Port Bottleneck Leads to Shipping Surcharges
With ships waiting as long as one week now to unload their cargo at the ports of Long Beach and Los Angeles, seven shipping lines announced they will start charging a congestion surcharge fee on cargo destined for those ports until the situation improves.
The delays, which are four to five days longer than normal, are costing shipping lines as much as $60,000 a day as ships sit idle beyond the breakwater waiting for a vacant spot.
So the Trans Atlantic Conference Agreement (TACA)—a British-based group that represents such shipping lines as A.P. Moller–Maersk Sealand, P&O Nedlloyd Ltd. and Hapag-Lloyd Container Linie GmbH—announced that on Nov. 15, its lines would impose a congestion surcharge on goods being shipped to Long Beach and Los Angeles. The congestion surcharge does not apply to other U.S. ports.
Shipping experts note the move is highly unusual. David Jeffries, general manager of the TACA, cannot remember when such a surcharge was imposed on cargo headed for the Los Angeles/Long Beach port complex.
“We expect the surcharge to last until there is an improvement in the turnaround times at these ports,” he wrote in an e-mail sent from England. “The congestion is expected to peak during November.”
Right now the surcharge, which is $200 per TEU (20-foot container) and $400 per FEU (40-foot container), applies only to vessels sailing from Northern Europe to Los Angeles via the Panama Canal.
But experts worry that shipping lines that sail from Asia to the Los Angeles/Long Beach port complex will follow their European counterparts. These lines are represented by a trade group called the Transpacific Stabilization Agreement (TSA), which helps set shipping and surcharge rates.
“I am hearing that because of the congestion in the harbor there, the transpacific cargo lines are looking at doing this, as well,” said Tony Munoz, editor and publisher of The Maritime Executive, a publication based in Fort Lauderdale, Fla., that follows the shipping industry.
Niels Erich, a TSA spokesman in San Francisco, said the 13 shipping lines that make up the industry group have no immediate plans to impose a shipping surcharge. “However, they are continuing to watch the situation closely,” he noted.
The TSA’s members include American President Lines Ltd., Orient Overseas Container Lines Inc., COSCO Container Lines Ltd. and Hanjin Shipping Co. Ltd.— some of the major apparel shippers from Asia to Los Angeles.
The shipping surcharge, which is about 10 percent of the base shipping rate, is just another cost of doing business during this time of globalization. But it still hurts.
“I’m thinking, holy cow. They are going to charge more because they can’t get it out quick enough. I think that is pretty lousy,” said John Salvo, president of Carmichael International Service, a Los Angeles customs broker and freight forwarder that has scores of apparel clients. “If I pay FedEx more, I expect to get my goods quicker.”
Fueling up
On Oct. 1, the TSA added a fuel surcharge to ship goods from Asia to the United States. In effect until the end of the year, the surcharge is $205 per TEU and $275 per FEU.
The new layer of surcharges may be an indication of what is in store for apparel importers next year when quotas disappear on most clothing items.
Already, predictions are that cargo space aboard ships will be tough to come by in January, when many goods start making their way across the ocean from China.
With shortages of longshore workers plaguing the two Southern California ports during the last four months, cargo cannot be unloaded as quickly as it arrives.
Also, because port and inland congestion in the United States and Asia has gotten worse and there are more delays through the Panama Canal, transpacific shipping rates will be going up 10 percent to 11 percent on May 1, 2005.
All this adds another layer of frustration in getting goods from Asia.
On Nov. 3, there were 33 vessels anchored beyond the breakwater near the Los Angeles and Long Beach ports waiting to dock and dispatch their cargo. Another 37 were docked at the complex. Normally, there are only four ships waiting for berths.
While 3,000 casual workers are expected to be trained and working by December to add to the 10,000 longshore workers already at the ports, that may not be enough.
Opportunity for Oakland
Scores of ships have been diverted to other West Coast ports. Hyundai Merchant Marine Co. Ltd. announced that in November it would bypass the Los Angeles/Long Beach port complex because of congestion and send five ships to Tacoma, Wash.
Since July, 57 vessels have skipped docking in Southern California and have gone to Oakland, Tacoma or Mexico to unload their cargo.
The Port of Oakland has seen this as an opportune time to promote its port, which is smaller than the huge Los Angeles/Long Beach port complex but still large enough to handle as many as 18 ships.
Oakland recently announced it is setting up a new rail transportation service to move cargo from the port to a warehousing center in Shafter, a small Central Valley town that borders Bakersfield, Calif.
Target Corp. opened a 1.7 million-squarefoot distribution center in Shafter last year, said Brent Green, business development director for Shafter. Ikea International A/S, Sears Roebuck and Co., and Wal-Mart Stores Inc. also have distribution centers in the surrounding towns. “With this, I would hope we would increase and get more business,” said Felicia Cousar, the maritime marketing manager for the Port of Oakland, where congestion problems have not been a problem this Holiday season.
