AS OIL PRICES RISE, PACIFIC SHIPPERS PILE ON SURCHARGES

Byline: Scott Malone

NEW YORK — The public concerns about the high cost of oil may have died down, but it’s continuing to hit apparel makers, importers and retailers in the pocketbook.
After easing somewhat in late March and April, the price of oil has crept its way back up this month, once again breaking the $30-a-barrel mark that so concerned consumers and government officials earlier this year.
This is keeping the pressure on fuel prices, from marine to diesel, and keeping costs up for everyone who has to worry about shipping goods.
The timing of the surge in prices earlier this year was particularly bad for those negotiating shipping contracts: The price of oil peaked at just about the time that those contracts came up for renewal, allowing ocean carriers to seek steep increases.
The Transpacific Stabilization Agreement, a voluntary organization of Pacific carriers who work together to try to keep their prices up, advised its members this year to seek a substantial fuel surcharge in their 2000-2001 contracts, on top of a recommended rate increase.
The TSA, with headquarters in Oakland, Calif., advised its members to seek an $80 surcharge on 40-foot containers, a $60 surcharge on 20-foot containers and a $4 per-revenue-ton surcharge. The charges were effective with May 1 contracts. At the time of this recommendation — made in late March — the carriers said that marine fuel costs had risen 80 percent over the past 12 months and that they had been losing money on fuel costs over the past year because contracts were locked in.
“Transpacific carriers have seen their marine fuel costs rise to more than $24,000 per ship per day, with additional increases in prices for diesel oil used in terminal equipment, and in trucking charges paid to motor carriers adopting fuel surcharges of their own,” the group said in a statement.
While fuel costs started to ease after crude oil prices began declining, oil’s about-face put the brakes on those declines.
The group recommended that the $4 per-revenue-ton surcharge be adjusted each quarter, to keep it in line with later rises and falls in the cost of oil.
Niels Erich, a representative of the TSA, explained that because most shippers now negotiate contracts confidentially with their carriers — a result of the Ocean Shipping Reform Act — the surcharges will affect each shipper differently.
“It’s not that these contracts did not exist prior to OSRA, but many more were signed last year in anticipation of OSRA taking effect” on May 1, 1999, he said.
Most contracts will be subject to the surcharge to some degree, though some include language ruling out the possibility, he said.
The fuel surcharge is not the only price hike ocean shippers are feeling this year. TSA members also sought to impose a $400 base rate increase on 40-foot containers, as well as a $300 peak-season surcharge to run from July to October, when most goods intended to reach stores for the fall and holiday selling seasons are on the water. That makes 2000 the third year in a row carriers have sought to hike their charges.
Increases in fuel costs are by no means limited to marine fuel, of course.
Diesel fuel prices have also risen substantially, pushing up trucking costs around the nation.
As with ocean shippers, most companies shipping their goods by truck have had to accept some level of fuel surcharges this year, observers said.
“Everyone is pretty much paying the extra costs and trying to figure out how they’re going to pass those costs on,” said Ed Rastatter, specialist in motor and rail transport at the National Industrial Transportation League, an Arlington, Va.-based trade group with members including Kmart Corp. and J.C. Penney Co.
“It’s big enough that they notice, but it’s not going to make them shift to another mode [of transport] or stop doing what they’re doing. They’re trying to be good soldiers and pay the extra costs as their carriers incur them.”
The League’s index of diesel fuel prices shows that, on average across the U.S., diesel prices as of May 15 were up 32.7 percent from their level a year ago. The cost varies significantly by region and in some cases is up as much as 50 to 75 percent, Rastatter noted.
Last week, the rising cost of diesel fuel and its effect on the trucking industry, largely made up of independent owner/operators contracting their services to intermodal service providers and freight forwarders, caught the attention of Congress.
Rep. Nick Rahall, (D, W.V.) submitted the Motor Carrier Fuel Cost Equality Act, which would require carriers or forwards to impose surcharges when the cost of diesel fuel rises suddenly, and that the proceeds from those charges would be passed through to the owner of the truck.