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FMC Grants Emergency Carrier Surcharges As Ocean Rates, Delays Surge

The Federal Maritime Commission is granting ocean carriers special permission to immediately hike rates on containers that are being rerouted around the southern cape of Africa, in response to concerns over possible Houthi rebel attacks on usual routes through the Red Sea.

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These new emergency disruption charges, paired with weekslong shipping delays, have led to added challenges and costs for the shipping industry, industry officials said. The charges have also caused some rates to double in price, with no indication of when they may be lowered.

Commercial cargo ships have seen a rise in attacks from the Yemen-based Houthis since at least mid-November, which has caused extended delays for shipments traveling from Asia and the Middle East to the U.S. East Coast and Europe (see 2312200045 and 2401030065). Although it’s unclear how long the shipping disruptions will last, Marc Iampieri, a supply chain and logistics consultant with Alix Partners, said messaging from major carriers, including Maersk, suggests they may linger for months rather than weeks.

“The question is, how long is that going to be? I wish I could predict that,” Iampieri said. “This is starting to become an issue that has to be addressed, and people need to start talking about dealing with it.”

Multiple major ocean carriers -- including Maersk, Hapag-Lloyd and Mediterranean Shipping Company -- have announced they no longer are sending ships through the Red Sea and near the Suez Canal and are instead transiting around Africa’s Cape of Good Hope. To help carriers justify the longer transit, the FMC in recent days has granted Maersk, Hapag-Lloyd, MSC, CMA CGM, Ocean Network Express and American President Lines special permission to immediately impose new container charges to recoup the costs of transiting around southern Africa or to pay for “feeder vessels” to pick up cargo at high-risk ports in the Red Sea. Those carriers would have normally been required to give 30 days notice for the new charges.

In its approval letters, the FMC said it can waive the 30-day notice period if “good cause has been shown.” Multiple carriers said they have lost cargo from Houthi attacks, including Ocean Network Express, which told the FMC that it had more than 3,000 20-foot equivalent units on board a vessel that was operated by Hapag Lloyd and “struck by a missile” in the region on Dec. 15.

The FMC’s decision to waive the 30-day notice period may frustrate some shippers, said John Padgett, a McGuire Woods lawyer who advises shipping industry clients. He specifically pointed to Maersk’s surcharge request, which was approved by the FMC “without any additional hearings” or information on the specific justifications for the “cost increases” Maersk will face.

“I've got some calls from my shipping clients about: is this another demurrage problem?” Padgett said, noting that there’s already “tension” between shippers and ocean carriers stemming from charge complaints submitted to the FMC under the Ocean Shipping Reform Act (see 2304270055). “We have no idea of whether this is going to become another profit center for carriers.”

Padgett said the carriers who were granted special permission by the FMC “will probably get a pass,” adding that it’s “hard to argue this is not an emergency situation.”

“But I think you will see shippers -- when they're trying to focus on how to reduce their costs, because they're going to go up dramatically in the near term -- you'll see some of these challenges arriving at the Federal Maritime Commission.”

Although the FMC has so far approved at least six requests from ocean carriers to waive the 30-day notice period, a commission spokesperson said Jan. 5 that FMC approval for expedited Red Sea-related surcharges isn’t guaranteed. “Special permissions are reviewed as received,” the person said.

The spokesperson added that the commission hasn’t yet received any formal complaints for shipping violations “related to events in the Red Sea and actions taken in response to those circumstances.”

The FMC warned ocean carriers last month that any rate increases or surcharges “must meet strict legal requirements” under U.S. shipping regulations. It stressed that carriers and “parties to vessel sharing agreements must continue to obey the Shipping Act, other U.S. competition laws, and all other applicable laws.”

The commission is “monitoring actions taken by ocean common carriers related to rates, fees, and surcharges to ensure their compliance with all statutory and regulatory requirements,” it said.

Among the increased rates recently granted by the FMC was a $1,300 fee for 20-foot dry containers and a $1,600 fee for 40-foot dry containers operated by Maersk. Those rates, coupled with peak season surcharges, have caused some shippers to face up to $2,000 in added fees from Maersk on containers that may have originally cost between $2,000 to $2,500, Iampieri said.

“It's almost a 100% increase,” he said, “and that's a big deal.”

Iampieri said a 30-day notice for an upcoming surcharge can be “helpful” for shippers, but he doesn’t view the FMC’s waivers as posing major issues because “a lot of your planning is done so far in advance.”

He also said many shippers “don't really have a lot of options” if they don’t want to pay the added surcharge. “There aren't a lot of Plan B's.”

Padgett agreed. “The bottom line is, all directions are pointing to significant costs increase.” He said he has heard experts forecast high rates remaining “for the next six or eight months.”

Both Padgett and Iampieri said some shippers are starting to turn to air freight, although they both noted not every product can travel via air, and Padgett said air capacity is currently “very limited.”

“I think you will see creative supply chains and logistics managers looking at all those options,” he said. “They're dusting off their contingency plans and trying to figure out in real time what this means to their bottom line."

Iampieri said if a company needs to quickly replenish its inventory, it may be forced to turn to the spot market or ship from another region, and spot market rates are “up almost 100% on a lot" of those routes.

“So there's really nowhere to hide.”