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Signals™ Headlines - September 6, 2012

International Longshoremen’s Association Announces Possible U.S. East Coast Port Strike

Members of the International Longshoremen’s Association (ILA) have authorized a strike at U.S. East Coast ports if a contract deal with the United States Maritime Alliance (USMX) is not reached by the end of September 2012. Contract talks between the ILA and the USMX regarding the renewal of the ILA’s East and Gulf Coast contracts recently broke down among disagreements over pay structures. An ILA strike would likely affect the entire U.S. eastern seaboard.

Contract talks broke down in the final weeks of August, prompting the ILA’s largest Local, Local 1804-1, to authorize a union strike. Local 1804-1 represents longshoremen and maintenance workers at the Ports of New York and New Jersey. USMX, which represents container carriers and port operators in the negotiations, is concerned with the contract’s overtime and bonus rules. USMX sees the current pay structure as a major factor in the high operation costs at the New York-New Jersey ports.

Shippers and retailers with cargo moving through U.S. East Coast ports are preparing contingency plans in the event labor talks do not resume, with some shippers already re-routing their shipments to West Coast ports. The National Industrial Transportation League (NIT) has written to U.S. Department of Transportation Secretary Ray LaHood and requested he work to put pressure on the two groups to resume talks. In a letter to the Secretary, NIT stressed the costly delays such a strike would cause. The National Retail Federation, Retail Industry Leaders Association, and the Waterfront Coalition have also separately urged the ILA and USMX to work toward resuming the negotiations.

U.S. West Coast ports are preparing for a possible influx of cargo over the coming weeks as shippers and retailers re-route shipments in anticipation of the potential strike. In the past week, many ocean carriers and NVOCCs have filed Congestion Surcharges in the tariffs of US $800 per 20ft container and US $1000 per 40ft container. These surcharges would apply to all shipments to and from all U.S. ports effective October 1, 2012.

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Docket No. 12-07: FMC Receives Comments on Proposed Freight Rate Indices

The U.S. Federal Maritime Commission (FMC) recently received a number of comments in response to its Notice of Inquiry soliciting public comment on the development of FMC-maintained container freight indices for U.S. agricultural exports. The Commission received comments from a variety of industry participants, with many commenters expressing concern over the use of confidential service contracts and the FMC’s role in the marketplace.

The FMC received over 15 comments from shipping industry participants, including the Westbound Transpacific Stabilization Agreement, National Customs Brokers and Forwarders Association of America, Inc., World Shipping Council, Morgan Stanley, and a number of agricultural exporters. Many commenters pointed out that one of the major purposes of the Ocean Shipping Reform Act (OSRA) of 1998 was to create a federal regulatory structure under which contract terms would remain confidential in order to foster competition. The World Shipping Council argued that under OSRA “there is no role for the FMC to inform the market of the level of, or changes in, market rates.” Other commenters questioned the accuracy of an index based solely on service contract rates, noting that rates in service contracts generally do not reflect actual freight prices as additional surcharges and discounts are often noted separately from rates. Proponents of the indices argued that the proposed indices would assist in enhancing efficiency and the ability of smaller shippers to compete with larger shippers.

The FMC will likely discuss these comments and the freight rate index proposal at their next Commission meeting. The Commission meeting schedule for September has not yet been announced. All comments are available at http://www.fmc.gov/12-07/.

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TSA Carriers Reduce Surcharges Effective October 1, Levy Low-Sulfur Fuel Surcharges

Carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA will reduce several surcharges effective October 1, 2012. Carrier members will also factor the added costs of low-sulfur fuel into updated bunker surcharges as a result of recently established North American Emission Control Areas (ECAs).

