HFA Pushes Federal Maritime Commission to Resolve Costly Fees at Ports

December 4, 2020  by Laurie Northington in Business Strategy, Industry   

According to the HFA, worsening delays and inefficiencies at the Southern California ports are knotting an already constricted supply chain and raising costs for many furniture importers, manufacturers and retailers.

Demurrage charges apply when an inbound container remains within a terminal beyond the free time allowed. Detention refers to the charge for use of the container outside the terminal or depot beyond a free time period. Industry groups contend these charges pile up because of policies and practices beyond their control.

“Despite months of effort to work with various supply-chain partners, including the ocean carriers and marine terminals, the San Pedro Bay port complex devolved to virtual gridlock due to a lack of collaboration needed for advanced planning,” the letter stated. “Much of this lack of collaboration can be attributed to the foreign-owned ocean carriers. Unfortunately, it is the American businesses – the U.S. importer, U.S. exporter, OTI (Ocean Transition Intermediaries) U.S. intermediaries and domestic supply chain – who must bear the financial brunt of these inefficiencies. The costs of this inefficiency will ultimately be passed on to the U.S. consumers.”

Ideally, containers would be unloaded from ships and quickly transported from terminals – if possible, by trucks dropping off empty containers at or near the same terminal. But that is far from reality.

“Despite efforts by the shipping and trucking industry to promote more dual-transactions to allow chassis to be recycled during the pick-up and drop-off of containers, the ocean carriers have refused to provide advanced notification of empty receiving locations to allow truckers and marine terminals to partner on increasing dual-transactions throughout the port complex,” the industry letter explained.

“This practice creates sub-optimization of drivers, a subsidized repositioning model by ocean carriers, and an unintended revenue source for carriers and terminals, all on the back of the American consumer. In addition, ocean carriers have fallen woefully short of their obligation to evacuate empty containers from marine terminals to create more space on their docks. Meanwhile, they have continued to unload loaded import containers, creating congestion at the terminals. This has resulted in restrictions by marine terminals further thwarting the ability to terminate empty containers or pick up imports during the allotted free time.”

The Harbor Trucking Association also is pushing for improvement at the ports: “We all know that the COVID-19 pandemic has created disruption throughout the supply chain,” it said. “However, as the U.S. economy and companies continue to recover, they should not have to be worried about congestion and additional costs that will further impact their businesses and recovery efforts.”

HFA and other trade associations agree. “The FMC must take action to support the interests of U.S. companies and consumers to ensure that the carriers are not imposing unfair costs on American exporters, importers or consumers,” they said in their letter.

In guidance issued in April, the commission said that when interpreting rules governing demurrage and detention charges, it will consider the extent to which they “serve their primary purpose of incentivizing the movement of cargo and promoting freight fluidity.” One of the principles it stressed is that “importers, exporters, intermediaries and truckers should not be penalized by demurrage and detention practices when circumstances are such that they cannot retrieve containers from, or return containers to, marine terminals because under those circumstances the charges cannot serve their incentive function.”

Rather than promoting the swift movement of cargo, practices at the ports of Los Angeles and Long Beach are creating chaos.

Furniture retailers support the efficient and cost-effective movement of goods through national and international supply chains so they can deliver products to their customers at the right time and for the right price.

On Nov. 20, the FMC announced it will investigate.

“The Commission has a compelling responsibility to investigate the situations that currently exist in our major port gateways,” Commissioner Rebecca Dye said. “The Commission is concerned that certain practices of ocean carriers and their marine terminals may be amplifying the negative effect of bottlenecks at these ports and may be contrary to provisions in the Shipping Act of 1984. The potentially unreasonable practices of carriers and marine terminals regarding container return, export containers, and demurrage and detention charges in the Ports of Los Angeles, Long Beach, and New York/New Jersey present a serious risk to the ability of the United States to handle trade growth. Removing the obstacles to port performance allows ocean carriers, ports and marine terminals, drayage truckers, American importers and exporters, and every other business engaged in freight delivery to grow and prosper.”