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Ship lines seek relief
Ocean carriers that locked out dockworkers want help from customers dealing with cost of dispute.
October 28, 2002: 8:04 PM EST
By Chris Isidore, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Ship lines calling on the West Coast are talking of raising rates and are trying to shift some of the costs of dealing with their labor dispute with dockworkers over to their customers.

The customers, major importers and exporters in retail, manufacturing and agricultural products, say they won't stand for the surcharges that will raise the cost of shipping a container of freight as much as $1,000 for a 40-foot container, or about 50 to 70 percent of normal costs.

The customers also are not happy that they are having to pay to move the containers that have sometimes been taken off ships at the wrong ports due to congestion since the end of a work stoppage Oct. 9. The cost of moving a container along the coast by truck or rail can sometimes top the cost of moving it across the Pacific on a container ship.

"The problem is, if it had been a labor strike, it would have been one thing," said Ed Emmett, president of the National Industrial Transportation League, the largest trade group representing customers of the shipping lines. "The fact it was a lockout makes it a different matter. The carriers participated in the decision on whether to close the ports."

The ports were closed by the Pacific Maritime Association, which represents the ship lines and port terminal operators in their negotiations with the International Longshore and Warehouse Union. The management group locked out the union at all 29 U.S. ports between Seattle and San Diego, effectively cutting off much of U.S.-Asian trade for nearly two weeks.

The PMA said it was forced to do so because the union had engaged in work slowdowns, in an attempt to have what PMA called a "strike with pay." The union denies it ever participated in any slowdown.

A PMA spokesman refused to comment on the proposed surcharges, or the use of a clause in a contract known as "force majeure" to not deliver a container to the agreed upon port. The clause allows one party in the contract not to live up to terms of the agreement due to outside forces, typically a storm or intervention by a third party such as government or labor. The PMA said that while shipping lines were part of the PMA, the decision on such actions are left up to the individual ocean carriers.

Several ocean carriers that industry sources say have filed for possible surcharges, including Hapag-Lloyd, Hyundai Merchant Marine and CMACGM, did not return repeated phone calls seeking comments on their plans.

An industry executive, who spoke on the condition he not be identified, said that the ship lines need more money and relief from the cost of trucking containers along the West Coast due to losses they were suffering even during what has been a strong shipping season.

He said customers supported PMA's negotiating goal of getting the union to accept greater use of technology to improve the productivity of the ports. That negotiating goal has been the main point of contention in the labor dispute that simmered all summer before heating up in late September as the peak shipping season was underway.

"The lines have run up significant costs from the 10-day lockout and subsequent handling of the backlog on the West Coast," said the executive. "The fight over productivity at the port terminals is a fight the shipping lines and their customers share. They went into this fight together. And the feeling is in the current market, with the kind of losses they've been experiencing in any case, they can't shoulder this burden by themselves."

A transportation manager with a major importer of goods said he doubts that the surcharges have much chance of sticking.

"They may try to implement it, but most shippers would not stand for such a thing," said the transportation executive, who also spoke on the condition that his name and company not be identified. "I recognize why carriers want to do it. But to stuff it down on the (customer) will create angst and anger and the carriers can't afford that either."

Reportedly some of the larger carriers, including Maersk-Sealand, have refused to go along with the surcharge plans, which has effectively limited its chance of taking effect in the near term. Maersk-Sealand also refused to return phone calls about a possible surcharge.

The transportation executive said he has heard that some ship lines are looking at trying to institute such a surcharge if the PMA and ILWU reach the end of a court-ordered 80-day cooling off period at the end of December without an agreement and are again free to take action to close the ports.

The National Industrial Transportation League's Emmett said that he also doubts many surcharges will be instituted, although he also believes that when new rates are negotiated in the spring, there could be higher shipping costs due to the labor dispute.

"I don't think any importer or exporter thinks that prices will stay where they are," he said. "This has distorted the market for a while."  Top of page




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