A variety of causes have converged to create chaos and congestion at U.S. and Canadian West Coast ports. Labour negotiations between the ILWU and the Pacific Maritime Association are ongoing, and negatively affecting all U.S. west coast ports. Right now discussions have been postponed for twelve days due to the American Thanksgiving. Severe chassis shortages and trucking problems at Long Beach and Los Angeles add to the tension and delays. U.S. destined cargo has been diverted north to Port Metro Vancouver and Prince Rupert. Congestion in Asia ports, larger vessels that take longer to handle in ports, and storms in the Pacific wreak havoc with vessel schedules. Some vessels are arriving 10 to 12 days late at Canadian and US ports. Dozens of vessels are anchored at ports waiting, sometimes for weeks to discharge. Volumes have not been this high in over 2 years.
Impacts:
Exports are being delayed.
Across North America, exports are being severely hampered. As vessels try to pick up time in their schedules, they discharge inbound containers and immediately depart, not waiting to load exports. In many cases, loaded export containers are being held at inland rail receiving terminals or held off-dock. Terminals are full and there is no room on the docks for empty containers that need to be returned to Asia. Vessels are not waiting to load empties.
Expect equipment shortages in Asia.
Every week that goes by with thousands of containers landing in North America and few being returned to Asia, the problem worsens. Soon we expect that the imbalance will be such that December and January exports from Asia will suffer as there will be insufficient containers to load there.
Expect even more surcharges.
It costs money to keep vessels at anchor for days waiting to discharge and to manage container imbalances. Carriers are beginning to implement congestion surcharges. For example, on Friday MSC has announced that, “With several weeks of slowdown on U.S. West Coast port operations, 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. 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.” It added that it wished “to recover our expenses and mitigate our potential loss of revenue, and shall, therefore, effective Nov. 26, 2014 (gate-in date) charge a Port Congestion Surcharge. The amount of the surcharge is $800 per TEU, $1,000 per FEU and $1,125 per high-cube container”. Other carriers are following suit. This surcharge could seriously affect freight forwarders’ treasuries and could substantially increase credit liabilities/ risk.
Airfreight is not necessarily the answer.
With weeks of delay in ocean freight, shippers desperate to have product on shelves for Black Friday and the Christmas retail season have diverted thousands of tonnes of ocean freight to air. Scheduled carriers are flying full and air charter rates inbound from Asia are through the roof. Importers who are trying to negotiate air cargo inbound from Asia during the next several weeks must be advised of realistic transit times, possible booking delays and cost expectations
CIFFA encourages all member firms to communicate the following to their clients:
1. Advise clients that these delays are totally beyond membership control and there is no course of claim or cost recovery for increase fees, demurrage, detention, storage or surcharges
2. Advise clients in writing of any new or increased carrier surcharges or cost recovery programs and get written acknowledgement from your clients.
3. Advise clients to take into consideration delays of up to three weeks in west coast ports and schedule arrival delays by carriers and increase their lead time from origin accordingly.
4. Advise clients to be prepared for continuous delays into Q1 2015, and possible further deterioration and delays with associated escalated costs until ILWU settles, productivity is stabilized and operations return to normal.
5. Advise clients to prepare for a strong peak Chinese New Year (CNY) season (Jan-Mar), with heavy volumes through west coast ports, including Canada.
The key to successful shipping through this crisis is proper advanced planning, communicating with clients, managing priority orders, and identifying delivery deadlines and necessary lead times to minimize costly cancellations.
The above article was kindly contributed by Canadian International Freight Forwarders Association (CIFFA)