FMC Commissioner Addresses Port Congestion

The U.S. Federal Maritime Commission (FMC) Commissioner William P. Doyle issued a statement today regarding port congestion, as well as the Transpacific Stabilization Agreement’s (TSA) amendment to expand its scope to include westbound trans-Pacific trade. The full statement is below.

“Today, I am voting to request additional information from the Transpacific Stabilization Agreement (TSA) parties on their proposed amendment to permanently include the westbound trans-Pacific trade as part of the TSA. By way of background, TSA previously filed an amendment seeking a 24-month trial period to expand the geographic scope of TSA to include westbound trans-Pacific trade. That 24-month trial period began on April 14, 2013. I am not going to disclose at this time the questions I am asking in the request for additional information. However, I will take this opportunity to address the separate issue of port congestion.

“In registering my vote today, I can comfortably say that the Commission has been responsible and judicious over the past two years with respect to the authorizations requested by the ocean carriers. This includes the review and allowance of requests such as vessel sharing agreements and proposed alliances, which have been recognized as promoting efficient and reliable international oceanborne commerce. I believe it is time that the ocean carriers do their part and find ways to assist in eliminating port congestion. As has been pointed out by many industry stakeholders, the actions of the carriers have in part led to where we are today. Certainly, adding congestion surcharge fees on cargo to and from West Coast ports is not helpful. I appreciate that many carriers are stepping back and reconsidering the surcharge.

“Larger ships: The carriers have forced ports around the world to react to their business model of building larger and larger vessels. Five years ago, 8,000 TEU vessels calling on ports in the U.S. was an uncommon event. Today vessels of up to 14,000 TEU of capacity are calling on the U.S. West Coast. The Journal of Commerce has reported that these large vessels regularly generate 5,000 container moves per vessel call, and sometimes as many as 8,000 to 10,000 container moves. This large volume places a severe strain on terminal resources. With containers stacked higher due to congestion, dockworkers are forced to dig through stacks to retrieve boxes. In the U.S., ports are spending tens of billions of dollars upgrading their ports in anticipation of larger vessels. The larger ships have come onto the market quicker than the ports can react by way of construction and upgrading, thereby, significantly exacerbating port congestion by unloading ever larger volumes of containers.

“Chassis: The United States operated under one chassis model for nearly fifty years—that is, the ocean carriers provided the chassis. Ocean carriers always owned and maintained chassis. When a shipper sent a truck to pick up a container on the dock, the terminal operator mounted the box on an ocean carrier owned chassis and turned that chassis over to the trucker. Approximately three years ago, as part of a major industry-wide cost cutting measure, ocean carriers began to sell off their chassis and get out of the business of supplying chassis. Many of the chassis were sold to equipment-leasing companies. And, even though they were sold, in some cases, the ocean carriers attached conditions that the leasing companies must act as a chassis repositioning vendor for the carriers and at the leasing company’s expense. It has not worked well to this point. There is either a shortage of chassis or a dislocation of chassis at major gateways (and sometimes both). The ocean carriers made their decision to get out of the business of supplying chassis and the rest of the supply chain had to react—this was a fifty year model that has been disrupted and the industry is sorting out how to make a new model work.

“Vessel Bunching: Vessel bunching occurs when several ships arrive at a port at the same time. All of the ships cannot be offloaded simultaneously and meet a scheduled time frame. And larger ships take longer to offload making bunching even worse. In addition, the cargo space in the terminals becomes filled because there is a lack of available chassis to move the containers out of the terminal.

“I believe the ocean carriers should not be adding surcharges for port congestion under any circumstance now or into the foreseeable future for imports or exports. Indeed, the ocean carriers have a substantial hand in the formation of port congestion matters as identified above. Things will get better over time as the supply chain adjusts to the changes we are experiencing in ocean transportation and services.”