Home / Signals™ / Signals™ Headlines – August 3, 2012

Signals™ Headlines - August 3, 2012

FMC Releases Study of U.S. Inland Cargo Moving Through Canadian and Mexican Ports

The U.S. Federal Maritime Commission (FMC) recently released the following Study of U.S. Inland Containerized Cargo Moving through Canadian and Mexican Seaports. The study was prompted by requests from members of Congress to research the impact and the extent to which the U.S. Harbor Maintenance Tax (HMT) and other U.S. policies and factors may incentivize U.S.-bound container cargo to shift from U.S. seaports to those located in Canada and Mexico.

The study examines the competitiveness of Mexican and Canadian ports with U.S. West Coast ports, and discusses the history and the theories of both cargo diversion and the HMT. Study analysis was based in part on the seventy-six responses the Commission received from shipping interests in the United States, Canada, and Mexico in response to a Commission Notice of Inquiry (NOI) issued in November 2011.

The study found that carriers shipping cargo through Canadian and Mexican ports do not violate any U.S. law, treaty, agreement, or FMC regulation. According to the study, numerous factors account for why shippers elect to use ports in Canada and Mexico, including overall shipment savings, risk mitigation through port diversification, perceived transit time benefits, avoidance of the HMT, and rail rate disparities. Lastly, the study outlined the many options available to Congress should it decide to revise or replace the current HMT structure. The study also confirmed previous estimates that a significant amount of containerized cargo imports moving through the ports of Oakland, Seattle, Tacoma, and Portland on the U.S. West Coast may be vulnerable to Canada routing. According to the study “it seems clear that removal of the HMT would drive some U.S. discretionary cargo going through Canadian ports back to U.S. west coast ports, but by no means all.” The Commission concluded the report with an overview of the current proposals to reform the HMT, improve port funding, and develop a national transportation infrastructure plan. The Commission stressed a need for long-term planning, noting that “decisions regarding infrastructure investments today will directly impact our ability to compete in a global economy for years to come.” The study is available at www.fmc.gov.

Back to top

FMC Chairman Lidinsky Applauds New USDA Container Availability Report

The U.S. Federal Maritime Commission (FMC) recently applauded the release of the first ever Ocean Shipping Container Availability Report (OSCAR). The report, which is compiled and issued by the United States Department of Agriculture (USDA), provides shippers, particularly those in the agriculture sector, with estimates of container availability for the current week as well as projected weekly container availability for the subsequent two weeks. This report provides a snapshot of the availability of shipping containers at 18 different intermodal locations for the westbound transpacific trade lanes. The data shows the availability for five types of equipment, including 20ft and 40ft dry, 20ft and 40ft refrigerated, and 40ft high cube containers. The data are voluntarily provided to the USDA’s Agricultural Marketing Service (AMS) by all ten members of the Westbound Transpacific Stabilization Agreement (WTSA). FMC Chairman Lidinsky is working to encourage participation by all U.S. shippers.

These reports come in response to numerous complaints from American agricultural exporters regarding difficulties obtaining shipping containers for exporting. In a 2010 Congressional hearing between the then House Subcommittee on Coast Guard and Marine Transportation Chairman Elijah Cummings (D – MD) and FMC Chairman Lidinsky, the Commission was urged to work with the shipping industry to increase transparency with regard to container availability. The weekly report data aims to offer a more transparent view of container flows, increase efficiency, and provide additional information to help U.S. exporters locate equipment to move their products, regardless of the type of cargo. For more information about the report visit the USDA’s Agricultural Marketing Service website at www.ams.usda.gov.

Back to top

Ocean Carriers Account for Higher Costs Within Emission Control Areas (ECAs)

Effective August 1, 2012 the U.S. Coast Guard will begin enforcing a requirement that vessels burn low sulfur fuel in new Emissions Control Areas (ECAs) within 200 miles off the coast of the United States and Canada. Many ocean carriers are expected to adjust their bunker surcharges to account for the higher cost of low-sulfur fuel, while others will be implementing new low-sulfur fuel surcharges to recover costs associated with this new ECA requirement.

