Port Congestion Notice

Below is a port congestion notice issued by Steam Logistics on Friday, 14 November 2014.  A PDF version of this notice is available for download here. 

Port Congestion 172.1 KB

FACTORS
For a number of reasons, vessels calling US West Coast ports are being significantly delayed.  This has been especially impactful to importers.  In a note to the President of the United States (US), The National Retail Federation believes that a coast-wide port shutdown “may be imminent.”  Here are some of the well-publicized issues creating this environment:

- Port labor unions and operators are in the middle of contentious contract negotiations
- Larger vessels calling west coast ports coupled with an improved US economic environment has increased container volumes by >10%
- A lack of chassis positioned where needed is creating a chassis shortage
- The annual peak season for holiday container traffic is occurring
- Containers that need to move via rail can be stuck at the terminal for weeks

These port congestion delays have the potential to impact our customers financially and physically impact their freight routings.

FINANCIAL IMPACT
These vessel delays allow ocean carriers to invoke a number of remedies contained in their bill of lading Terms and Conditions.  Based on recent communications from carriers servicing the west coast, we fully expect that port congestion surcharges will be applied to shipments in the near future.  While the full cost of these surcharges are not yet known, costs of up to US$1000 per full container load (FCL) have been discussed.  Further compounding the worry to our customers, lines are allowed to apply this surcharge at any point before a container is discharged at the destination port.

A secondary impact related to this congestion is increased demurrage charges applied by the steamship lines and storage charges applied by the ports.  Whether it’s a government FDA inspection, which can take well over a week, or a chassis shortage that prevents a drayage company from picking up a container, many customers are experiencing an increase in these charges.

Another possibility in this volatile environment is a dockworker strike or port lockout.  In this event the steamship lines are allowed to invoke Force Majeure clauses from their rules tariffs which typically allow them to disrupt service.  The usual result is the steamship line will discharge the freight at an alternative port.  When this occurs, freight repositioning (extra inland transportation, etc.) will be the responsibility of the customer.

As a tertiary observation, it is my personal opinion that the carriers are taking advantage of this chaotic environment to impose General Rate Increases (GRIs).  While it has long be recognized that the steamship lines required some level of revenue recovery, the additional of a GRI in the current setting will create an additional burden to the shipping community.

ROUTING IMPACT
The congestion at the ports of Los Angeles and Long Beach has had a domino effect along the west coast, creating slowdowns at alternative ports such as Seattle, Vancouver, etc.  Many customers have already begun to avoid the west coast altogether and route freight via the Gulf of Mexico and US East Coast locations.  This has also meant a change of mode in some circumstances, with ocean freight being diverted to air.  Of course, this creates a tightening of capacity across modes.  As a broader strategy, many customers have begun to take stock of their West Coast routing approach and are evaluating permanently diverting freight in alternative lanes.

With no immediate end in sight for this port congestion problem, the professionals at Steam Logistics stand ready to assist in developing solutions specific to your business needs.  We understand that one-size does not fit all.  Your business is special, and our customers are special to us. Please feel free to contact us with any questions you may have.

Brad Kemp
Chief Operating Officer
Steam Logistics