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Freight Rate Hike Arrives

NEW YORK — As if apparel executives don’t have enough to worry about, between the shaky retail environment and uncertain effect on sourcing of the continuing SARS outbreak in Asia, now they’re facing another hike in the cost of...

New rates on ocean shipping are taking effect this month for most major importers.

New rates on ocean shipping are taking effect this month for most major importers.

WWD Staff

NEW YORK — As if apparel executives don’t have enough to worry about, between the shaky retail environment and uncertain effect on sourcing of the continuing SARS outbreak in Asia, now they’re facing another hike in the cost of shipping goods from the Far East to the U.S. This month, most new contracts covering Pacific shipping take effect. And as some importers go down to the wire in their negotiations, the carriers are pushing for increases of $700 to $1,200 on each 40-foot container of cargo they transport. That represents a sizable chunk of the approximately $2,000 per trunk importers paid during the last contract period, though sources said many companies have talked down the proposed hikes and will pay a significantly smaller amount.

This story first appeared in the May 20, 2003 issue of WWD.  Subscribe Today.

Since the shipping industry was reformed in the late Nineties, contract rates have been negotiated in secret between carriers and their customers.

As reported, the Transpacific Stabilization Agreement, a group of 14 major steamship companies handling the Pacific trade, had advised its members to seek increases of $700 for all-water service to the West Coast and $900 for service including intermodal transportation on to a distribution center. In addition, the TSA recommended a $300 peak-season surcharge for June 15 through Oct. 31.

That period is likely to be a time of particularly high congestion in shipping channels this year because the uncertainty about the economy and lackluster retail environment has many buyers delaying committing to fall orders. That, in turn, causes importers to push back their order dates, leaving shorter windows for delivery.

China’s explosive growth in the apparel business — U.S. imports of Chinese textiles and apparel were up 65.4 percent in the first quarter — has led to increased demand on Asian shipping. The TSA estimated in a statement that about 60 percent of the eastbound Pacific trade is headed to the U.S. from China.

The weak economy of the past few years has generally pushed down freight rates, though importers have had to bear surcharges due to higher fuel cost and war-risk charges due to higher insurance premiums for cargo traveling in the vicinity of the Mideast during the recent Iraqi conflict.

“Carriers are simply not being adequately compensated for the service provided,” said Albert A. Pierce, the TSA’s executive director.

Despite some industry speculation to the contrary, a TSA spokesman denied that carriers intended to hike their rates on cargo out of Asia as a result of the SARS outbreak. The WHO has said that there is no evidence that the disease can be transmitted by lifeless cargo containers.

The members of the TSA, a descendant of the former Pacific shipping cartel that calls itself a “discussion forum,” are American President Lines, CMA-CMG, COSCO Container Lines, Evergreen Margin Corp., Hanjin Shipping Co., Hapag Lloyd Container Line, Hyundai Merchant Marnie Co., Kawasaki Kisen Kaisha, Maersk Sealand, Mitsui OSK Lines, Nippon Yusen Kaisha, Orient Overseas Container Line, P&O Nedlloyd and Yangming Marine.