On Monday, the ports of Los Angeles and Long Beach began counting the days that containers remained on dock. Local delivering containers would be penalized after nine days – local rail cargo after three days. Shippers already accustomed to demurrage and detention now have to add another mystery charge to be invoiced an indeterminate period of time in the future – to the detriment of their cash flow and operations.
Unlike demurrage and detention which are fixed at ‘X dollars per day after the free time has expired, the goal of this fee is to incentivize cargo to move by coming back each day with an exponentially larger stick. After the permitted period of time expires, the fee is $100 for the first day, $200 for the second day, $300 for the third day, and so on with no cap.
While Port of Los Angeles Executive Director Gene Seroka told the commission which unanimously voted in favor of the charges that, “His stomach was in knots,” the decision to do this apparently outweighed his suffering guts.
The fact of the matter is terminals will bill ocean carriers. Those ocean carriers will presumably invoice the consignee on the master ocean bill of lading. This means that for shippers who utilize an NVOCC or other co-loader, that invoice must work through multiple layers. Logistics companies also have no way right now to determine the status of a container subject to these penalties, nor how much the final amount will be when the container is picked up.
Not unlike the FMC’s current investigation in the opaque demurrage and detention billing practices of terminals and carriers, this fee will undoubtedly find itself the subject of their scrutiny in the not too distant future.
These two paragraphs from a Journal of Commerce article (paywall) sum up who will be hurt the most by these penalties:
A terminal operator who requested anonymity said the large national retailers already have contractual arrangements with trans-Pacific carriers for extended free time that can be 30 days or longer. They also have the financial resources to arrange special gate hours for themselves and can take delivery of dozens of containers in a single shift, if they choose to do so. However, most other importers are not so well-positioned.
“My concern is that the big guys will pay for a gate, but the smaller guys can’t,” the operator said.
Truckers are pointing the finger back at terminal operators, citing problems returning empties and securing wheels to get containers off the terminals in a timely manner. Because the chassis pools aren’t “gray,” meaning they can be used for any container from any line, the supply is both artificially constrained and imbalanced.
Sobel Network Shipping is committed to working diligently on behalf of our customers to remove containers from the terminal as quickly as they are made available and our trucker can schedule an appointment. We once again ask our clients to be as flexible as possible to accommodate receiving containers when they become available so as not to add additional costs that have already been applied through increased ocean freight costs and possible trade remedy duties.