The International Maritime Organization (IMO) is establishing these ECAs in select shipping lanes in order to reduce air pollutants from vessels. When vessels are inside these ECA areas they must burn only low-sulfur fuel which must contain a maximum sulfur content of 1 percent in main engines, generators, and boilers. Worldwide, vessels can burn fuel with as much as 3.5 percent sulfur, although ECAs do exist off the coast in the Baltic and North Sea. The new ECAs in North America take effect on August 1, 2012. The United States Caribbean Sea ECA, another newly presented ECA, covers certain waters adjacent to the coasts of Puerto Rico and the United States Virgin Islands and was designated under MARPOL amendments. This ECA was adopted in July 2011 with an expected entry into force on January 1, 2013. It is scheduled to take effect 12 months later on January 1, 2014.

Several ocean carriers have begun to implement new ECA Bunker Adjustment Factors (ECA BAF) or other low sulfur fuel surcharges in order to recover the higher cost of low-sulfur fuel required for transit through these ECAs. On August 1, Mediterranean Shipping Company S.A. (MSC) will impose a low sulfur surcharge of US$ 10 per 20ft container and US$ 20 per 40ft container for cargo moving through U.S. East Coast and Gulf ports and US$ 12 per 20ft container and US$ 24 per 40ft container for cargo moving through U.S. West Coast ports. However, MSC is not planning to apply such a charge on transpacific cargo serving the Asia / U.S.A. trade lanes. K Line’s Car Carrier division has announced an ECA BAF charged per weight or measure on all roll-on/roll-off (RORO) cargo of US$ 0.40 for trade between U.S.A and Europe, the Mediterranean, and the Middle East, US$ 0.25 for trade between U.S.A. and South America, Central America, and Mexico, and US$ 0.45 for trade between U.S.A. and Asia, Far East and Oceania. Alternatively, some ocean carriers have adjusted their standard bunker adjustment formulas to account for these low-sulfur fuel cost increases in trades where it is used. The amounts of these ECA surcharges and bunker surcharge adjustments vary among trade lanes and ocean carriers. .

Back to top

TSA Carriers Implement Recommended Guideline Rate Adjustments for August 2012

Carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA trade lane have announced additional interim rate adjustments in the form of General Rate Increases (GRIs) and/or other revenue initiatives effective early August 2012. These increases come on top of GRIs filed by several member carriers in April and May of 2012 as well as a Peak Season Surcharge (PSS) effective in June 2012. These additional revenue initiatives are aimed to further increase rates that have fallen steeply since last year.

The TSA’s 2012-13 recommended guideline revenue program recommends an increase of an additional US$ 500 per FEU for cargo to the U.S. West Coast and US$ 700 per FEU for cargo on intermodal services to interior destinations and on all-water services from Asia to the U.S. East Coast effective in early August, 2012. The exact effective date of this GRI varies among carriers.

The TSA Carriers also indicated that further revenue and cost recovery initiatives would be considered for application later in the year after a review of market conditions and the outlook for the second half of 2012. Rather than adopting formal guideline increases, TSA carrier members have indicated they will individually pursue various approaches to interim cost recovery and revenue restoration. Some member carriers are filing GRIs, while others are using peak season surcharges (PSS), emergency revenue charges (ERC), or other mechanisms depending on each carrier’s unique situation.

The TSA’s 15 carrier members are American President Lines, CSCL, CMA-CGM, COSCO Container Lines, Evergreen Marine, Hanjin Shipping, Hapag-Lloyd Container Line, Hyundai Merchant Marine, “K” Line, Maersk Line, Mediterranean Shipping, NYK Line, OOCL, Yang Ming Marine and Zim Integrated Shipping Services. The group’s web site at www.tsacarriers.org provides additional information.

Back to top

to top

Celebrating 45 Years of Navigating the Regulatory Seas

Need help with U.S. Federal Maritime Commission compliance?

Get in touch