming months after the suspension of MSC’s operations.

“We understand the position of the company as a concern and pressure to stop the use of containers for shipping drugs, but we would like and prefer that this had been done differently because it complicates exports and will cause Brazilian companies to have fewer options for shipping their goods,” highlights Gleisner.

According to him, the agricultural sector tends to be the most affected due to the diversity of products exported by container: meat, fruit, coffee, sugar, and wood.
No talk

MSC’s client, Café Labareda, had about 15 containers scheduled to be shipped when the company announced the suspension of its operations on land.

Besides the rush to find new suppliers for the delivery service to the port and stuffing, the commercial director of Café Labareda, Gabriel Lancha Alves Oliveira, says that the inconvenience generated by MSC’s decision lasts until today.

“Of the containers that had already been sent to Santos, we cannot receive the documentation. So this access and communication that used to be easy and agile have stopped”, says the executive.

The difficulty in communication worries Café Labareda, which has faced challenges in receiving, among other documents, the “Bill of Land” (or “BL”), which proves that the exported product was delivered at the port.

In the FOB (Free on Board) type exportation, the most common in the sector, the document is necessary to prove the execution of the contract and request payment for the exported cargo. “If I’m going to make the exchange with the bank, the bank asks for this document to lock in the price. It is a document that proves receipt,” explains Oliveira.

In the maritime freight services already contracted and still being provided by MSC, the commercial director of Café Labareda says he also faces problems. “I can’t schedule some ships already pre-dated with them, and nobody answers. When they answer, sometimes they don’t give the price.

When they give the price, I go to close, they don’t answer confirming the appointment. It is a severe problem,” complains the exporter, pointing out that the company is already looking for new suppliers to replace MSC in its operations.

“It was a service they provided that was not their core business; their focus is to have the liner, put the ship in, and charter it to the destination. And today they are making a lot of money with this and have focused only on this”, evaluates Oliveira.
Contamination is an old problem.

Agribusiness is among the leading sectors affected by cargo contamination, according to professionals who work in foreign trade and border control.

“We trade with 215 countries globally, and more than 50% of our cargo is of agricultural origin. So, naturally, it is going to be a very contaminated cargo. Not that other cargoes are not contaminated, but the preferred cargo, in terms of proportionality, is agricultural cargo,” says one of them.

“There has been an increase in this; it is noticeable,” he says.

According to the executive director of the Brazilian Association of Retroport Terminals and Container Carriers (ABTTC), Wagner Souza, the contamination of containers with drugs is an old problem in the sector and one that has already been faced.

“We have noticed that they [traffickers] have been perfecting the methods to contaminate containers and send drugs to their final destination. So, we are always running behind to understand what innovations are being implemented to improve control and be more effective,” says the executive.

Federal Police (PF) actions with drug seizures in containers have been recurrent. In one of them, held in Paraná on January 28, eight temporary arrest warrants and nine search and seizure warrants were served in Paranaguá, Matinhos (municipality on the state’s coast) and Piraquara, in the metropolitan area of Curitiba.

“The investigated are responsible for providing privileged information about positions, routes and loads of containers to subsidize criminal organizations in actions at the Port of Paranaguá, besides moving the containers to enable the insertion of cocaine shipments within the courtyard of the port terminal,” said, in a statement, the superintendence of the (PF) in Paraná.

Who contaminates the containers do not necessarily consider the content but the destination.

According to a federal agent who works in border control, among the most coveted routes by traffickers are those that go to the European ports of Antwerp, in Belgium, Algeciras, in Spain, and Rotterdam, in the Netherlands.

“It is a problem that has always existed and is now being more exposed and publicized. I have heard from employees of this company and others that this is tarnishing their name, hurting customers who have nothing to do with the situation,” notes the agent.

“Today, a phenomenon contributes indirectly: the lack of containers in the world. And South America participates very little in the global container handling market.

The company can redirect its container to any other corner of the world and continue to be profitable with low risk. Therefore, this is not a one-time thing; there is a larger structure behind this decision”, evaluates the professional.
A ‘message’ to Brazilian exporters

In evaluating the executive director of ABTTC, MSC’s decision can be a message to Brazilian exporters to be more attentive when hiring logistic services.

“I think the decision was taken to bring to the debate, mainly from exporters, that they need to participate more in the logistics process and choose their service providers better. We monitor and see many exporters that hire companies that the customs agency does not even authorize to do the export process, which is a tremendous risk,” points Souza.

Gleisner, from Cisbra, recognizes that there are “weak links” in the inspection and control of cargo exported by Brazil. “These weak links are not only in the police.

The companies themselves have to examine this with their specialized personnel in logistics and with their partners and do the inspection work to know where the weak points are and help so that they are no longer places where drugs are introduced – whether in the warehouse or truck transportation,” emphasizes the executive.

Besides the legal consequences of having a cargo contaminated with drugs, the companies that are victims of this type of crime still face the million-dollar costs related to tariffs and fees charged by the port operator during the period in which the cargo is stopped awaiting police investigation.

“It is necessary to understand that when a cargo like this is contaminated, many times the owner loses the cargo, the insurance doesn’t want to pay for the expenses, and those who have nothing to do with it are harmed,” says an inspection agent, classifying the model adopted in Brazil as “outdated”.

“It is a war in which Brazil is not concentrating its efforts in the way it should. The structures are small, outdated, there is a lack of legislation, employees, so it falls short of what is necessary,” says the federal agent.

According to him, cargo contamination is a “commonplace” situation in Brazilian ports and borders. And the country should adopt a centralized inspection model in a single body, concentrating a performance that today is done in a shared manner by the Federal Police, Internal Revenue Service, Agricultural Inspection, and even Ibama.

“This has to do with the structure of the ports, the public agencies, and the lack of personnel. Four to five agencies are working simultaneously when it could be a single agency doing the control with a single work philosophy, its organization, its careers, or that lends employees to this agency to work. But Brazil is very late in relation to this,” adds the agent.

The Federal Police and the Internal Revenue Service did not answer the interview requests sent by the reporter. The National Center for Transatlantic Navigation (Centronave), an entity representing shipping companies, was also contacted but declined to comment.

With information from Globo Rural