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Signals™ Headlines - July 6, 2010

FMC Reports to Congress, Requests Greater Authority Over Carrier Contracts

Chairman Richard A. Lidinsky, Jr. and Commissioner Rebecca F. Dye of the Federal Maritime Commission (FMC) visited the House Committee on Transportation and Infrastructure, Subcommittee on Coast Guard and Maritime Transportation for a Subcommittee hearing which focused in part on the status of the Commission’s investigation into vessel capacity. The Commission recently initiated Fact Finding Investigation No. 26 into vessel capacity and equipment availability in the United States export and import liner trades, in response to shipper complaints.

At the June 30 hearing Commissioner Dye reported in detail of the status of the investigation. According to Commissioner Dye the investigation focused on vessel space shortages, chronic container shortages in certain parts of the U.S., and ocean carrier practices regarding service contracts. The FMC recently conducted a series of confidential interviews around the country to gather information for the investigation. Commissioner Dye along with FMC Chairman Richard Lidinsky reported that while vessel capacity has increased in recent months, this increase has not kept pace with growth in U.S. trade. Furthermore, growth in demand for container imports and exports in the upcoming peak shipping season may strain current vessel capacity. Container availability for export cargo in some regions of the country may continue to be difficult and expensive to arrange. In March of this year, President Barack Obama directed agencies “to use every available federal resource” to increase U.S. exports over the next five years, and the FMC is making a strong effort to support this directive. Commissioner Dye presented the following recommendations for immediate action which were approved by the Commission at its meeting on June 23rd:

  • Rapid Response Teams: Teams within the Commission’s Office of Consumer Affairs and Dispute Resolution Services (CADRS) have been organized to quickly address and help resolve disputes between shippers and carriers – particular problems involve cancelled bookings, rolled cargo, and container unavailability.
  • TSA and WTSA Oversight: The Commission will increase oversight of the Transpacific Stabilization Agreement (TSA) and the Westbound Transpacific Stabilization Agreement (WTSA) by requiring transcripts of certain Agreement meetings of these groups whose member Carriers service the USA-Asia trade lanes.
  • Global Alliance Oversight: The Commission has directed staff to prepare recommendations for prompt Commission action on ways to increase oversight of global vessel alliances.
  • Extend Fact-Finding Investigation: The Fact Finding Investigation No. 26 is extended to November 30, 2010. This will allow the Commission to continue the investigation through the peak shipping season and to fully develop additional solutions. The interview process also will continue during this time.

Chairman Lidinsky also suggested to the Subcommittee that Congress begin considering adjustments to the Shipping Act that would complement Commissioner Dye’s initiatives. He suggested a modification to give the Commission a greater role in resolving disputes between importers or exporters and ocean carriers quickly through mediation or arbitration. He also suggested a regulatory or legislative response to ocean carriers who refuse to provide or accept shipping containers from U.S. exporters. Representative Elijah E. Cummings, Chairman of the Subcommittee on Coast Guard and Maritime Transportation, requested a preliminary list of such legislative proposals from the Chairman within 30 days.

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TSA Carriers Implement and Increase Peak Season Surcharges

The carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA trade lane have recently implemented Peak Season Surcharges as recommended by the group’s 2010 Revenue Recovery Plan. Strong demand for service in the trade has prompted Carriers to implement these surcharges earlier than planned and to amend their tariffs to increase the surcharge amounts later this month or on August 1, 2010.

In their 2010 Revenue Recovery Plan the TSA Carriers noted a Peak Season Surcharge (PSS) of US$ 400 per FEU to be effective August 1, 2010. This surcharge was planned to address higher cargo handling and equipment positioning costs during the peak season. Due to strong demand, many of the TSA Carriers implemented a PSS in this trade lane as of June 15. In recent weeks, Carriers have amended their tariffs to increased PSS amounts effective in late July or on August 1. The increased PSS amounts vary; ranging from US$ 600 to $1200 per 40ft ctr. The PSS is generally at the lower range on shipments to US Pacific Coast Ports and higher to US Inland Points and to US Atlantic Coast Ports. Some carriers have included an expiration date of November 30 for this PSS, but many have not included an expiration date for the PSS.

This PSS, combined with the current bunker adjustment factors (BAF), and recently implemented General Rate Increases (GRI), produces total ocean freight charges that are at the highest levels seen on in the East Asia/USA trade lane in several years. On the heaviest volume routes, for example, from Hong Kong to Los Angeles, the lowest total freight now available on the spot market is about $2600 per 40ft ctr.

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. Visit www.tsacarriers.org

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FMC Launches Fact Finding Investigation of Household Goods Shippers

The FMC has initiated another Fact Finding Investigation. FMC’s Investigation No. 27 will focus on complaints or inquiries from individual shippers of household goods and personal property in U.S.-foreign ocean trades. Commissioner Michael A. Khouri has been named to lead the Fact Finding.

Each year, the FMC receives a substantial number of complaints from individuals that have experienced various problems with their international household goods shipment. The Commission’s Fact Finding Order issued June 23, 2010 notes that typical complaints allege failure to deliver the cargo and refusal to return the pre-paid ocean freight charges; loss of the cargo; significant delay in delivery; charges to the shipper for marine insurance that was never obtained; misinformation as to the whereabouts of the cargo; significantly inflated charges after the cargo was tendered and threats to withhold the shipment unless the increased freight was paid; or failure to pay the common carrier who actually moves the cargo. In many cases, shippers have had to pay another carrier or warehouse a second time in order to have their cargo released.

According to reports, individuals and companies have held themselves out to perform ocean transportation to the public and accepted responsibility for the transportation of these shipments without obtaining the required Ocean Transportation Intermediary (OTI) license and providing required proof of financial responsibility (surety bond) to the Commission. In some cases, vessel operating common carriers (VOCCs) or non-vessel operating common carriers (NVOCCs) may have received cargo from these unlicensed individuals in violation of the Shipping Act.

Through Fact Finding 27 the Commission will develop a record on the nature, scope and frequency of the problem of potentially unfair, unlawful or deceptive practices. An interim report is due to the Commission not later than November 15, 2010, with a final report due not later than February 15, 2011.

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