Port Congestion Surcharge In Effect

Ships Off Long Beach

Ships anchored off of Long Beach, CA waiting to unload (Source: L.A. Times)

Due to ongoing port congestion issues on the West Coast, particularly the Ports of Los Angeles-Long Beach, ocean carriers are now implementing a Port Congestion Surcharge on all imports.  This surcharge is effective immediately. Please see a recent L.A. Times article relating to this matter, if you are unfamiliar with the situation.

Per tariff filings with the Federal Maritime Commission (FMC), the Port Congestion Surcharge will be $1,000 per FEU, “effective for all import cargo discharging at U.S. West Coast ports on or after November 17.”

An “FEU” is ocean-speak for a full, 40′ container.

Surcharges are as follows:

  • $800 per 20′
  • $1,000 per 40′
  • $1,125 per 40’HC
  • $1,266 per 45’HC

All carriers including, but not limited to, Hanjin, CMA CGM, Hyundai, Yang Ming, Evergreen and NYK are putting this surcharge in effect. Some of these surcharges were filed with the Federal Maritime Commission (FMC) as far back as two years ago in case of any severe service disruptions along the East, West Coast or Gulf Coast ports.

Here are links to a few official carrier announcements:

This unprecedented decision by carriers stems from carrier argument that they are incurring huge operating losses while their ships sit idly, anchored offshore waiting to be unloaded. In some cases, the delay to be unloaded has recently been 7-10 days in some cases.

In response, some carriers have even been cancelling sailings and/or re-routing vessels to alternate ports.

As if things weren’t tough enough on importers, there is now also a strong possibility of some type of a work stoppage in the near future by the ILWU (longshoreman’s union), as their contract negotiations from this past summer appear to have stalled and reached a critical juncture.

We understand how this major event affects your cost of doing business. It affects us adversely as well..

We will continue to monitor this situation very closely. Any mitigation of this surcharge will immediately be passed on to you.

Note that there is a similar, though much small surcharge in place on exports as well.

Have questions or need to know more? Please contact a Customer Service Representative for more information. We’re here to help.

Peak Season Update: Port Congestion Grows on Both Coasts

Harbor Delays

 

‘Tis the Season… To Ship Early

With the peak of the holiday shipping here, port congestion at the nation’s two largest container gateways continues to grow, leaving truckers and importers fuming. Severe congestion at  the Port of Los Angeles and Port of New York-New Jersey has been widely reported, with the situation in Los Angeles becoming increasingly dire.

“The vessels keep arriving and the trucks keep arriving,” said John Cushing, president of PierPass Inc., which manages the extended gates program for the 13 container terminals in the port complex. Yet the backlog continues to grow.  “There are times when the imports are not moving. The numbers are outrageous —6,000 to 7,000 containers just sitting at the terminals,” he said.

One terminal operator in Long Beach said he is working only two cranes each week per vessel, rather than five cranes he should be, because the yard cannot absorb any more boxes. Unloading of vessels has slowed to the point that some terminals are in danger of having to tell vessel operators to slow down their arrivals because the ships can not be handled on schedule.

So what is the cause of this rapidly snowballing problem?

Chassis Shortages Severe
Chassis ShortageIn Southern California, truckers and terminal operators point to chassis being in short supply, in the wrong place at the wrong time or chassis being out-of-service as being the main culprit.

“Chassis are the Achilles’ Heel here,” said Fred Johring, president of Golden State Express and chairman of the Harbor Trucking Association of Southern California.

Ocean carriers during the last five years have exited the chassis business in Los Angeles-Long Beach and New York-New Jersey, selling the assets to chassis leasing companies. Terminals on both coasts immediately began to report that they did not have enough chassis, not because the overall supplies in the harbors were reduced, but because the business relationships involving cargo interests, shipping lines, terminal operators and chassis providers had changed. It can now take truckers twice as long to get an empty chassis, often from an off-site location, at increased rates. Those increased costs have been passed along to shippers, where they were previously built into ocean carriers’ pricing.

Truck & Driver Shortage Continues
As if the chassis shortages aren’t enough, truck drivers in the US are voting with their feet and leaving the industry at an “unsustainable pace”.  These are the words of Federal Maritime Commission (FMC) commissioner William Doyle, who is at the forefront of an investigation by the Washington agency into port congestion. It is a combination of depressed wages, rising equipment cost and increased regulation.

[Read more…]

Customs Exam – The Two Worst Words In Shipping

CBP Inspection

CBP Inspectors examining a produce shipment.

