Ongoing uncertainty surrounding shifting tariff policies is disrupting the traditional timeline for finalizing annual service contracts between ocean carriers and importers on the eastbound trans-Pacific trade lane.
Typically, most service contracts beginning May 1 are finalized by late April. However, recent developments have delayed negotiations by at least two weeks. Industry sources cite confusion over how tariffs and trade tensions will affect volumes and pricing in the coming year as the main cause for hesitation.
Shippers are particularly cautious when committing to minimum quantity commitments (MQCs), which require firm volume agreements for the life of the contracts. This added uncertainty has complicated decision-making and disrupted normal negotiation cycles.
While pricing disputes between carriers and major retailers continue, tariff concerns are introducing new complexities. Disagreements over relatively small rate differences—around $100 per forty-foot equivalent unit (FEU)—have stalled progress. Although such differences may seem minor, they add up significantly when shipping large volumes of containers annually.
In a typical year, ocean carriers and large importers complete service contract talks by early April, with non-vessel-operating common carriers (NVOs) finalizing agreements shortly thereafter. However, the current environment is pushing negotiations beyond the usual April 30 deadline. Many smaller importers and NVOs are awaiting the outcome of negotiations between carriers and major retailers before finalizing their own rates.
While some second- and third-tier importers have agreed to rates ranging from $1,600 to $1,900 per FEU to the West Coast, others are holding back, hoping to benefit from any shifts in the market driven by decisions from larger players.
Despite a notable 37% drop in bookings from China since late March, spot and freight-all-kinds (FAK) rates from Asia to the U.S. remain elevated compared to last year’s contract rates. Spot rates to the West Coast recently stood at approximately $2,067 per FEU, and to the East Coast at around $3,067 per FEU, according to market data.
Blank sailings — the cancellation of scheduled voyages — have also played a role in propping up rates, as carriers aim to control capacity in response to declining volumes.
Should negotiations with large shippers continue past May 1, carriers are expected to temporarily extend existing contracts until new agreements are finalized. However, if the standoff persists, the market could experience a surge in last-minute contract signings, potentially driving rates even higher into May.
Overall, the ripple effects of tariff uncertainty are reshaping not only service contract timelines but also broader strategies around capacity management, pricing, and supply chain planning for the year ahead.