The TSA’s New Formula Bunker Adjustment Factor (BAF) for the October to December 2012 quarter, with adjustment for slow steaming, will be reduced to US$ 527 per 40ft container (FEU) to U.S. West Coast Ports and US$ 1020 per FEU to U.S. East and Gulf Coast Ports, with other sizes as per the formula. Inland Fuel Charges (IFC) for the same quarter will be reduced to US$ 348 per container for shipments to IPI destinations served via West Coast Ports, US$ 174 per container for shipments to RIPI destinations, and US$ 101 per container for shipments to Group 4 Points and to East Coast local store door points. The Currency Adjustment Factors (CAF) for the same period will be 22 percent for shipments from Japan.

Recently established North American ECAs requiring vessels to reduce sulfur oxide emissions have prompted carrier members to factor the added costs of the more expensive low-sulfur fuel into their existing bunker fuel charges. The new component will be applied concurrent with the next scheduled bunker charge adjustment on October 1, 2012 in the amount of US$ 17 per FEU to the U.S. West Coast and US$ 21 per FEU to the U.S. East and Gulf Coasts.

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.

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WTSA Carriers Reduce Surcharges October 1, Incorporate Low-Sulfur Bunker Component

The Westbound Transpacific Stabilization Agreement (WTSA), FMC Agreement No. 011325, whose member carriers serve the U.S. export trades from the USA to East Asia, announced adjustments to current Currency Adjustment Factors (CAF), Bunker Adjustment Factors (BAF) and Inland Fuel Charges (IFC) effective October 1, 2012. Carrier members have also incorporated a Low-Sulfur Bunker Component, which factors the added costs of low-sulfur fuel, into the updated BAF amounts effective October 1, 2012.

WTSA BAF for the October-December 2012 quarter, with adjustment for slow steaming, will be reduced to US$ 1120 per 20ft dry container, US$ 1400 per 40ft/45ft dry container, and US$ 1850 per 40ft/45ft reefer container for shipments from and via U.S. Atlantic/Gulf Coast Ports. BAF for shipments from or via U.S. Pacific Coast Ports will reduce to US$ 563 per 20ft dry container, US$ 703 per 40ft/45ft dry container, and US$ 984 per 40ft/45ft reefer container. The IFC for the same period is reduced to US$ 348 per container for rail and intermodal rail/truck shipments and US$ 101 per container for local/regional truck shipments. CAF for the same period will be 7 percent for Taiwan and 21 percent for Singapore.

WTSA carrier members have also announced a Low-Sulfur Bunker Component effective October 1, 2012. Carrier members have established this bunker component in order to recover the higher costs of low-sulfur fuel required within recently established North American Emissions Control Areas (ECAs). The Low-Sulfur Bunker Component utilized by WTSA carriers will be US$ 9 per 20ft container (TEU) and US$ 11 per 40ft container (FEU) for shipments moving via the U.S. West Coast Ports and US$ 30 per TEU and US$ 38 per FEU for shipments moving via U.S. East Coast and Gulf Ports.

The WTSA’s 10 member carriers are American President Lines, COSCO Container Lines, Evergreen Marine Corp., Hanjin Shipping, Hapag-Lloyd Container Line, Hyundai Merchant Marine, “K” Line, NYK Line, OOCL and Yang Ming Marine. For more info visit www.wtsacarriers.org.

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Trans-Atlantic Carriers Announce General Rate Increases Effective October 1, 2012

Several carriers have announced General Rate Increases (GRIs) in the Transatlantic trade lanes (to/from USA – Europe) effective October 1, 2012. OOCL has announced a GRI for all Westbound and Eastbound cargo between Europe and the United States of US$ 300 per 20ft container (TEU) and US$ 400 per 40ft (FEU)/45ft container. Hapag Lloyd has also filed a GRI of US$ 320 per TEU and US$ 400 per FEU for Westbound cargo and Eastbound cargo moving out of U.S. West Coast ports. The GRI amounts for Eastbound shipments from U.S. East and Gulf Coast ports are filed at lower amounts of US$ 200 per TEU and US$ 300 per FEU. Maersk Line has announced GRIs for service from Europe to USA of US$ 300 per TEU and US$ 450 per 40/40 HC/45ft container. View specific carrier FMC tariffs for more information.

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