Ocean carriers will pass on fines for lingering containers to importers

Date: Wednesday, October 27, 2021
Source: Freightwaves

Logistics industry professionals say retailers and other cargo owners will ultimately bear the cost of drastic new fees announced Monday by the ports of Los Angeles and Long Beach in response to mounting congestion disrupting the entire U.S. economy.

The fees ostensibly penalize ocean carriers for not quickly clearing out imported containers piling up in their terminals, but a lack of details in the press release left freight industry stakeholders confused about how the rules will be applied.

The two Southern California ports said they will begin charging ocean carriers $100 per container, compounding in $100 increments each day, for containers scheduled to move by truck that sit for nine days or more, beginning next Monday. For containers moving by rail, shipping lines will be charged if the container has dwelled for three days or more.

For example, a box that sits longer than the allotted time would cost a carrier $100 on the first day after storage time for truck moves expires, $200 on the second day, $300 on the third day, $400 on day four and $500 on the fifth day for a grand total of $1,500.

Within minutes of the announcement by the twin ports, container lines began sending letters to importers alerting them to be prepared for the new charges, Matt Schrap, CEO of the Harbor Trucking Association, told American Shipper.

“So clearly, they are not just absorbing these costs as a part of doing business to get this cargo out. They are passing these costs on to the beneficial cargo owner, which as we all know goes right into the American consumer’s bottom line,” he said.

So far, there are more questions than answers.

Initial indications were that the fines apply to cargo for which the carriers arrange all inland transportation beyond the port, known as a door-to-door move. But Schrap said he’s now hearing that all haulage — including container movements directed by the merchant through its own transport provider — are covered. And the surcharges apply only to loaded containers, not empties.

“I can’t seem to get a straight answer. Until we see it in black and white, the message to the ocean carriers is, move the stuff or you’re going to start getting fined,” he said.

The fines are the latest attempt to expedite the clearance of shipping containers off the docks amid a supply chain crisis that has gained national attention on newscasts and at the White House, as retailers prepare for lost holiday sales with goods stuck at ports and on vessels at sea.

“We must expedite the movement of cargo through the ports to work down the number of ships at anchor,” Port of Los Angeles Executive Director Gene Seroka said in a statement. “Approximately 40% of the containers on our terminals today fall into the two categories. If we can clear this idling cargo, we’ll have much more space on our terminals to accept empties, handle exports, and improve fluidity for the wide range of cargo owners who utilize our ports.”

On Tuesday there were 77 container ships waiting offshore for a parking spot in the port complex, according to the Maritime Exchange of Southern California.

Ocean carriers said they are still trying to get more details and better understand the new fees, which the port authorities said were determined in consultation with White House, U.S. Department of Transportation and multiple industry participants.

“The supply chain is complex and interconnected, and we welcome initiatives that will enhance the flow of containers through ports and the supply chain as whole. We will need to see what any official action includes in the end, but the information to date does not indicate an approach that can be expected to incentivize cargo owners to pick up their cargo from the ports,” the World Shipping Council, which represents foreign-owned container lines operating in the U.S., said in a statement to American Shipper.

“As described the fee is on the ocean carrier, but the control over when the cargo is to be picked up sits with the cargo recipient. Having the ocean carrier pay more does nothing to encourage the cargo interest to pick up the cargo; therefore, the incentive does not reach the party that needs to come to the port to remove the long-dwelling cargo,” it said.

Schrap said new measures should target empty containers that can’t easily be returned to full terminals because it “would motivate the carriers to send a sweeper ship in to get them out of here” and clear room for loaded imports.

Several freight experts expressed skepticism about whom the fees will actually impact, why carriers are being singled out and whether the ports have the legal authority to impose late fees.

[Read from the original source.]