  • Why Me? – What causes an exam
  • Types of Exams – VACIS, Tailgate, USDA and Intensive
  • How to minimize the likelihood of an exam

Overview

They have been called the two worst words in shipping: “Custom Exam”.  That phrase can strike fear in the heart of even the most seasoned shipper or logistics professional. In this article, we’ll take a look at exactly what a Customs Exam is all about, what it means to you as an importer and what can be done to mitigate the risk of having it happen to you.

Why Me? – What Causes an Exam

Customs-Inspection #3You, your overseas supplier and your freight forwarder have done everything perfectly. The schedule has run like clockwork and your freight is due for delivery any day now. Then, you get that most unwelcome of emails or phone calls. Your freight has been flagged by the U.S. Customs and Border Patrol (CBP) for an exam.  Your heart sinks and you mutter a few choice expletives that we’ll omit here. Everyone’s first question: Why Me?
In the post 9/11 world, it is no secret that security measures are on the rise and that CBP is increasing frequency with which they flag shipments for exams. Under 19 USC 1467, CBP has the right to examine any shipment imported into the United States, and you, the importer, are required to bear the cost of those cargo exams. Not only can an exam delay delivery of your freight by days, or weeks, the fees you are responsible for can run into the hundreds of dollars for which you have not budgeted.

What could you have done wrong? You’re not a bad guy, right? Unfortunately, CBP will not disclose the reason for a hold on a specific shipment, citing security concerns. They don’t want the bad guys to know what they are looking for. What we do know is that the CBP “selectivity process” uses complex algorithms to evaluate the degree of risk associated with each shipment.  Factors include:

  • Number of previous shipments:  Are you a first time importer who lacks a track record with CBP?
  • Identity of manufacturer, shipper, importer, and consignee:  Are any of these entities associated with previous “problem” shipments, or violations of U.S. regulations?
  • Origin, routing, and destination of shipment:  Did the shipment come from, or pass through, any locations where unauthorized persons might have had access to the cargo?
  • Who arranged and loaded the shipment: Was everyone involved in handling the shipment a “known entity” to U.S. Customs, with an adequate cargo security program?
  • Commodity: Does this type of product often have inaccurate declarations of classification or value, high potential for commercial fraud, high risk factors for consumer product safety issues, or intellectual property rights issues?

One very important item note is that your shipment may not be the source of the hold.  If your shipment is part of a consolidation (i.e., partial container), if any one shipment in the container gets flagged for an exam, the entire container may be held for an exam. More about this in a minute.

[Read more…]

NMFC Freight Class System Needs to Go

NMFC-Confusion

Quick, what do travel agencies, printed encyclopedias and the National Motor Freight Classification (NMFC) system have in common?

Answer:  They are all obsolete.

Each of those three are relics of a bygone era. Sure, you can still call a local travel agent to book a flight to Miami, but why?  Key up Expedia.com and book the lowest cost fare in a matter of moments. Want to know what the population of Lichtenstein is? Wikipedia or Google can tell you in less time than it takes to type the question.

Want to know what the proper freight class is for shipping surfboards?  Good luck.

History

1930's Semi

The National Motor Freight Classification (NMFC) system of rating freight is a relic that dates back to the 1940’s. Since that time, motor carriers have been permitted to collectively determine rates under the Reed-Bulwinkle Act. Specifically, it exempts motor carriers from anti-trust laws when acting collectively and submitting agreements governing their activities to the Interstate Commerce Commission (ICC), and now to the Surface Transportation Board for approval.

The NMFC system does not allow for rate collusion. However, it provides a uniform method of rating freight “by class” that is used by the majority of less-than-truckload (LTL) freight carriers nationwide.

Classification involves the grouping of commodities with similar transportation characteristics into categories, or “classes”. It should be noted that the process does not actually involve the setting of rates but is a part of the motor carrier rating process. Every commodity that can be shipped by truck is placed into a class with other commodities that have similar transportation characteristics. Each class is then assigned a number, which increases as transportability becomes more difficult, dangerous or expensive for the carrier. In order to reach a final price, carriers using the classification procedures typically apply a rate to the class that the commodity falls.

Historically, access to the NMFC system has been tightly controlled.  Obtaining a complete copy of the classification system has been restricted to those willing to purchase a subscription from and/or a membership in the  National Motor Freight Transprtation Assosciation (NMFTA). For most shipper’s the only way to obtain a rate class for their shipemtn is to “call their carrier for a rate”.

[Read more…]