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Ocean carriers will pass on fines to importers for lingering containers

LA, Long Beach ports pressure liner companies to clear cargo faster, while California Gov. Newsom tries to alleviate shipping backlog

Rail-mounted gantry cranes cull container stacks at the Port of Long Beach. (Photo: Jim Allen/FreightWaves)

(Updated 10:10 A.M. ET, Oct. 27, 2021, with reaction from World Shipping Council, AgTC, and RILA)

Logistics industry professionals say retailers and other cargo owners will ultimately bear the cost of drastic new fees announced Monday by the ports of Los Angeles and Long Beach in response to mounting congestion disrupting the entire U.S. economy. 

The fees ostensibly penalize ocean carriers for not quickly clearing out imported containers piling up in their terminals, but a lack of details in the press release left freight industry stakeholders confused about how the rules will be applied.

The two Southern California ports said they will begin charging ocean carriers $100 per container, compounding in $100 increments each day, for containers scheduled to move by truck that sit for nine days or more, beginning next Monday. For containers moving by rail, shipping lines will be charged if the container has dwelled for six days or more. 

For example, a box that sits longer than the allotted time would cost a carrier $100 on the first day after storage time for truck moves expires, $200 on the second day, $300 on the third day, $400 on day four and $500 on the fifth day for a grand total of $1,500.

Within minutes of the announcement by the twin ports, container lines began sending letters to importers alerting them to be prepared for the new charges, Matt Schrap, CEO of the Harbor Trucking Association, told American Shipper.

“So clearly, they are not just absorbing these costs as a part of doing business to get this cargo out. They are passing these costs on to the beneficial cargo owner, which as we all know goes right into the American consumer’s bottom line,” he said.

So far, there are more questions than answers. 

Initial indications were that the fines apply to cargo for which the carriers arrange all inland transportation beyond the port, known as a door-to-door move. But Schrap said he’s now hearing that all haulage — including container movements directed by the merchant through its own transport provider — are covered. And the surcharges apply only to loaded containers, not empties.

“I can’t seem to get a straight answer. Until we see it in black and white, the message to the ocean carriers is, move the stuff or you’re going to start getting fined,” he said. 

The fines are the latest attempt to expedite the clearance of shipping containers off the docks amid a supply chain crisis that has gained national attention on newscasts and at the White House, as retailers prepare for lost holiday sales with goods stuck at ports and on vessels at sea.

“We must expedite the movement of cargo through the ports to work down the number of ships at anchor,” Port of Los Angeles Executive Director Gene Seroka said in a statement. “Approximately 40% of the containers on our terminals today fall into the two categories. If we can clear this idling cargo, we’ll have much more space on our terminals to accept empties, handle exports, and improve fluidity for the wide range of cargo owners who utilize our ports.”

On Tuesday there were 77 container ships waiting offshore for a parking spot in the port complex, according to the Maritime Exchange of Southern California. 

Ocean carriers said they are still trying to get more details and better understand the new fees, which the port authorities said were determined in consultation with White House, U.S. Department of Transportation and multiple industry participants.

“The supply chain is complex and interconnected, and we welcome initiatives that will enhance the flow of containers through ports and the supply chain as whole. We will need to see what any official action includes in the end, but the information to date does not indicate an approach that can be expected to incentivize cargo owners to pick up their cargo from the ports,” the World Shipping Council, which represents foreign-owned container lines operating in the U.S., said in a statement to American Shipper.

“As described the fee is on the ocean carrier, but the control over when the cargo is to be picked up sits with the cargo recipient. Having the ocean carrier pay more does nothing to encourage the cargo interest to pick up the cargo; therefore, the incentive does not reach the party that needs to come to the port to remove the long-dwelling cargo,” it said.

Schrap said new measures should target empty containers that can’t easily be returned to full terminals because it “would motivate the carriers to send a sweeper ship in to get them out of here” and clear room for loaded imports.

