Shipping

Earlier this week, 159 trade associations representing key supply chain stakeholders sent a letter to the Biden administration and relevant congressional committees calling on the U.S. government to intervene in the stalled labor contract negotiations between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX). On June 10, the ILA issued a press release announcing its refusal to continue negotiations due to an outstanding dispute with a terminal operator involving one Gulf Coast port. The ILA has signaled its willingness to call for a coastwide strike if a new contract agreement is not reached prior to the expiration of the current contract, which covers roughly 45,000 dockworkers at seaports on the U.S. East and Gulf Coasts.

  • Many of the rate hikes represent almost a 100% increase in shipping rates
  • The special permission is not only to increase the rates and charges, but these increases are effective immediately as they also waive the FMC’s required 30-day notice period for increasing rates
  • Absent significant military or diplomatic action, our expectation is that these circumstances will not disappear quickly

The Federal Maritime Commission (FMC) has granted special permission to ocean carriers to immediately increase the rates on containers that are being rerouted around the Cape of Good Hope in Africa or are retaining feeder vessels for pickup of cargo at high-risk ports in the Red Sea due to increased hostilities. Since mid-November 2023, Houthi rebels based in Yemen have attacked Red Sea shipping bound for Israel or linked to Israeli ports. Reported security incidents have ranged from outright attacks, approaches, and business interruptions to mere sightings.

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Don’t Forget the Chassis in the Chase for the Cure.

A new level of frustration has arisen from the ocean shipper ranks during this “post-COVID” period. Shipments from Asia to the U.S. are experiencing extreme difficulties in getting their cargo delivered, mainly due to the acute shortage of chassis to effect delivery of their containers on the U.S. side. The painful example of this is the BNSF current experience with Lot W. Aside from the impact to the importer in not being able to access its cargo and experiencing serious damage to its business, it is also likely to face serious demurrage charges from the ocean carrier. This is on top of having just experienced a quadrupling (or more) of the base FAK per container rates, and the ocean carrier choices to leave agricultural commodities sitting at West Coast U.S. ports, favoring the shipment of empty containers opting to position equipment for the lucrative Asia to U.S. trade.

As a result of the contagious ocean carrier saga, recently the subject of a Presidential Executive Order dealing with anti-competitive developments in ocean shipping, the contagion has now fixated on rail ramps where intermodal deliveries of ocean freight moves has come to a virtual standstill. At least that is the case at Lot W.

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According to media reports, a massive 400-meter container ship operated by Evergreen Marine Corp. in Taiwan, the Ever Given, became stuck in the Suez Canal after apparently running aground due to high winds from a sandstorm. As a result, potentially hundreds of ships cannot pass on either side of the Suez Canal

What might not be so obvious in this COVID-19 environment, which we have grown to associate with shortages, is that counterintuitively there are issues beginning to appear dealing with the opposite situation. The Journal of Commerce has reported that “[t]he container shipping industry is marshaling a response to signs of a building import backlog as some retailers and manufacturers fail to pick up containers because warehouses are full or closed due to not being deemed essential service providers responding to coronavirus disease 2019 (COVID-19).” This is a development with implications to all stakeholders in the supply chain and will have some impact on retailers/manufacturers, ocean carriers, ocean transportation intermediaries, and warehouses.

Most agencies of the United States government, including the Federal Maritime Commission (”the Commission”), have been closed since December 22, 2018. Since that date shippers, ocean common carriers, and non-vessel operating common carriers in their shipper role have not had access to SERVCON, the service contract electronic filing system of the Commission. So how is it intended for these supply chain players to adhere to Commission regulations related to initial or service contracts about to be renewed, or amendments to existing service contracts during this dysfunctional period which at this point hasn’t shown even a hint of an end game? Short answer: the same as always, but without the filing obligation nor risk of sanctions (penalties). The filing requirement is temporarily lifted. Therefore, service contract activity can continue as usual without concern of penalties. There are some caveats though.

On September 22, 2018, Bill (SB-1402) was signed into law in California to become effective January 1, 2019. That law makes “Customers” (generally shippers, exporters, importers, and ocean intermediaries, FMCSA Property Brokers)  that engage or use “a port drayage motor carrier” jointly and severally liable with that port drayage motor carrier if that carrier is listed on the Internet Web site maintained by the California Division of Labor Standards Enforcement. This ominous list now identifies port drayage motor carriers which have been found liable to a “port drayage driver” for unsatisfied court judgments, assessments, orders, decisions, or awards, for port drayage services performed for which the drivers have not been paid or expenses for which they have not been reimbursed, plus damages, penalties, and interest. The California Labor Commissioner’s Office, Division of Labor Standards Enforcement, has awarded in excess of $45 million in unlawful deductions from wages and out-of-pocket expenses to more than 400 drivers, and the California Labor Commissioner’s Office noted that drivers have seen little of those awards.

On September 22, 2018, Bill (SB-1402) was signed into law in California to become effective January 1, 2019. That law will make a “Customer” that engages or uses “a port drayage motor carrier” jointly and severally liable with that port drayage motor carrier if that carrier is listed on the Internet Web site maintained by the Division of Labor Standards Enforcement. This ominous list will identify port drayage motor carriers which have been found liable to a “port drayage driver” for unsatisfied court judgments, assessments, orders, decisions, or awards, for port drayage services performed for which the drivers have not been paid or expenses for which they have not been reimbursed, plus damages, penalties, and interest.

The reason why this Bill is not as tentative as it sounds is that The California Labor Commissioner’s Office, Division of Labor Standards Enforcement, has awarded in excess of $45 million in unlawful deductions from wages and out-of-pocket expenses to more than 400 drivers, and that drivers have seen little of those awards.