Huge surcharge push by carriers to offset West Coast congestion costs

Grace M. Lavigne, November 15, 2014, JOC.com

Multiple container lines operating in the trans-Pacific lane have plans to implement some of the largest port congestion surcharges ever ― up to $1,000 per 40-foot container ― on cargo moving via U.S. West Coast ports, signaling the extent to which carriers are being battered financially by the worst U.S. port congestion in years.

 

In the last 24 hours, six ocean carriers ― Hanjin Shipping, U.S. Lines, Evergreen Line, Mediterranean Shipping Co., CMA CGM, NYK Line and Shipco ― have said they will implement a port congestion surcharge, effective Nov. 17. For import cargo, the surcharges will be $800 per 20-foot container, $1,000 per 40-foot container, $1,125 per 40-foot high-cube container and $1,256 per 45-foot container. A surcharge announcement by the Transpacific Stabilization Agreement, a discussion group of carriers, signals that all of its 15 carrier members have or will soon implement the surcharge.

 

Carriers are also planning to implement congestion surcharges on export containers on the same date, Peter Friedmann, executive director of the Agriculture Transportation Coalition, told JOC.com today. Most of those surcharges will be $240 per 20-foot container and $300 per 40-footer, he said.

 

“Until this action, shippers and carriers were sort of in this port labor disruption together,” Friedmann said. “With the announcement of these surcharges, that is apparently no longer the case.”

 

Terminal operators at Seattle and Tacoma are reporting 40 percent to 60 percent productivity reductions in loading and discharge of vessels, disrupting schedules and delaying receipt and delivery of cargo, according to an announcement today from the TSA.

 

The TSA cited increased longshore container and chassis safety inspections in Southern California that have contributed to average truck turn times of two to three hours at terminal gates and yards, and work slowdowns and disruptions involving equipment operators at the port of Oakland. The Marine Exchange of Southern California reported today that six container ships were at anchor awaiting berths this morning, down from 12 earlier in the week, but in normal times vessels proceed directly to berth with no wait at anchor.

 

“Carriers are mindful of the potential impacts of added charges on their customers and are monitoring the situation closely,” TSA Executive Administrator Brian Conrad said in a statement today. “They would clearly rather not impose the charges, but are concerned that disruptions can escalate quickly across their networks, at significant cost, if they fail to respond quickly.”

 

Evergreen Line said its service schedule and terminal operations have been “seriously disrupted,” resulting in significant increases in operational costs and financial losses.

 

“Evergreen has been exercising our best efforts in mitigating the impacts toward our service level and shipside operation,” the carrier said today in its congestion surcharge announcement to customers. “However, without foreseeable relief in sight, we are forced to trigger congestion charge collection.”

 

“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,” U.S. Lines said in its notice.

 

With talks that a shutdown is still likely to occur before Thanksgiving, according to a West Coast port congestion update today from Scarbrough International, these surcharges will remain in effect until advised otherwise. In addition, carriers are implementing a surcharge for cargo moving on a carrier-to-door delivery basis for $100 per FEU, Scarbrough said.

 

Carriers, including Maersk Line, have also announced general rate increases on shipments from Asia to the U.S. of around $900 per 20-foot container, $1,000 per 40-foot container and $1,125 to $1,130 per 40-foot high-cube container, starting Dec. 15.

 

A TSA survey of member line costs associated with service interruptions and delays to date revealed that lines are now incurring losses and expenses due to blanked sailings, skipped port calls and speedup of existing vessels or chartering of added ships and equipment to maintain schedules. In addition, when ships must wait outside the port for a berth, as many ships have been doing off Los Angeles-Long Beach in recent weeks, the engines will continue to run, burning bunker fuel.

 

Shoreside costs include container detention and storage charges, additional longshore gangs and associated overtime, extended gate hours and fees, tug services and increased trucking charges relating to inter-terminal transfers, the TSA said.

 

“Many carriers no longer own their own chassis and yet still provide them to customers as part of store-door moves from the port to nearby distribution centers,” a large carrier told JOC.com today. “When that equipment sits idle the carriers still most pay for its use.”

 

The carrier also pointed towards rail as another source of extra costs:

 

“Carriers will pay railroads to reposition railcar equipment from the eastern to the western U.S. so as to have more railcar capacity to remove backed up containers at the ports,” the carrier said. “Sometimes they will do this by shipping empty containers to the West Coast, which has the effect of repositioning railcar equipment to the ports where it’s needed to get backed up import containers moving into the hinterland.”

 

 

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