Several freight experts expressed skepticism about whom the fees will actually impact, why carriers are being singled out and whether the ports have the legal authority to impose late fees.

“I don’t know how they can pick out one part of the supply chain and charge them when in fact the issue is caused by many parts of the chain, not just carriers, but the terminals, truckers, chassis providers, railroads, warehouses and shippers,” said an executive for a large freight management company who spoke on condition of anonymity because he is not authorized to speak publicly.

A maritime industry consultant who asked not to be named so as not to upset clients said the Shipping Act gives port authorities the power to set fees. A key procedural question, however, is whether they set up the joint surcharges under Federal Maritime Commission auspices. Any policy made between competing ports outside of an FMC agreement raises competition concerns.

The daily fees for containers that linger at terminals appear designed to pressure shippers to collect containers faster. The port authorities had to direct the surcharges against carriers with terminal leases because they don’t have jurisdiction over importers, though officials realize the customer is likely to ultimately pay. 

“The ocean carriers are not going to just eat this. There’s no way they’re going to do that,” the consultant said.

Carriers already charge demurrage to importers that exceed allotted free time for retrieving containers. Avoiding those charges is a priority for merchants. They typically try to pickup cargo within one to three days on the expectation that containers will be available at terminals when scheduled and that empty ones can be returned, so how the fines do anything to motivate faster pickups is unclear, Schrap said.

The average demurrage and detention charge has increased by 42% from 2020 to 2021 at the San Pedro Bay ports, according to a July report by Container xChange. Among the biggest carriers operating in Los Angeles, CMA CGM had the highest increase in demurrage and detention charges at 167%, closely followed by Maersk with an increase of 161%. In actual dollars, the hike in fees is costing shippers an additional $1,227 per container, on average.

Craig Grossgart, senior vice president of ocean for Seko Logistics, called the congestion-mitigation measure “ill-conceived,” much like the recent move to a limited experimental third shift has not had the intended effect of spreading truck transfers to late-night hours.

And, he said, it is ironic the federal government is endorsing demurrage fees on carriers after responding to vociferous complaints from shippers about excessive fines for late pickups with investigations into whether carriers are engaging in anticompetitive behavior.

The FMC is conducting an audit of major carriers to determine if they are using their market power to overcharge shippers on demurrage and detention fees. Business groups say the charges are often unfair because they can’t make reservations to pick up a load or drop an empty container when the terminals are jammed. Under the Port of Los Angeles tariff, free-time storage is four days for international imports. Detention relates to shippers holding containers for too long outside the marine terminals. Ocean carriers are responsible for collecting penalties on behalf of marine terminals, most of which are subsidiaries of the shipping lines themselves.

“The government, through the FMC, has been attacking demurrage and now they want to get into the same game. The problem is that the warehouses are so full there is no place to put the product. So what exactly is this new charge meant to achieve that the extant demurrage charges haven’t been able to?” Grossgart said in an email. Carriers will simply bill the surcharges to importers, who are already struggling with limited capacity, high transportation rates and unpredictable charges, he added.

Los Angeles and Long Beach port officials should be applauded for trying anything to get the terminals unclogged, but will need to closely monitor whether carriers increase the demurrage charged to shippers and if there are enough trucks and chassis to move the containers off the terminals faster, Agriculture Transportation Coalition Executive Director Peter Friedmann said. The AgTC, which represents agricultural exporters, has been one of the loudest voices calling for regulators to limit what it considers excessive and unfair penalties on customers for box delays.

“While leading retailers share the goal of restoring fluidity to the port complex, we are wary that carriers will simply pass the costs on to shippers, who are already moving cargo out of the ports as fast as possible. Instead, carriers and terminal operators must do more to address the systemic issues that breed congestion,” Jess Dankert, vice president of supply chain at the Retail Leaders Industry Association wrote in a blog post Wednesday.

How congestion started

The COVID pandemic set off the shipping chaos nearly 18 months ago, when companies in North America rapidly began restocking inventories that were depleted when consumers kept ordering while overseas factories were closed for quarantines. 

