Port Congestion Surcharges Impact Shippers at Major U.S. Ports, FMC Hands Tied

2022-06-24T13:58:42+00:00October 20th, 2021|Export, Freight Market, Freight Talk, Import, Shipping News|

Growing pressure to ease port congestion and restore transportation fluidity to U.S. supply chains has been building since early summer as record numbers of ocean vessels line the California coast waiting to berth and containers sit in overflow yards waiting to be delivered.

As the supply chain crisis of bottlenecks endures, steamship lines and drayage providers have already announced fees, such as the “port congestion surcharge,” leading into peak season holiday shipping.

WHAT IS A PORT CONGESTION SURCHARGE?

A port congestion surcharge (PSC) is an additional charge that reflects the additional expenses that the ship lines, or domestic carriers, incur when calling at congested ports.

Ocean carrier example…

During a regular market, a vessel has a schedule time and day of berthing, un-loading and loading before moving onto their next port of call.  Right now, at the Port of Los Angeles, the average time for a vessel to anchor and at berth is 14.5 days.  Vessel operators must pay for all terminal fees, vessel costs and employees during this waiting period adding significant costs.

Trucking example…

It typically takes a trucker several hours to get a chassis, get to the port and collect a shipping container.  In severely congested ports, a trucker might not have chassis equipment available for their container, can often sit for 5-9 hours waiting in line to get into the port complex and the container may still not be available based on its congested location in the stack.  This can extend pick-up attempts for days adding extreme costs for domestic carriers that cannot receive and deliver the containerized cargo.

CAN THE FEDERAL MARITIME COMMISSION HELP?

Last year, after U.S. companies filed complaints regarding unfair demurrage and detention practices, the Federal Maritime Commission (FMC), which regulates the U.S. international ocean transportation system for the benefit of U.S. exporters, importers, and the U.S. consumer, audited the top nine ocean carriers to assess if they were being compliant with the FMC’s interpretive final rule on detention and demurrage and create best practices.

This summer, U.S. shippers turned to the FMC again as ocean freight rates hit record highs and steamship lines began announcing and applying new additional surcharges.  While the FMC requires carriers to give shippers 30 days of notice before implementing new fees, in accordance with The Shipping Act, it cannot put a limit on freight rates or require carriers to guarantee export capacity.

THE WHITE HOUSE

During a White House briefing on October 13, 2021, United States President Joe Biden announced the clearing of global bottleneck of transportation supply chains as a critical mission for the nation.

“After weeks of negotiation and working with my team and with the major union and retailers and freight movers, the Ports of Los Angeles — the Port of Los Angeles announced today that it’s going to be — begin operating 24 hours a day, 7 days a week,” said President Biden. “I want to be clear: This is across-the-board commitment to going to 24/7.  This is a big first step in speeding up the movement of materials and goods through our supply chain.  But now we need the rest of the private sector chain to step up as well.  This is not called a “supply chain” for nothing.  This means the terminal operators, railways, trucking companies, shippers, and other retailers as well.”

Some supply chain industry experts also point to an overwhelming shortage of warehousing and driver talent needed to unload the backlog of consumer goods, leaving vital container and chassis equipment sitting with private businesses waiting to be unloaded.

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