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Two of the five US Federal Maritime Commissioners say they want to take a closer look at how the agency monitors blank sailings even as the FMC has stepped up its monitoring of how alliances cut and add capacity in response to the pandemic-driven decline in container volumes.
Commissioners Carl Bentzel and Daniel Maffei say they aren’t looking for a formal investigation but say a review of how the agency tracks blank sailing and impacts the market is warranted.
Under the Shipping Act of 1984, container shipping alliances can cancel or blank sailings as long as it’s done to adjust capacity to match lower volumes and they don’t cause an unreasonable reduction in transportation services or unreasonable increase in costs. Citing “the unusual circumstances and challenges created by the COVID-19 pandemic together with trade agreement changes,” the FMC said in a statement it has heightened its scrutiny of how alliances lower capacity.
Container lines reduced container slot space on the trans-Atlantic and trans-Pacific trades following double-digit declines in container volumes, leading to elevated container spot rates, rolled cargo, and premiums to ensure that cargo will be loaded onto the ship as scheduled. Some shippers have accused carriers of cutting capacity too aggressively so they can maintain — and even increase — spot freight rates, which as of July 17 were up nearly 70 percent year over year in the eastbound trans-Pacific, as well as secure premiums. Container lines argue that they are adjusting capacity as best they can based on shaky volume forecasts from shippers.
The recent rollercoaster-nature of ocean shipping makes it difficult to determine what constitutes an “unreasonable” increase in transport cost or decrease in service levels. New and increased tariffs — as well as further threats thereof — spurring the front-loading of imports further complicates carriers ability to match capacity to demand.
How the FMC monitors blank sailings
The FMC generally requires carriers to notify the agency before it implements a blank sailing and no later than 15 days after the decision was made. If they fail to do so, carriers have to request a waiver in which they must explain the reasoning for not notifying the agency and when the blank sailing occurred. The agency also receives notices of the reinstatement of blanked sailings.
The commission said it prioritizes its monitoring efforts on alliances, as the highly-integrated and expansive vessel-sharing agreements have the highest potential to cause or facilitate adverse market effects. Alliances allow carriers to mitigate overcapacity by sharing vessels, but they are restricted by US regulators to market or sell services jointly. Alliances compete with each other, as do carriers within an alliance.
“If the FMC detects any indication of carrier behaviour that may violate section 6(g) (of the Shipping Act of 1984, we immediately seek to address these concerns with the carriers and, if necessary, the FMC will go to federal court to seek an injunction to enjoin further operation of the alliance agreement,” the agency said.
Cancelled Sailings out of India Causing Rollovers and Bookings Logjam
Container trades out of India are faced with increasing congestion, due to a combination of blanked sailings, equipment shortages and carriers unable to clear a backlog of bookings.
This backlog was largely due to blanked sailings on almost every trade lane, container shut-outs and rollovers “on every vessel”, an ever-lengthening list of bookings due to cancelled sailings, growing congestion at transhipment facilities “due to shortage of manpower and voided vessels and limited vessel berthing windows, also due to “manpower shortage and other operational issues”.
This month carriers have withdrawn 24% of capacity on the India-Far East trade, blanking 23 out of 120 scheduled sailings. Next month, a further 17% capacity is expected to be withdrawn – with 17 blanking’s already announced. Carriers have stated the situation is likely to continue for another three-to-four weeks.
This is having an impact on bookings and procurement of export containers, as carriers are not able to issue bookings on immediate vessels even though the schedule is there – and sometimes they are releasing it on two-to-three-weeks advance sailings. There is a struggle to meet customers’ requirement for immediate dispatch of their cargo, as bookings are getting declined on current week sailings.
Meanwhile, the continuing problem of clearing import containers due to lockdown restrictions in India meant most carriers were facing an acute shortage of inventory in almost all load ports.
CMA CGM announced on Friday it is to reorganize its Asia-Subcontinent Express (AS1) service next month, which will see calls at Shekou and Port Klang dropped in favour of a new call at Nhava Sheva, which may alleviate some pressure for Indian forwarders.
