Wednesday 12th Dec, 2018

INDUSTRY OPINION: Is it time for a public inquiry into port practices?

Image: Jim Wilson and Shutterstock
Image: Jim Wilson and Shutterstock

IN DECEMBER 2016, a group of 25 major retailers, manufacturers, truckers, transportation intermediaries and other business groups, known as the Coalition for Fair Port Practices, petitioned the United States Federal Maritime Commission (FMC).

The Coalition wanted the FMC to set new policy preventing terminal operators and ocean carriers from charging unfair fees when uncontrollable incidents such as storms and strikes keep cargo from being picked up from ports on time.

“Recent events involving port congestion, labour strife, an ocean carrier bankruptcy, inclement weather and other disruption events have had crippling effects on U.S. ports and the stakeholders who rely on the efficient movement of goods,” the CFPP said.

“But, during these periodic events, demurrage, detention, and per diem, i.e., charges by ocean common carriers and marine terminal operators that are intended to incentivise the efficient removal of cargo from or return of equipment at U.S. ports, did not abate consistently even though shippers, consignees, and drayage providers had no control over the events that caused the ports to be inaccessible and prevented them from retrieving their cargo or returning equipment.”

Matters had come to a head in the aftermath of the August 2016 bankruptcy of Hanjin Shipping, when legal, commercial and operational headaches stranded containers at sea and on land for many months.

The Coalition very reasonably argued that while the charges were intended to speed up the turnaround of cargo and equipment, lines and terminals, the incentive was weakened if they could, in effect, profit from penalties imposed on parties “who have no influence over the operations and conditions that prevent” the prompt collection of cargo and return of equipment.

The Coalition petitioned the FMC for the establishment of a clear policy that clarifies the Commission’s interpretation of “unjust and unreasonable practices” in the Shipping Act of 1984, to provide needed guidance to the industry; help ensure that demurrage and detention charges are properly assessed in situations where they can fulfil their purpose of incentivizing the timely removal of cargo and return of equipment; and help to focus carriers and marine terminal operators to more efficiently address the circumstances causing port delays.

In essence, the CFPP wants mandatory extension of free days when delays are beyond the control of the parties.

The coalition said millions of dollars in fees have been charged during such incidents.

In examples cited, a retailer was charged US$80,000 because it took up to nine days to retrieve containers when only four free days were allowed; a trucking company was charged US$1.2 million after long lines at New York and New Jersey ports kept it from returning containers on time; and a transportation company was charged US$1.25 million after containers it tried to return were turned away at West Coast ports; the amount was eventually reduced to US$250,000 but only a year after the company was forced to pay the fees upfront.

“Shippers, consignees and drayage providers do not create and cannot avoid these events,” the Coalition said. “They cannot control the weather. They do not choose the terminals that carriers use. They are not parties to port labour collective bargaining agreements.”

Predictably, some carriers, ports/terminals and their representative bodies have rejected the thrust of the Coalition’s campaign, saying the sought changes will unduly transfer risk, invite shippers to exploit circumstances and unnecessarily regulate a system that is already adequately regulated.

These matters will resonate strongly with Australian shippers.

After receiving submissions all year in support of the CFPP petition, the FMC decided in September to hold public hearings into the matter and these have been scheduled for mid-January “to hear directly from affected stakeholders”.

APSA’s preferred approach is always to negotiate better outcomes with carriers and terminals, out of the public spotlight. But transgressions and exploitative behaviour continues. In the aftermath of the Victoria International Container Terminal (VICT) industrial dispute, some lines were quick to apply leniency in container detention charges, while others tried to profiteer.

Although progress is being made in some areas, urgent representations over the infamous infrastructure charges continue to fall on defiantly deaf ears, it seems.

So, is it time for a public inquiry into port practices in Australia?

Travis Brooks-Garrett is secretariat at the Australian Peak Shippers Association

Send this to friend