WASHINGTON — Textile and apparel importers say an overcapacity of cargo space and competition from independent ocean carriers is giving shippers the edge in annual contract talks with the cartel used to ferry the bulk of their goods from the Far East.
Since its founding in 1986, the Asia North America Eastbound Rate Agreement and its 10-carrier membership typically has had the upper hand in the annual wrangling over some 600 service contracts, scheduled to expire May 1.
“This year, ANERA and everyone else is ignoring the proposed general rate increase,” said Tom Eye, international distribution manager for J.C. Penney Co., Dallas. The retailer relies on ANERA to move about half of its 10,000 containers of goods from the Far East each year.
For starters, ANERA has asked for an across-the-board increase of $225 per 40-foot container, or roughly a 5 percent hike. This first request is usually modified when bargaining actually begins. However, this year the modifications are considerably deeper.
Eye expects Penney’s to sign a contract this week with an increase of no more than 1 percent.
Wal-Mart Stores, one of the first large shippers to sign an ANERA agreement, also received only a nominal hike, while increasing its shipping commitment to 18,000 containers from last year’s 12,000, according to sources. Queries to Wal-Mart were not answered.
“We have found ANERA to be quite flexible,” said Hubert Wiesenmaier, executive director of the American Import Shippers Association, New Rochelle, N.Y., who expects to also sign a contract this week. The association represents 60 of the leading apparel importers, including Liz Claiborne, Leslie Fay, Chaus, Gitano, Jordache and Anne Klein, that primarily use ANERA.
“In the past, right up to the last day of April, it was difficult to get even a $5 or $10 concession from ANERA,” said Wiesenmaier. He expects this year’s increase will be well below the $175 hike ANERA had offered when bargaining opened.
Although the fleet of independent carriers has added sailing times, ports and capacity while offering lower prices, importers dealing with tight deadlines dictated by fashion say they can’t function without ANERA. The menu of services provided by its members — particularly its railway connections — is essential to insuring on-time deliveries, they say.
Still, the independents, whose prices for carrying apparel generally run 12 percent below those of ANERA carriers, are putting pressure on the organized competition to keep prices down, importers observe.
“There has been a tremendous amount of space entering the market and the amount of cargo hasn’t been able to increase at the same percentage,” said Rich Hastings, transportation manager of Nike Inc., Beaverton, Ore. “It’s going to be interesting to see if the carriers can achieve an increase next year.”
Because of this supply-and-demand pressure, Nike last month was able to amend the second year of its two-year contract with ANERA to receive a lower rate increase, Hastings said, but he declined to specify the amount.
Reportedly, Nike’s competitor, Reebok, did the same. Reebok’s transportation executives could not be reached.
As in the past, independent carriers will ferry about 30 percent of the 8,500 containers Nike ships to the U.S. and will be used primarily to bring goods between north Asia and the West Coast. “There is very little difference [in service and timing],” Hastings said. An ANERA spokesman acknowledged there are changing situations in the battle over cargo.
“In any given year, ANERA is looking at the forces at work. They are looking at demand and they are looking at competition,” the spokesman said, noting that “ANERA has said it intends to be competitive with independents on rates.”
The spokesman also downplayed the issue of excess capacity. “We are seeing a fairly healthy trade growth in eastbound traffic (to the U.S.) that is offsetting a lot of this capacity,” he said.
Despite ANERA’s willingness to make deals, it remains the top-of-the-line in price and out of the reach of importers with smaller shipments.
The 25-member Textile and Apparel Shipping Services West based in Seattle this year has abandoned ANERA for an independent carrier. TASS West members include BUM Equipment, Pacific Trail and Columbia Sportswear.
“It’s mainly a matter of scale, since the ANERA rates are based on the volume you are willing to commit. Our association is relatively small. Also, the cost and the effort required to negotiate an ANERA contract isn’t worthwhile anymore,” said Jim Langlois, TASS West’s secretary-treasurer.
TASS West has signed a contract with the independent Korean carrier Hyundai for $1,500 per container less than Langlois said they could have negotiated with ANERA.
“Five years ago you couldn’t put your cargo on an independent; they were just too unreliable. ANERA had a grip on the business. Now in our group, ANERA has become a carrier of last resort,” Langlois said. “With independents, the service is good. The transit time is comparable to ANERA carriers. They don’t offer all the bells and whistles that ANERA does, but for $1,500 less, it’s worth it.”