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Demurrage invoicing complications cloud FMC’s rulemaking process

In advance of the FMC concluding its detention and demurrage rulemaking process, a handful of container lines have announced they have stopped charging importers demurrage fees on days when terminals are closed. That has clouded the invoicing picture. From the perspective of MTOs, storage fees will accumulate whether or not the terminal is open to truckers. 

The way terminals get paid for extra days of container storage is important. Additionally, the FMC is weighing whether to specify that the consignee on the bill of lading is the party to which demurrage should be billed.

The complexity is that the consignee on the bill of lading has a contract with the container line, not the MTO. Therefore, someone still needs to pay if a container line is voiding demurrage charges on behalf of its customers for days a terminal isn’t open.

The National Association of Waterfront Employers shared a list of data points that impact importer delays in retrieving cargo where MTOs lack insight. The list includes: the importer’s inland warehouse capacity and hours of operation; availability of chassis; availability of drayage capacity; the amount of free time agreed between the container line and importer; whether the ocean carrier’s performance caused or contributed to the delay; the underlying cause of any customs holds; and the existence of any disputes between the ocean carrier and importer.

Therefore, the NAWE believes that, without insight into those data points, charging terminal storage fees is the best way to incentivize cargo retrieval.

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Retailers expect slow import growth

The NRF sees little change in the near-term for US monthly imports that continue to decline. They said that while imports show a return to pre-pandemic levels, the West Coast longshore situation remains a wildcard. 

Import volumes were dismal to start 2023. However, volumes should climb through the summer as shippers return to seasonal ordering patterns. Import volumes hit 1.55 million TEU in February, a 26% decline from the same period in 2022.

The Global Port Tracker lowered its volume forecast for March to 1.68 million TEU from 1.74 million TEU. From April to June, imports should show month-to-month gains.

Shippers remain concerned about protracted talks over a new West Coast labor agreement between the ILWU and PMA. Therefore, shippers continue to divert cargo to the East and Gulf coasts. Additionally, the NRF reiterated its call for the Biden administration to intervene in the negotiations.

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Trans-Pac capacity fills as risk of GRIs hangs over shippers

Trans-Pacific container lines are trying to increase sagging spot rates with an April 15 GRI. The success of this push will depend on the health of green shoots of demand and the effectiveness of increased blanking of capacity. 

For a standard 40-foot container, MSC, CMA CGM, and HMM have each filed notice of a $600 GRI effective April 15th. Small carriers Wan Hai and ZIM have filed notice of a $1,000 and $1,200 GRI, respectively.

Utilization rates on the Asia to West Coast routing have increased in recent weeks to over 85%. Utilization rates might drop after the GRI. That will depend on how well carriers can recalibrate oversupply to weakening Asia import demand.

Rates & Negotiations

Service contracting power has shifted from carriers to shippers. Therefore, many importers have held off on signing trans-Pacific service contracts. They want to leverage the spot market and see what rates big box retailers receive.

Recent projections say that spot market rates are nearing the bottom and should level out but the middle of the year. Therefore, it is reasonable to expect that the contract rate for mid-size forwarders and mid- to large BCOs will be around $1,500 to $1,600 and $2,500 to $2,700 for the West Coast and East Coast, respectively.

Eastbound trans-Pacific spot rates have been descending slightly. As of April 7, the Shanghai to USWC rate was $1,292 per FEU, up from the 2023 low of $1,148 per FEU on March 31.

Roughly 70,000 TEU of ocean capacity, accounting for 25% of capacity to the US Pacific Southwest ports, has been blanked weekly since the end of January. To the Pacific Northwest ports, carriers have cut about 30,000 TEU (30% of capacity from Asia). Trans-Pacific services to the USEC have seen about 45,000 TEU per week cut, amounting to 20% of capacity.

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About O’Neill Logistics

O’Neill Logistics is a leading third party logistics provider. We operate in California, Savannah, New Jersey. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.

O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.

Lastly, we aim to simplify your supply chain. We deliver exceptional service and can optimize your operational performance. Therefore, we aim to build, protect and foster strong business partnerships.

Please reach out to us if you have any questions or need assistance with your logistics solutions!