Carriers back down from immediate activation of charges linked to West Coast labor issues.
Container shipping lines are responding to the pushback from shippers and the Federal Maritime Commission over their plan to implement hefty $1,000-per-FEU congestion surcharges on boxes entering or exiting West Coast ports by abruptly announcing they will postpone implementing those surcharges.
Mark Hirzel, president of the Los Angeles Customs Brokers and Freight Forwarders Association, said Wednesday that it appeared most forwarders are postponing plans to implement surcharges announced last week or early this week.
Wording on the surcharges and the postponements varied, but some carriers linked the surcharges to labor issues created by the ongoing contract negotiations between the International Longshore and Warehouse Union and employers represented by the Pacific Maritime Association.
The surcharges carriers had planned to put into effect this week and have now postponed were hefty, amounting to about half the $2,090 spot rate quoted for moving a container from Shanghai to the West Coast, as published in the Shanghai Containerized Freight Index.
The reversal comes after comments last week by Mario Cordero, the chairman of the FMC, that questioned the carriers’ ability to implement surcharges on cargo that was already accepted by carriers or was already in transit.
In an alert issued by the FMC on Monday, the agency said it had received “numerous inquiries regarding the congestion surcharges for labor unrest being implemented by ocean carriers.“
The FMC noted, “Many carriers previously published in their tariffs advance or conditional notice of an intention to implement surcharges in the event certain conditions are experienced. All such carrier tariff rules, however, must be clear and definite as to the implementation and termination of the surcharge based upon specific criteria related to ‘labor unrest.’ “
The FMC said, “The Shipping Act and the commission’s regulations require that the rules applicable to any given shipment shall be those in effect on the date the cargo is received by the common carrier or its agent. 46 CFR § 520.7. Thus, if any labor disruption were to occur at a port after cargo has been tendered by a shipper, a carrier may only lawfully charge the rates in effect on the day the cargo is tendered.”
Carriers did a quick turnaround after shipper outcry over the congestion surcharges.
For example, OOCL released a customer notice announcing a congestion surcharge on Nov. 18, only to withdraw it the same day “until further notice.” Evergreen posted a similar notice, saying that a surcharge it announced on Friday for implementation on Monday will be postponed, despite “very difficult conditions created by the ongoing congestion.”
Evergreen said, “We ask for your consideration and understanding that the conditions continue to exist as we informed you in our Nov. 14 notice. 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.”
Maersk Line said “congestion remains a real and critical issue facing the ports on the U.S.
West Coast. As a result of this, service-delivery challenges resulting
in added costs at both origin and destination have created a scenario
which is unsustainable. We expect service delivery challenges to
continue over the foreseeable future.”
It added, “That
said, we take the feedback and viewpoints shared with us very
seriously. As a result, we will delay the application of the congestion
surcharge until a thorough review can be completed with all
stakeholders. The
congestion surcharge will not be in effect for cargo arriving Nov.
18th, as communicated previously. As the situation develops, we will
provide you with relevant and timely information on this matter.”
Carriers did not appear to be specifying when they might actually put the congestion surcharge into effect.
Hirzel said it was “high time the FMC answer some of the questions that have been posed to them as to when these congestion surcharges go into effect. This was asked many months ago, and we also think an important factor is that somebody does the math to find out when we will be able to dig out of this mess. How many containers are moving out of the terminals per day? How many more are the carriers bringing in? It’s simple math. If we are not moving as many out as we are bringing in, they are creating the congestion themselves and, therefore, causing this potential penalty to be assessed.”
John Cushing, president of PierPass, said the 13 terminals in the Port of Los Angeles and Port of Long Beach are seeing about 30,000-32,000 moves of containers each day, a number that has not changed much since May even though terminal operators are spending about $3 million more each week. Terminals increased the number of shifts they are open by 30 percent in September and 33 percent in October.
Carriers postpone congestion surcharges