The system has never caught up. Containers were out of cycle in various parts of the world and couldn’t be easily returned as vessel operators focused on moving exports out of Asia. Shipping lines have been unable to keep up with the volume of shipments, and the situation has deteriorated further in the wake of COVID outbreaks in China, large storms, the blockage of the Suez Canal and other disruptions that have created delays and compounded the capacity crunch.

Warehouses and truck yards in the region are so full they have little room to receive new containers of goods. A short supply of chassis for carrying the containers, and truck drivers being more selective about assignments, have contributed to the slow drawdown of containers from the marine terminals. Meanwhile, marine terminals are shutting out empties once their allocation with a particular shipping line has run out. 

Schrap said that one of his members has 500 empty containers sitting on chassis at its six facilities. Fifteen companies that responded to an informal Harbor Trucking Association survey had a combined 4,251 empties; 86% were on wheeled equipment and the rest were in stacks. One motor carrier has been stuck with empty shipping boxes since Aug. 31 because the terminal won’t accept them, he said.

Before the import surge, containers waited at terminals four days, on average, to be delivered to local warehouses and less than two days to get on a transcontinental train, according to port authorities.

“I support the actions taken by the ports of Los Angeles and Long Beach today to charge ocean carriers for lingering containers on marine terminals. These actions aim to expedite the movement of goods and reduce congestion in our ports,” said John D. Porcari, the port envoy to President Joe Biden’s Supply Chain Disruptions Task Force.

Port officials said they will reinvest fees collected from stranded cargo in programs designed to enhance efficiency, accelerate cargo velocity and address congestion impacts throughout San Pedro Bay.

On Friday, the City of Long Beach temporarily loosened zoning restrictions to allow container yards and warehouses outside the port to store containers up to five high. Previously, two containers could be stacked together. Schrap said stacking could free up space at some trucking operations, but only if they own top loaders or other lifting equipment.

Governor seeks solutions

Meanwhile, the state of California is expanding its own effort to find short- and long-term solutions to inefficiencies gripping the port sector amid record demand for goods. In an executive order last week, Gov. Gavin Newsom directed agencies to identify by Dec. 15 state-owned properties that could be used to store containers near ports, to create more space for longshoremen, truckers and railroads to operate more efficiently on marine terminals. 

The Department of General Services will expedite the execution of leases on any state properties identified for container storage. Also, the Office of Business and Economic Development will hunt for private, locally owned and federally owned parcels that could be available to reduce the pileup of containers in ports.  

The order also instructs transportation agencies within 30 days to identify priority freight routes that could temporarily be exempted from existing gross weight limits to allow trucks to carry more goods.

By the end of the year, the California Labor and Workforce Development Agency will name an industry panel, as required under state law, to explore how to increase workforce training and education programs for port workers and others in the supply chain who could lose jobs associated with automation and the transition to clean-fuel vehicles, according to the executive order.

The moves build on earlier efforts this year to work with industry stakeholders and the Biden administration to increase the velocity of container distribution from California ports. A key discussion point is developing 24/7 operations throughout the supply chain, along the lines of the recent initiative brokered by the White House between the Southern California ports and several large shippers with nearby warehouses.

Under the order, the Department of Finance will pull together ideas to support port operations and goods movement for consideration in the governor’s January budget, including freight transportation infrastructure improvements and electrification of the logistics system. Other solutions being explored with industry include data sharing and technology applications.

 Click here to read more FreightWaves/American Shipper stories by Eric Kulisch.


