Posted by David Petersen
2014, the importation market has received a very high number of questions from our customers, relative to the status of the West Coast situation including the most recent development with a very significant Port Congestion Surcharge levied by carriers.
We are seeing what is unprecedented in the US market, the implications will have profound effects upon all imports, and the situation only looks to become increasing worse.
For many months, the congestion at both the L.A. and Long Beach ports has crippled the normal flow of containers, in, as well as out. There are several reasons that account for this problem, including chassis availability and an unexpected surge in overall volume. This has now placed the industry into very long dwell times and significant additional charges for all customers.
Shippers are all well aware of the standard free time offered by ports. During this congestion time period, free time is not being allowed, forcing shippers to now carry the additional cost burden of those charges, including many who have already seen very significant increases.
Labor negotiations between the PMA and ILWU continue along, but labor issues are now beginning to be demonstrated with slowdowns in Seattle, Portland and Oakland, with workers being sent home due to low productivity. The net effect for shippers will certainly result in higher costs.
November 17, 2014 carriers have imposed a Port Congestion Surcharge of $1000.00/40’ cargo arriving at all US West Coast ports. This massive increase, based on an arrival date with virtually no advance notice is unheard in the U.S. market. The market is bracing for a very large negative impact for virtually all customers, which we expect to continue until the labor negotiations are concluded. Once concluded, the congestion issue is expected to remain for a yet undetermined amount of time.
During the 2002 labor action, which only lasted 10 days, the end result was months of related equipment shortages worldwide, again used for significantly increasing worldwide prices. The normal flow of containers back to the origin ports is vital to the ongoing business. It can be argued that the labor problems of 2002 were not nearly as significant, or costly, than the equipment imbalance surcharges associated with those shortages.
Today, international shipping is fully intertwined in the business model of most companies, as we enter 2015 we will keep you posted and hope that ongoing labor negotiations are concluded shortly.