The transport user group has lobbied the Federal Maritime Commission to protect shippers from ocean carrier actions.
The Agriculture Transportation Coalition on Friday thanked the Federal Maritime Commission for investigating and raising questions about the imposition of surcharges by ocean carriers for congestion experienced at West Coast ports, saying the extra fees are a severe burden on struggling exporters.
Many carriers announced last month they would implement surcharges of $1,000 per FEU because of massive delays at ports such as Los Angeles and Long Beach, which sometimes force vessels to skip sailings there, as well as productivity problems in Oakland, Seattle and Tacoma. The congestion has been exacerbated in recent weeks by an apparent work slowdown orchestrated by the longshoremen’s union to gain leverage in stalled contract talks with terminal operators. Several liner companies also announced general rate increases of $1,000 per box. Carriers backed off an immediate application of surcharges after the FMC, responding to complaints from cargo owners, questioned the timing of the surcharges and whether adequate notice was provided. Last week, the 15 carriers belonging to the Transpacific Stabilization Agreement agreed to forego any surcharges until 2015.
The surcharges and rate hikes, many of which are aimed at imports, are especially onerous because farmers and other shippers of agriculture products face heavy financial losses as a result of port delays that are preventing overseas orders from being filled. Truck shortages have also sent transportation rates for many exporters spiraling upward.
“Thus the specter of ocean carriers imposing congestion surcharges or GRIs at this particular time, when all exporters are suffering great losses and some exporters are losing their entire year’s sales, is callously packing salt in the wound, to put it mildly. If carriers claim to want to be partners with their customers, they certainly should not be imposing draconian extra charges at this particular time,” AgTC Executive Director Peter Friedmann wrote in a letter to the agency.
He suggested that U.S.-based carrier executives appear to recognize the exporters’ problems, and that the push to squeeze revenue out of the situation is coming from the headquarters of international ocean carriers.
Although ocean carriers face higher costs themselves for vessel delays, altered ship rotations, trucking, and overtime for dock labor, those impacts pale in comparison to the potential losses for exporters, some of whom could lose revenue for their entire harvest season, Friedmann said.
Hay and straw shippers, who collectively book several hundred thousand TEUs every year, illustrate the plight of many exporters. So far this season, the congestion has cost the forage products sector $25.7 million in lost revenue, because 7,365 TEUs of hay could not be shipped, as well as higher truck rates to compensate motor carriers for wait times and the lack of capacity. The reduction in export opportunities has caused farmers to lay off 120 people.
Friedmann said the figures probably underestimate the situation and that other AgTC members have not submitted any data yet.
The big worry for agriculture producers and processors is that the loss of orders could be permanent, as foreign customers look to other markets that are perceived to be more dependable. Many Japanese candy makers turned to Turkish almond growers when a labor dispute in 2002 shut down West Coast ports for 10 days, and some California almond growers have never recovered that business, Friedmann told the FMC.
“If the cargo cannot move, the customer can, and generally does, reject the entire shipment. This means, at the time when the agriculture products are being harvested and packed, they cannot ship. The carrier may lose the freight revenue, but the exporter loses the entire value of the contents of that container — tens of thousands of dollars — and loses the customer, perhaps forever,” he wrote.
The FMC has a statutory responsibility to help promote the growth of U.S. exports and ongoing attention is required to ensure any charges are reasonable so that importers and exporters can remain competitive in global markets, he added.
Ag exporters urge continued vigilance over congestion surcharges