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  1. yodami

    I get paid over $87 per hour working from home with 2 kids at home. I never thought I’d be able to do it but my best friend earns over 10k a month doing this and she convinced me to try. The potential with this is endless.
    Here’s what I’ve been doing…► 𝗪𝘄𝘄.𝗝𝗼𝗯𝘀𝟳𝟬.𝗰𝗼𝗺

  2. Andy Bell

    We are one of those cargo owners that the article talks about and these “fines” are NOT a solution for any issue at the port. The carriers already have “fines” for cargo owners that do not get their containers picked up by the last free day. It’s called demurrage. This “fine”, though charged by the carriers, not the port, penalizes the cargo owners for not getting their containers out. There is not need to create another “fine” for everyone. Many of us, who use this port for imports, beg daily to get our containers out of the port. Every excuse that they cannot be picked up is due to someone else, not us, the cargo owner. There are not enough truck drivers because CA made it too expensive for owner operators to run in CA due to emissions….not my problem solve. There are not enough chassis to put containers on…..not my problem to solve. The carriers built larger vessels that carry more containers but the ports can’t handle the increased volume with the existing infrastructure…not my problem to solve. The coordination/scheduling of moving cargo in and out of the port is a nightmare. It’s pure chaos and truckers sit for hours. Where are the remaining truckers and chassis? Sitting in lines all day waiting to get into to drop off or pick up. Fines are not the issue, the infrastructure is the issue. If the real problems were addressed, cargo owners would not be begging for our cargo at the ports. Cargo owners are not going to absorb the fines if they are charged, they will be passed onto the consumers through price increases. Ultimately the consumers are paying the price for the issues that are not their problem to solve. There are people/companies who’s responsibilities are to prevent or solve these issues. Let them pay the fines for not addressing the actual problem, not the consumers. I have no confidence that anyone currently in control is going to solve this because this is not a new issue. It’s just getting more publicity in the media. This time last year the rail yards were congested and cargo sat on trains or grounded at rail yards. Solve the infrastructure issues to support the needs for today and the future. Otherwise, it seems like a recession where the demand drops is the only way to align demand with the existing infrastructure that we have to support it.

    1. Dawn Phillips

      Exactly!! My 20ft container arrived at Seattle/Tacoma Port and was pulled for an extensive exam but because they were backed up and not able to examine my container they put it into a storage facility area until they were ready. Not only did I have to wait over a month to get my goods, I was charged $280 a day for them to store my container until they had the time to examine it. I finally received and $10,000 of this was for the storage and exam. Not only were the import fees higher but I have to pay an extra $10k that I was not expecting and it all cost me almost as much as the goods.
      Someone is lining their pockets!!! :/

  3. Brian Gunderson

    I’m confused….or maybe I’m not. Biden is paying people to stay home and collect ‘welfare’. At the same time, he’s mandating masks and vaccinations or be fired, both of which are at the heart of the economic woes. Now he wants to fine the very people who are waiting to have their cargo moved while at the same time, many reports surface that crane operators are working at a snail pace to do their job. All under the direction of Biden administration. This is obviously an intentional move to hurt Americans as much as possible. It’s pretty obvious the Dems want to collapse the economy as part of their continuous coup attempt.

  4. Bubba Johnson

    Classic – The State of California along with Biden’s crew is going to solve the issue by charging more fees and penalties? Sounds like typical Big Government, no improved efficiencies, no new free market approach, just more fees/taxes is somehow going to solve the problem? Oh wait they need more truck drivers? Anyone hear of AB5? Maybe the Union bought Politians can convert all the hard working independent truckers into dues paying Teamsters? That way everyone can pay more dues and taxes and have less money to feed their families.

Comments are closed.

Eric Kulisch

Eric is the Supply Chain and Air Cargo Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He has won two regional Gold Medals and a Silver Medal from the American Society of Business Publication Editors for government and trade coverage, and news analysis. He was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. He won Environmental Journalist of the Year from the Seahorse Freight Association in 2014 and was the group's 2013 Supply Chain Journalist of the Year. In December 2022, Eric was voted runner up for Air Cargo Journalist by the Seahorse Freight Association. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. He has appeared on Marketplace, ABC News and National Public Radio to talk about logistics issues in the news. Eric is based in Vancouver, Washington. He can be reached for comments and tips at [email protected]