New Surcharges at California Ports Could Be 'Catastrophic,' FMC Advisory Committee Says

Shippers were caught off guard by a new surcharge announced this week by the Los Angeles and Long Beach ports that could exacerbate unfair detention and demurrage fees, members of the Federal Maritime Commission’s Shipper Advisory Committee said. The ports announced a surcharge to ocean carriers for containers that dwell at terminals, a fee that will likely be passed on to shippers, members said during the committee’s inaugural meeting Oct. 27 (see 2109100008 and ​​2110140001).

Beginning Nov. 1, the ports will impose additional charges for containers moving by truck and dwelling for nine days or more and for containers moving by rail and dwelling for six days or more. The ports will charge $100 per container, rising in $100 increments per container per day. “I think it will be catastrophic,” Rich Roche, vice president of Mohawk Global Logistics, said during the committee meeting.

The surcharges are aimed at helping to “expedite the movement of cargo through the ports to work down the number of ships at anchor,” Port of Los Angeles Executive Director Gene Seroka said in a statement. “If we can clear this idling cargo, we’ll have much more space on our terminals to accept empties, handle exports, and improve fluidity for the wide range of cargo owners who utilize our ports.”

But Roche said chassis were “already in short supply, and this will artificially suck out the rest of the containers that may be sitting in there that didn't need to be on a chassis and are going to be parked somewhere. So we're going to probably wipe out whatever's left in terms of chassis.” He said the advisory committee should look at whether it can help “put the brakes on this.”

The surcharges may “cause even more problems than they're going to fix,” said Steve Hughes of the Auto Care Association and the Motor & Equipment Manufacturers Association. “I understand the logic behind it, and it makes some sense. But unfortunately, because we don't have that throughput at the front gate, I think this could cause us more troubles than we have already.”

Hughes also said the committee should determine whether the FMC was “given notice” about the fee, and whether it followed the “proper” processes. Bob Connor, executive vice president of global transportation at Mallory Alexander International Logistics, said he doesn’t think FMC was notified. “From the conversations that we had” with "contacts" at FMC, “it was pretty obvious that they were not forewarned,” he said.

U.S. shippers and trade groups have complained for months about the practices of terminals and ocean carriers during the COVID-19 pandemic, including unfair detention and demurrage charges and carriers increasingly declining or canceling export bookings (see 2109130023). While FMC Chair Daniel Maffei said earlier in the meeting that it’s “always tempting to demonize a particular sector,” the port problems won’t be fixed by pointing fingers. “I think if we really want to see positive change, we must all be prepared to come to the table to work together and to work with others through the industry,” he said. “And that is what I think that this committee can be a great catalyst for.”

FMC Commissioner Rebecca Dye said she will recommend to the FMC that it establish an advisory board for terminal operators and ocean carriers and hopes they can work with the shipping committee to help address port issues, including unfair fees (see 2110130036). “Right now we need fresh, broader perspectives on the freight delivery system,” Dye said.

FMC Commissioner Carl Bentzel said he supports the idea of a separate advisory committee for terminal operators and ocean carriers. “I think this is the template,” he said of the Shipping Advisory Committee, which is composed equally of industry exporters and importers. “I hope this is the committee that can show us the way ... to come up with a better system of regulating ocean shipping.”

Maffei specifically said he hopes for recommendations from the advisory committee to find “what's necessary to increase cargo fluidity through technology and data sharing,” and whether the FMC’s actions are helping to address detention and demurrage issues.” Dye issued a series of long-awaited recommendations to the FMC in July aimed at addressing ocean freight delivery issues, including a revision to shipping laws to allow for double reparations for shippers when a carrier violates detention and demurrage rules (see 2107290021).

“I'm looking for an honest discussion,” Maffei said. “What's outrageous? What's tolerable? What may be important to keep the flow flowing, what the commission can do, and some feedback on where the commission's actions so far are making a difference.”