Hanjin, CMA CGM, Hyundai Merchant Marine, Yang Ming, Evergreen, and NYK all sent notices to shippers yesterday saying they will implement on Nov. 17 a port-congestion surcharge they have had on file with the FMC.
There were rumors that other carriers are planning to “pull the trigger” on surcharges they filed with the Federal Maritime Commission in the spring as a contingency because of contract negotiations between employers and the International Longshore and Warehouse Union; the carriers and feared there might be a strike, lockout, or worker slowdown. Some of the surcharges were actually filed as far back as 2012 in anticipation of possible port disruptions on the East or Gulf Coast when employers were negotiating a contract with the International Longshoremen’s Association.
Peter Friedmann, who represents several groups of shippers and freight forwarders, predicted that imposing such surcharges will create a “firestorm that carriers do not want to see arise from Congress and Federal Maritime Commission and others.
“Nobody is being injured more than the shipper right now,” he continued. “We are all in it together, and the carriers are being injured, but they are not being as injured as cargo owners [because they] are actually losing their sales.”
Friedmann, who is executive director of the Agriculture Transportation Coalition, a group that represents shippers of agricultural and forest products, said, “A steamship line can say ‘I am losing the $2,500 of revenue I’m getting from the container,’ but the guy who has $130,000 worth of cargo that is spoiling in that container, which has to be written off — that is losing $130,000 because of that shipment not going; we are not blaming the carrier, and we can’t charge the carrier for not carrying it.”
He added, “I think the carriers ought to be very cautious about imposing a surcharge on shippers that are losing 20, 30, 50 times what the carriers are losing with this disruption.”
The Pacific Maritime Association, which has been in talks with the International Longshore and Warehouse Union since May to negotiate an agreement to replace a contract that expired July 1, yesterday repeated their accusation that the union is conducting slowdowns that are pushing West Coast ports “closer and closer to outright gridlock.”
The union has accused the employer group of being deceitful and that congestion is due to “numerous, non-labor related causes” including the decision of carriers to divest themselves of chassis, use larger ships, and reorganize the alliances within which they operate without adequate planning and preparation. They note truck driver shortages and inadequate rail capacity have also contributed to the problems at ports.
Friedmann said, “This work slowdown is a calamity because it comes just as the fresh product is harvested and needs to go. They could not have picked a time to inflict greater injury on exporters, in particular, as well as importers who would love to deliver products so they are on the store shelves for the holiday shopping season. It could not have been selected more effectively and targeted more effectively to create injury to our economy.”
He said the slowdown could seriously hurt the bottom lines of importers for the year and the country’s economic recovery, “but … we are talking about permanent damage to some exporters who will not recover from this.”
He continued, “We perfectly understand the need for carriers to adjust their system. We perfectly understand that their suffering is infinitesimal compared to the suffering of some of these exporters who are losing their entire revenue for the entire year; some of them have loans on farmland that they are going to have difficulty making payment on. You can lose your farmland over this thing. People have to realize the injury to their customer is at least as great as anything they are facing.”
Hanjin said the charge will apply to all U.S. and Mexico destined shipments received by Hanjin or its agent and discharged at West Coast ports in the U.S. or Canada.
It said the charge “is to cover the massive increase in costs arising from significant increases in port congestion and serious disruption to our normal course of operation due to labor unrest or action” as provided in its tariff.
Hanjin said the amount is $800 per TEU, $1,000 per FEU, $1,125 for 40-foot high cube containers and $1,266 for 45-foot high cube containers.
CMA CGM cited the “ongoing labor difficulties on the U.S. West Coast” in a customer advisory announcing the surcharge.
“The situation has impacted terminal and vessel operations to the point where normal business is simply not possible to continue, and extraordinary costs are being incurred at every step of cargo movement,” it said.
“The unfortunate result of this is that we will be forced to trigger the Port Congestion Surcharge that was filed in 2012 in anticipation of possible labor action. The surcharge will be effective for all cargo discharging at U.S. West Coast ports on or after Nov. 17. The surcharge will remain in effect until advised otherwise, and will be applicable for all cargo and equipment types,” the carrier said.