Chassis Shortages Reported at Ports of LA/Long Beach
BRI USA has received several reports that there is currently a shortage of chassis available in the Ports of Los Angeles and Long Beach that is causing delays in the import/export cargo flow. Several large chassis providers have confirmed they are currently out of chassis in the area. The situation has reached a level where shipments are incurring demurrage/per diem charges. At this time, carriers are not making any allowances or concessions for demurrage or detention accrued because of the problem, except for in the few instances where they are providing door delivery service. Further, our sources also shared that many truckers may be implementing a delivery appointment schedule and requiring delivery orders two to three days prior to accepting cargo.
BRI USA is monitoring the situation and working to minimize the impact to our customers. At this time, we encourage importers to consider carriers with premium service offerings. While these services do come at a significant increase in cost, premium service from carriers include guaranteed equipment and faster turnaround at the terminals. If you have urgent cargo; potential delays are mitigated and free from detention and demurrage charges outside of your control. Please contact your assigned BRI rep without delay
U.S. Ports Status Update
Below is a general overview of the operations BRi USA has been able to gather for most major U.S. ports. This list will be updated as information is made available.
Port of Seattle and Tacoma – Container volume at the Northwest Seaport Alliance declined 15.2 percent in January-May. However, port managers expect some improvement in the second half of the year. Carriers blanked 55 sailings to Seattle-Tacoma through June to match capacity with flagging demand, but carriers have announced only seven cancelled sailings through September, which is a good sign for import volumes this fall. All terminals at the ports are open and operational this week.
Ports of Los Angeles/Long Beach – The Port of Los Angeles recently joined shipping lines and terminal operators in asking state and regional regulators to re-examine business and environmental regulations they claimed are costing West Coast ports container volume. They are asking regulators to balance clean-air goals and their impact on the cost of moving cargo through West Coast ports. The ports say they intend to do their part by reducing cargo-handling costs through efficiency measures. All terminals are open for normal operations this week.
Port of Oakland – Voyage cancellations are on the decline at the Port of Oakland, as just five scheduled vessel arrivals have been scrubbed in July and only one for August. Oakland has reported a 2.2 percent drop in cargo volume this year because of the coronavirus pandemic. All terminals are open and operational this week.
Port of Houston – Both Bayport and Barbours Cut Terminals are open and operating normally this week.
Port of New York/New Jersey – The FMC is beginning Phase 2 of its fact-finding investigation regarding the impacts of the coronavirus pandemic on the regional ocean container supply chain. They will be examining how the Port Authority is both adjusting operations in response to the pandemic and laying the groundwork for handling higher cargo volumes in the future. The ports of NY/NJ are open this week for normal operations and gate hours.
Port of Virginia - Cargo volume through the Port of Virginia fell more than 6% in fiscal year 2020 compared to a year earlier. Though volumes suffered, the amount of cargo moving by barge to Richmond Marine Terminal (RMT) and the overall barge volume grew. Container volume at RMT was up 22.5%, an increase of more than 7,500 units. Total barge volume (total units moved to RMT and Port of Baltimore by barge) was up almost 9%, or nearly 4,800 units, according to the port. All terminals are open and operational this week.
North Carolina Ports - All North Carolina Ports terminals – the ports of Wilmington and Morehead City and Charlotte Inland Port – continue to operate on a normal schedule.
South Carolina Ports - SC Ports in Charleston, Greer and Dillon are operating normally for gates and vessels at this time.
Port of Georgia - Both Port Savannah and Brunswick are open for normal hours this week.
Port of New Orleans - Through a state program, the Port of New Orleans (Port NOLA) will deploy sensors on commercial ships, such as tugboats and barges, working in the region so that it can use the collected data to make navigating the Mississippi River more efficient and safer. The information provided by the new sensors on sedimentation and draft levels in the Mississippi can help the port better assess where and when it needs to position dredgers. Port NOLA cargo operations continue to function as normal.
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As a valued customer, we hope that you will continue to trust us to source the best options for your supply chain needs now and into the future. Should you have any questions regarding USA News, please fee free to contact your Customer Solutions Representative.
Keeping you updated,
BRI Customer Solutions Team
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