Corianne Egan, November 19, 2014, JOC.com
[Editor’s Note: Both Maersk Line and NYK Line have also suspended port congestion surcharges. In a customer advisory this morning, Maersk said it expects the problems on the U.S. West Coast to continue for the foreseeable future.
“That said, we take the feedback and viewpoints shared with us very seriously,” the advisory said. “As a result, we will delay the application of the congestion surcharge until a thorough review can be completed with all stakeholders.”]
At least seven carriers have suspended newly announced port congestion surcharges on cargo heading from Asia to the U.S. West Coast, likely resulting from fierce importer pushback and U.S. regulatory scrutiny.
CMA CGM, Evergreen Line, OOCL and U.S. Lines announced the suspension of port congestion surcharges today in customer advisories, and Mediterranean Shipping Co. told JOC.com that it had done the same. United Arab Shipping Co. and Cosco Container Lines customers told JOC.com that their respective surcharges were also repealed. The carriers were not available for immediate comment.
Carriers were expected to start collecting the additional fees from customers Monday.
The lines suspending their surcharges, which amounted to as much as $1,000 per 40-foot container, did not reveal the reasoning behind the move. But the Nov. 14 announcements drew immediate ire from the FMC, the U.S maritime regulatory agency, and importers.
The FMC said Monday it had received numerous inquiries from shippers frustrated with the proposed surcharges. Most carriers have said labor slowdowns were the main reason for congestion, prompting the surcharges, but shippers and the FMC questioned whether labor unrest can be blamed for congestion that was already at its peak nearly a month ago.
Though increased volumes and a shortage of chassis are the root causes of congestion at West Coast ports, labor slowdowns resulting from the fraying coastwide labor contract negotiations between the International Longshore and Warehouse Union and waterfront employers have only exacerbated the problem.
“For us, the $64,000 question is, ‘What is the trigger?’ What’s the basis that will allow them to charge a surcharge?” FMC Chairman Mario Cordero told JOC.com. “That’s the interesting question we at the FMC have to look into. Our staff is looking into whether there’s a trigger mechanism that is legitimate to even apply the surcharges,”
Shippers were most upset about the sudden implementation, as most carriers announced on Nov. 14 with a Nov. 17 implementation date, Brian Kim of ViewSonic Corporation told the JOC.com
“As a shipper we understand the dire situation at port and are willing to share the cost,” Kim said. “We’re not unreasonable, a bit of time to react is all we ask. However the way PCS is being implemented is wreaking havoc into our entire year of expectations. Instead of shoving PCS into shippers’ arm without so much as a hello, carriers could have provided shippers enough time and offer alternative solutions such as rerouting and/or direct shipment to customers through ports unaffected by PCS.”
The reasoning behind carriers’ push to shore up losses are clear. A survey of members of the Transpacific Stabilization Agreement showed lines are incurring losses and expenses because of blanked sailings, skipped port calls and speedup of existing vessels or chartering of added ships and equipment to maintain schedules. The carriers are also racking up additional fuel costs from having to wait at sea for the chance to berth. As of this morning, there were eight container ships at anchor off the coast of Los Angeles-Long Beach, down from seven Monday, according to the Marine Exchange of Southern California.
Shoreside costs include container detention and storage charges, overtime costs for labor, extended gate hours and fees, tug services and increased trucking charges relating to inter-terminal transfers, the TSA said.
“We ask for your consideration and understanding that the conditions continue to exist as we informed you in our Nov. 14 notice,” Evergreen’s customer advisory reads. “The ongoing congestion at the major U.S. West Coast ports is causing serious interference with our service schedule and terminal operations are causing significant financial losses.”
Hanjin Shipping, Hapag-Lloyd and Shipco also announced surcharges because of port congestion, but those carriers have not publicly released whether they are suspending the charge. Maersk Line warned customers of a $1,000 per FEU general rate increase on Nov. 14, but plans are for the full 15-member Transpacific Stabilization Agreement to announce the increase at some point next week.