In the space of five days last week, ocean container lines announced, suspended and reimposed surcharges of up to $1,000 for every container imported through West Coast ports in a sign that chronic congestion at those ports is worsening.
The waffling was triggered by the Federal Maritime Commission, which announced Monday that it was investigating reports that ocean container lines were imposing surcharges related to port congestion in a way that violated federal regulations. In a press release, FMC reminded shippers that ocean carriers had to post the amount and justification for such surcharges 30 days in advance and could not levy them on shipments received prior to the ports becoming congested.
Container lines began announcing surcharges of $800-$1,000 in early November, claiming they were needed to lease new containers to replace those stranded on inbound ships backed up outside West Coast ports.
“Our vessels are being worked at a slower pace, extending the stay at the port, which consequently leads to other vessels having to wait a significant number of days outside the port,” reads an excerpt from a letter one carrier sent to its customers. “Consequently, a costly recovery program, including a multitude of services, has been orchestrated to lessen the delay of U.S. exports, Asia exports and flow of equipment into Asia.
The letter was posted on the website of the logistics firm Scarbrough International Ltd., a Kansas City, MO logistics firm that said it had helped several of its customers file complaints against ocean carriers with the FMC. On Wednesday, two days after the FMC announcement, Scarbrough reported carriers were suspending the surcharges. On Friday, Scarbrough reported some carriers were again reversing course and proceeding with surcharges.
The surcharges came on the heels of a new public relations campaign by the Pacific Maritime Association (PMA), which represents more than 100 companies that own the container lines and terminals serving West Coast ports. Since Nov. 4, PMA has issued four press releases accusing the International Longshore and Warehouse Union (ILWU) of deliberately worsening port congestion through work slowdowns. PMA says the slowdowns started on Halloween in Tacoma, WA and soon spread to Seattle, Oakland, Los Angeles and Long Beach. In Southern California, for instance, PMA said ILWU failed to dispatch qualified crane operators to alleviate yard congestion. In some ports, PMA says productivity remains 30 percent or more below normal.
ILWU has countered these charges by drawing attention to the many structural reasons for port congestion, including: a shortage of truck chassis and rail cars, the arrival of larger container ships, limited space, and an exodus of truck drivers who cant make a living wage.
Regardless of the cause, the growing congestion is being blamed for raising costs by everyone from American Presidents Line, one of the largest container lines serving the Pacific trade, to the TJX Companies, Inc., which attributed an unusual rise in its operating costs in the third quarter to pulling forward its holiday imports. Smaller companies, however, have had to respond on the fly.
“We have had shipments up to four weeks late out of the LA port,” said Jim BoisDEnghien, VP of sales for Nite Rider Technical Lighting Systems, a San Diego company that serves the cycling and dive markets. “We recently rerouted our freight through Oakland port to avoid delays. Appears the freight is flowing quicker through that location.”
On Thursday, PMA blasted lead contract negotiators for the ILWU for taking a 12-day Thanksgiving break from the talks, although it acknowledged that discussions continue among subcommittees. Full talks are scheduled to resume Dec. 2. Some had hoped the two sides could make enough progress for ILWU to present a tentative agreement to a Dec. 15 meeting of its leadership caucus.
PMA’s recent press releases, however, mark a significant change in tactics that could signal that the talks are approaching an impasse. The last time that happened was in September, 2002, when PMA locked out ILWU workers at all 29 West Coast ports, prompting an 11-day shutdown of West Coast ports that economists estimate cost $1 billion in economic activity. Ultimately, President Bush had to invoke the Taft-Hartley Act to order the two parties to mediation.
While a growing number of trade groups, including most the major retailing and sporting goods associations, recently asked President Obama to intervene in the current talks, a White House spokesman told Bloomberg Nov. 19 that the president remains confident the two sides can reach an agreement. Both the PMA and the ILWU must agree to work with federal mediators, who helped the PMA’s East Coast counterpart reach an agreement with ILWU in 2013