As labor negotiations between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) continue, several major ocean carriers have implemented "port congestion" surcharges that have captured the attention of the entire shipping community, including the Federal Maritime Commission (FMC). On November 17, the Transpacific Stabilization Agreement (TSA), a discussion group of carriers, announced that a number of its 15 carrier members have or will soon implement the port congestion surcharge, taking immediate effect. For import cargo, the surcharges will be $800 per 20-foot container, $1,000 per 40-foot container, $1,125 per 40-foot high-cube container, and $1,256 per 45-foot container. This week, the FMC stated that it will review these congestion surcharges for compliance with the Commission's rules and regulations.
The ILWU has been working without a contract since its previous agreement with the PMA expired on July 1. While cargo-handling productivity was not affected for the first four months, recent issues have caused tensions to rise. Last week, the PMA issued a press release alleging that the ILWU was intentionally slowing down traffic at the ports, leading to congestion. The ILWU quickly responded, denying the charge and citing other factors contributing to the slowdown, including a shortage of chassis and truck capacity.
Regardless of the cause, the impact at West Coast ports has been severe. A November 3 survey by the Journal of Commerce found that 97% of shippers said they were affected by congestion at the ports of Los Angeles and Long Beach, with nearly 70% saying they will reroute cargo. The TSA has stated that terminal operators at Seattle and Tacoma have seen 40-60% productivity reductions in loading and discharge of vessels, while 14 ships were at anchor in Los Angeles-Long Beach harbor awaiting a berth.
The FMC is now receiving numerous inquiries regarding the congestion surcharges, and whether they are permissible under the Commission's rules. Pursuant to the Shipping Act of 1984, as amended, and FMC regulations, unless done pursuant to a waiver or exemption, any tariff rule (including surcharges) of a common carrier that results in an increased cost to a shipper may not be effective earlier than 30 days after publication. See46 U.S.C. § 40501(e); 46 CFR § 520.8.
Earlier this year, many shipping lines published congestion charges to cover labor-related service disruptions. According to the TSA, this publication satisfies the FMC's 30-day notice requirement. In its press release, the FMC cautioned that all such carrier tariff rules must be clear and definite as to the implementation and termination of the surcharge based upon specific criteria related to "labor unrest." The FMC further advised that it will continue to review congestion surcharge rules published in carrier tariffs and is gathering information from carriers regarding implementation of these surcharges.
Shippers have also spoken to FMC about the amounts of the surcharges, but FMC Chairman Cordero said the reasonableness of the surcharge is secondary to the analysis of whether the surcharges meet the Commission's requirements of being "clear and definite."
Should the labor unrest continue, U.S. West Coast ports will likely continue to face congestion, with damaging effects on all members of the shipping community.