A handful of container lines have prepared shippers for the reality of the cost impacts of a potential strike by U.S. East and Gulf coast longshoremen at the end of September by saying they will slap a major surcharge on shipments to and from U.S. ports from Oct. 1.
has reported on a couple of those proposed surcharges over the last few days, but the list is larger than first reported. Maersk Line, Hyundai Merchant Marine, Yang Ming, and Hanjin Shipping have all announced they will assess surcharges of $1,000 per 40-foot container and $800 per 20-foot container in the event there's a work stoppage by International Longshoremen's Association (ILA) members.
They join NYK Line
and COSCO Container Lines
in seeking to be reimbursed for shipments affected by a strike. The ILA and its employers are ensconced in terse negotiations over a new master contract, one that appears headed to the Sept. 30 deadline. NYK's, it should be noted, says the surcharge is $1,000 per unit. Some of the notices say the surcharge applies only to the transpacific trade, while other say it applies to all shipments in and out of U.S. ports.
Crucially, some of the surcharges announced indicate the fee will only be assessed if an ILA work stoppage does materialize. Others make no distinction.
For instance, Maersk's notice said "this is a forward filing as precaution to address the potential for congestion as result of possible labor actions. Should there be no labor action and subsequent congestion disrupting operations, this tariff filing will be nullified."
Similarly, NYK's and Yang Ming's notices stipulate the tariff will not be assessed if a port strike does not occur. COSCO's, Hyundai's and Hanjin's make no such distinction.
Carriers are required by law to submit proposed surcharges 30 days in advance, so the increase notices were all filed at the end of August, one week after talks between the two sides suffered a breakdown over work rules, container royalty provisions, and overtime pay.
Additionally, most of the surcharges are applicable to both U.S. imports and exports. While a $1,000 surcharge would represent a significant burden on import shippers - representing an increase in total ocean freight costs of around 40 percent of projected base rates between Asia and the U.S. West Coast, and around 30 percent to the U.S. East Coast - it would be even more daunting for export shippers.
Indeed, an $800 per TEU surcharge on most U.S. export commodities, particularly agricultural products, would make them uncompetitive in Asian markets. While retail and manufacturing importers have repeatedly voiced their concerns over the implications of an ILA strike, exporters could be hit much harder.
The proposed strike surcharge was discussed by members of the Transpacific Stabilization Agreement, a discussion group whose membership accounts for the vast majority of transpacific capacity. But the eventual surcharges announced were not part of a TSA initiative, TSA spokesman Niels Erich told American Shipper
“Addressing potential congestion problems has certainly been a subject of discussion within TSA, but because of carriers' different operational patterns, contract provisions and so on, it's been difficult to come up with a uniform TSA guideline and so it was left to each carrier to handle individually,” he said.
Also, any surcharge assessed by carriers on trades outside of the transpacific falls outside the auspices of the TSA.
“The charges are driven by concerns about dealing with a surge in cargo on the (West Coast) as a result of diversion related to labor uncertainty, whether due to an actual work stoppage, or fear of one, at East Coast ports," he said. "It was important to file in advance to meet 30-day advance notice requirements under U.S. law, and forward-filings of this kind tend to be at the high end of expectation (and later adjusted as needed) to cover contingencies. The specific $1,000 level was initiated by the lines."
To keep track of the surcharges, the Agriculture Transportation Coalition is maintaining a list
of surcharges it has found that relate to U.S. exporters. Most of the notices also apply to imports. - Eric Johnson