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Home » Shippers balk at "emergency" surcharge
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Shippers balk at "emergency" surcharge

January 22, 2010
Toby Gooley
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Container shipping lines, which lost an estimated $20 billion in 2009, are desperately trying to boost revenue in a bid to stave off extinction. Yet some shippers—battered by the economy themselves—strongly oppose one carrier group's recent attempt to stem those losses.

On Jan. 15, the Transpacific Stabilization Agreement (TSA), a group of 15 ocean carriers in the Asia-to-North America trade, adopted a "voluntary guideline Emergency Revenue Charge (ERC)." The plan calls for surcharges of $320 per 20-foot container (TEU), $400 per standard 40-foot container (FEU), $450 per high-cube FEU, and $505 per 45-foot container. The TSA described the ERC as an "interim" charge and said it is "intended to expire" when 2010–2011 service contracts are signed, beginning in May.

TSA members said they need more cash, right now. "We're looking at the ERC as a bridge to get carriers through the first half of 2010, recognizing that the current rate levels do not adequately cover the cost of operating assets in this trade," said Jack Yen, president of Evergreen Marine Corp. and a member of TSA's Executive Committee, in a statement. "As an industry, we're sending out an SOS to the shipping community with this emergency charge."

Despite that plea, TSA lines earned no sympathy from Asian exporters. The ERC follows an October 2009 general rate increase of $800 per FEU for West Coast port-to-port and local cargo, and $1,000 per FEU for all other all-water and intermodal shipments. Bunker fuel surcharges have also soared, reflecting an 81-percent increase in fuel prices in 2009.

In a Jan. 15 statement, the Asian Shippers Council (ASC), which represents 20 shipper councils in 16 countries, slammed the new fee. The council said the addition of the ERC to earlier increases has nearly doubled the cost of shipping a container from Asia to the United States in just one year. Of equal concern was the TSA's announcement that it would apply the ERC where contract terms allow and "[seek] to negotiate reopening of contracts that do not provide for interim adjustments."

The shipper group said it was "astounded" by TSA's plan to reopen legally binding contracts. "What good are service contracts if shipping lines can just alter them without proper consultation with shippers?" asked ASC Convenor for Greater China Willy Lin.

The backlash against the ERC could have far-reaching implications. ASC Chairman John Y. Lu said the emergency charge had reinvigorated his organization's efforts to get Asian governments to revoke ocean carriers' antitrust immunity. He also said that ASC would work with shipper groups in other regions to "bring an end to shipping conferences and rate agreements."

Transportation Maritime & Ocean
KEYWORDS Evergreen Marine Corp.
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Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.

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