Increased Shipping Costs Lead to High Costs for Consumers
Washington, D.C.--U.S. Senators Mike Crapo (R-Idaho) and Jim Risch (R-Idaho) joined Senator Jerry Moran (R-Kansas) and 12 additional colleagues in urging the Federal Maritime Commission to re-evaluate the new fees imposed for shipping container carriers at the Ports of Los Angeles and Long Beach that will be imposed starting November 22. The members expressed concerns that these increased shipping costs will eventually be passed on to American consumers.
“These fees, just like tariffs, ultimately will be passed onto the American consumer in the form of higher prices for goods at a time when the prices are already at record highs,” the senators wrote. “Without question, ports across the United States are experiencing unprecedented congestion and record container volumes. We are sympathetic to the strain placed on all facets of the global supply chain, but it is misguided to levy an exorbitant fee under these unprecedented circumstances. Certainly, the delays and congestion at these ports is a multi-faceted problem, but these hyper-demurrage fees are not the solution. If left in place, they will have significant consequences for importers and American consumers.”
The letter is also signed by Senators Roger Wicker (R-Mississippi), Shelley Moore Capito (R-West Virginia), John Thune (R-South Dakota), Roger Marshall (R-Kansas), John Cornyn (R-Texas), Joni Ernst (R-Iowa), Rick Scott (R-Florida), Deb Fischer (R-Nebraska), John Hoeven (R-North Dakota), Steve Daines (R-Montana), John Boozman (R-Arkansas) and Ben Sasse (R-Nebraska).
The full letter can be found here and below.
Dear Chairman Maffei:
We write to express our serious concern with the new “Container Excess Dwell Fees” at the ports of Los Angeles and Long Beach that will be levied against ocean carriers starting on November 22. Although the ocean carriers will be receiving the bill, they have clearly stated their expectations that all fees will be passed through to the importers. These fees, just like tariffs, ultimately will be passed onto the American consumer in the form of higher prices for goods at a time when the prices are already at record highs. We call on the Federal Maritime Commission (Commission) to immediately review these fees against the statutory and regulatory requirements within the Commission’s jurisdiction. We also urge the Commission to review the ocean carriers’ plan for passing through the detention and demurrage fees to shippers.
Without question, ports across the United States are experiencing unprecedented congestion and record container volumes. We are sympathetic to the strain placed on all facets of the global supply chain, but it is misguided to levy an exorbitant fee under these unprecedented circumstances. Certainly, the delays and congestion at these ports are a multi-faceted problem, but these hyper-demurrage fees are not the solution. If left in place, they will have significant consequences for importers and American consumers.
The ports of Los Angeles and Long Beach will begin charging ocean carriers daily dwell fees of $100 per container, increasing in $100 increments every day until the container leaves the terminal. For containers scheduled to move by truck, fees will be incurred by containers that sit for longer than nine days. For containers moving by rail, shipping lines will be charged if the container sits in port for longer than six days.
With this fee structure in place, the costs may increase astronomically. A container that has accrued fees for 30 days will be issued a hyper-demurrage fee of $46,500. Among other possible violations, this punitive fee structure appears contradictory to the spirit of the Commission’s “reasonable” practices outlined in 46 CFR § 545.5. - Interpretation of Shipping Act of 1984 - Unjust and unreasonable practices with respect to demurrage and detention, which the Commission published on May 18, 2020. Under this rule, to be reasonable, the fee must serve its “intended primary purposes as financial incentives to promote freight fluidity.” If the fee cannot serve this purpose, it would unfairly penalize the importer and function as an improper revenue stream.
In addition to being excessive, these fees fail to take into account that freight congestion is the result of complex interactions among numerous stakeholders. Labor shortages, empty container congestion, and lack of available intermodal equipment all add to the congestion. With the current logistical issues facing these two ports, it is often not feasible for importers to pick up containers in a timelier fashion. Punishing importers via fees levied against ocean carriers is an ineffective and particularly punitive incentive that not only fails to decongest ports, but ultimately trickles down and hurts the American consumer.
The Commission’s mission is to protect American shippers from the unfair practices of ocean carriers, freight consolidators, and port operators. Now, in the midst of these already challenging times, oversight is needed more than ever. As the nation grapples with the recovery from the coronavirus pandemic, it is essential that port operators adhere to the existing regulations. We urge the Commission to move expeditiously to review the ports of Los Angeles and Long Beach for violations within the Commission’s jurisdiction. As is visible from the fee structure, time is a critical factor. Thank you for your attention to this urgent matter.