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Importers Face Increase in Fare For Asian Cargo

NEW YORK — The economy is shaky, the U.S. is threatening war with Iraq and the underlying labor problems that brought West Coast ports to a halt this month have not yet been resolved. What else does a shipper have to worry about? Rising...

NEW YORK — The economy is shaky, the U.S. is threatening war with Iraq and the underlying labor problems that brought West Coast ports to a halt this month have not yet been resolved. What else does a shipper have to worry about? Rising rates.

This story first appeared in the October 22, 2002 issue of WWD.  Subscribe Today.

A group of 14 ocean carriers who haul cargo from Asia to North America plan to try to raise the price of shipping a 40-foot container by between $700 and $1,200 for the contract year beginning in May. The 14 members of the Transpacific Stabilization Agreement, an Oakland, Calif.-based organization, said they intend to raise the prices from Asia to West Coast ports by $700 per box and the prices for intermodal service, which includes delivery by truck, by $900. TSA members also plan to impose a $300 peak-season surcharge for cargo coming in between June 15 and Oct. 31.

The group is also extending this year’s $300 peak-season surcharges through Nov. 30, given that many holiday shipments have been delayed by the West Coast port lockout.

While rates are negotiated in secret between carriers and shippers, the current cost of shipping a container from Asia to the U.S. is about $2,000, according to industry sources.

A spokesman for the TSA said carriers have had to lower their rates in recent years to the point that many are losing money. An effort this year to raise prices was only partly successful, he said.

“We’ve seen costs continuing to rise and at the same time, rates are stagnant at best and in most cases going down over time,” he said. “That’s an industry-wide problem.”

The TSA noted that, through the first six months of the year, eastbound shipments across the Pacific were up 17.5 percent.

Hubert Wiesenmaier, executive director of the American Import Shippers Association, which represents small to mid-sized importers, said it is likely the carriers will succeed in raising rates, but not necessarily as much as they’d like.

“A rate hike of $700 or $900 on a 40-foot-box, I wouldn’t call that being reasonable,” he said. “I advise our members to be prepared for some rate hike because rates have decreased and carriers have a fairly credible claim that they’re not really making money. But where that will settle, it remains to be seen.”

Another factor that could raise the cost of importing goods from Asia is the threat of war with Iraq. At times of war, steamship companies typically have to pay higher rates to ensure their vessels and pass those charges to customers. Wartime surcharges, which would likely be highest for cargo coming through the Middle East, could be applied to shipments originating at other ports as well, Wiesenmaier said.

“It all depends on the seriousness of the situation and the risk that is perceived there,” he said. “There are all sorts of risks associated with terrorism and they can be very, very substantial.”

He noted that last year, during the early days of the U.S. military campaign in Afghanistan, shippers were paying $700-per-container surcharges on shipments from Sri Lanka.

In the event of war in the Middle East, and in light of the recent terrorist attacks in Indonesia, it is possible that wartime surcharges could be applied to other ports, particularly in predominantly Muslim nations, he noted.

Meanwhile, on the West Coast, anger between dockworkers and their employers continues to stymie work efforts. Federal mediator Peter Hurtgen and several staff members toured the Long Beach-Los Angeles port complex Monday.

He’s expected to set a date for a negotiation session later this week.

Productivity has been off 20 percent since the ports reopened Oct. 9, a Pacific Maritime Association spokesman estimated last week. He added that the shipping association is “considering presenting some information to the justice department.”

A spokesman for the International Longshore and Warehouse Union characterized the ports as “a complete mess because of the PMA lockout. They have their people out there with clipboards harassing our workers.” (For a look at why an East Coast labor dispute is less likely, see page 9.)

Freight forwarders said they — and the clients — are suffering the brunt of the damage.

Ernie Stein, vice president of operations for freight forwarder Norman Krieger Inc., said steamship companies are levying huge increases — anywhere from $500 to $1,000 per container — as part of a West Coast congestion surcharge. “Everybody is up in arms about it,” he said. “Space is at a premium. Vessels aren’t making it back to Asia. There is a shortage of bookings, of containers, of [truck] chassis. It’s a domino effect.”

Another factor that could raise the cost of importing goods from Asia is the threat of war with Iraq. At times of war, steamship companies typically have to pay higher rates to ensure their vessels and pass those charges to customers. Wartime surcharges, which would likely be highest for cargo coming through the Middle East, could be applied to shipments originating at other ports as well, Wiesenmaier said.

“It all depends on the seriousness of the situation and the risk that is perceived there,” he said. “There are all sorts of risks associated with terrorism and they can be very, very substantial.”

He noted that last year, during the early days of the U.S. military campaign in Afghanistan, shippers were paying $700-per-container surcharges on shipments from Sri Lanka.

In the event of war in the Middle East, and in light of the recent terrorist attacks in Indonesia, it is possible that wartime surcharges could be applied to other ports, particularly in predominantly Muslim nations, he noted.

Meanwhile, on the West Coast, anger between dockworkers and their employers continues to stymie work efforts. Federal mediator Peter Hurtgen and several staff members toured the Long Beach-Los Angeles port complex Monday.

He’s expected to set a date for a negotiation session later this week.

Productivity has been off 20 percent since the ports reopened Oct. 9, a Pacific Maritime Association spokesman estimated last week. He added that the shipping association is “considering presenting some information to the justice department.”

A spokesman for the International Longshore and Warehouse Union characterized the ports as “a complete mess because of the PMA lockout. They have their people out there with clipboards harassing our workers.” (For a look at why an East Coast labor dispute is less likely, see page 9.)

Freight forwarders said they — and the clients — are suffering the brunt of the damage.

Ernie Stein, vice president of operations for freight forwarder Norman Krieger Inc., said steamship companies are levying huge increases — anywhere from $500 to $1,000 per container — as part of a West Coast congestion surcharge. “Everybody is up in arms about it,” he said. “Space is at a premium. Vessels aren’t making it back to Asia. There is a shortage of bookings, of containers, of [truck] chassis. It’s a domino effect.”