CARGO—As Cargo Volume Skyrockets, Shippers Eye Increase in Rates

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With the volume of Asian imports into L.A.-area ports booming, local importers will likely soon be hit with shipping rate hikes of at least 13 percent.

The Transpacific Stabilization Agreement, an informal group of 14 major container shipping lines that serve routes between Asia and the West Coast, last week recommended tariff increases ranging from $525 to $750 per 40-foot container, depending on the type of service and destination. The proposed hikes would be instituted as of May 1, 2001, and would be tacked onto the current rates that start at around $4,000 per 40-foot container.

The new increases would come on top of this year’s hikes, which the carrier group recommended should be about $400 per container.

In addition to the proposed per-container increases, the shipping group also is recommending an additional $300 peak-season surcharge per container, which would be in effect from July 1 through Oct. 31, 2001. The carriers also want to impose as-yet-unspecified fuel surcharges, to recoup higher fuel costs. In addition, they are planning to start charging for the chassis they previously made available for free to shippers to move containers off the docks.

The stabilization agreement is a remnant of the days when the shipping lines would jointly set freight rates that they all adhered to. The industry’s immunity from antitrust laws has since been revoked and individual carriers can now negotiate confidential contracts with their clients, but they can still discuss prices and issue non-binding, voluntary recommendations.

As shipments from Asia into the U.S. are expected to increase another 10 percent next year, capacity on the container ships will be very tight, giving the carriers plenty of leverage to push through new rate hikes and bolster their bottom lines.

“It is a supply-and-demand issue,” said Jay Winter, executive director of the Foreign Trade Association of Southern California. “These increases are a combination of the shipping line trying to get back to a more reasonable level of profitability, as well as to recover some of the higher costs they have been incurring.”

The shipping lines argue that the rate hikes are justified because of their increased cost of operations. Aside from higher fuel prices, other costs they say they need relief from include higher longshore labor costs, higher vessel charter rates (as more carriers enter the trade and charter the limited number of vessels that are available), and the growing cost of retrieving containers inland and shipping them back to Asia empty. So-called deadhead shipments of empty containers are necessary because of the huge current trade imbalance between the U.S. and Asia.

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