CMA CGM said it remains “hopeful that the PMA and ILWU will resolve the pending labor issues and that the situation will thereafter quickly return to normal, allowing us to withdraw this surcharge.”
The French carrier said its surcharge was $800 per TEU, $1,000 for 40-foot containers of all sorts, $1,266 for 45-foot containers, and $1,600 for 53-foot containers.
Jan Fields, manager of the Savannah office of John S. Fields and chairman of the Transportation Committee of the National Customs Brokers and Forwarders Association of America, said if carriers start invoking the surcharges on Monday, “it’s just going to add fuel to the fire for importers who can’t get their cargo.”
Fields continued, “While we are sympathetic with the carriers, it is crippling the country; it is crippling the importers. Now they can’t get their cargo, and now they are going to have to pay and additional $1,000 fee.”
Rich Roche, vice president of international logistics at Mohawk Global Logistics and chairman of the NCBFAA’s subcommittee on NVOCCs, said the congestion surcharges filed by carriers are not uniform and that this was a concern the industry has raised with the FMC.
The ability of NVOCCs to pass surcharges is “a complicated issue and it depends on what kind of mechanism the NVO uses for rate filing — whether they’re tariff filers whether they’re NRA (negotiated rate agreement) users, and whether or not they’ve forward filed this.”
He said ocean tariffs usually apply on a gate in or sailing date, not when cargo is discharged.
“This one goes on beyond the usual,” he said. “Frankly, I’m surprised to see that it’s based on very short notice even though it’s forward-filed; they’re coming with a three- or four-day trigger and not applying it to cargo sailing, which in my opinion would be the proper way to do it.”
In addition to these overall container surcharges, most carriers have announced much smaller intermodal door delivery (IDD) congestion surcharges that will take effect later this week.
The Transpacific Stabilization Agreement (TSA), a discussion agreement of 15 container carriers, has said its members are moving forward individually with charges of $100 per FEU and $90 per TEU, effective on or around Nov. 15, but by no later than Dec. 1. The charges apply to all cargo moving under intermodal store-door delivery through rates from Asia to the U.S. There are higher charges on high cube and 45-foot containers announced by some companies.
APL, for example, said the tariff will apply on cargo originating in Asia, Australia, the Middle East and West Asia to the U.S. and Canada. It said it was announcing the charge “in view of unexpected increases in the cost of inland transport and door delivery in recent months, including extensive port congestion, truck driver shortages, sharply increased rail volumes with increasing limitations on rail shipments, extreme weather, and increased inland carriage costs.”
James E. Devine, Jr., president of the tariff publisher Distribution Publishing Inc. in Oakland, Calif., said, “Most carriers serving the transpacific have similar rules in their tariffs.”
These $100 surcharges are one-tenth as large as the congestion surcharges that many carriers filed this spring in advance of the ILWU contract expiring.
Devine added that many NVOCCs have similar port congestion surcharge rules filed in their tariffs, with the proviso that “nevertheless, if there is no aforementioned circumstance, or the underlying ocean carrier utilized to move the shipment does not assess additional charges to address these circumstances, this charge will not be applied.”
He continued, “The IDD surcharge is new this week, but many NVOCCs have already filed rules in their tariffs to authorize them to pass along this cost to their shipper customers. Some are charging more than $100 per FEU because they are trying to recover both the IDD surcharge and other cost increases they are incurring when they handle door shipments. Others are simply building this new cost into their all-inclusive selling rates for ocean transportation.”
Meanwhile, the Pacific Maritime Association issued an update Thursday afternoon saying that union slowdowns and work actions at the major West Coast ports are continuing
The organization said:
- Since Oct. 31, ILWU members have continued to work slowly in the ports of Tacoma and Seattle. “Various reports have detailed the dramatic impact these slowdowns are having at this critical harvest season for Washington State apples, potatoes, Christmas trees and other perishable produce.”
- In recent days, longshoremen on several shifts have walked off the job in Oakland, shutting down their terminals for the remainder of the shift. The union has said some of these walkoffs have related to safety issues and other cases having to do with irregularities in the hiring of workers.
- In the critical ports of Los Angeles and Long Beach, where growing congestion has been a recognized issue for some time, the ILWU continues to short-shift crews by withholding qualified yard crane operators.
