A recent report by the Journal of Commerce focused on the growing congestion at US ports and how it has increased demurrage penalties. PortVision has written on tanker demurrage in the past, and many of the oil majors use PortVision as part of a strategic demurrage reduction strategy. However, now we are seeing demurrage claims rising with container ships as well, as ever larger ships are pressing ports to deal with volumes of cargo and containers not seen in the past.
Gridlocked marine terminals are struggling to move trucks in and out more quickly. An October hearing by the Federal Maritime Commission cited many examples of shippers who were ready to transport their containers, but the terminal was not able to oblige; thus, shippers incurred demurrage penalties. Items of concern at the hearing included truck wait times, ocean carrier arrival bunching impact on ports, and infrastructure.
Shippers and trucking companies are liable for demurrage if they exceed the “free days” allowed after containers or bulk cargo is unloaded. Terminals have limited storage capacity and use these charges to discourage extended storage situations. Disagreements develop when shippers blame truckers for missing a deadline for pickup and truckers cannot access their loads in a timely manner. The Journal of Commerce estimates that during the past two years, tens of millions of dollars in demurrage charges and late fees for container returns have been assessed.
Terminals will waive fees for a limited time but they, too, struggle with a balance between expected revenue for their space and a need to be flexible due to port congestion. The Los Angeles-Long Beach Port is experiencing particular difficulties with hundreds of containers stuck in ports accumulating demurrage penalties. Typical tariffs being charged: In Los Angeles, demurrage on a 40-foot container is $43.60 a day for the first five days after “free days” have expired and $87.32 per day beginning on the sixth day. New York-New Jersey fees are $145 a day for the first four days, $195 for the fifth through ninth days, and $355 for the tenth day and thereafter.
Some truckers believe that terminals view demurrage and late return fees as a profit center. Trucker protests have become more common as port congestion grows.
Recently, New York-New Jersey and Virginia terminals have refused the return of empty containers due to congestion, asking truckers to return those containers to off-dock sites. Los Angeles is considering using vacant lots near the port for off-dock storage. Truckers are asking for compensation for this extra activity.
Complicating matters is a growing number of labor disputes between port management and dock workers. Dock workers deny that they are using “slow down” tactics to make a point; they insist that port congestion has led to deficits of truck chassis (needed to pick up containers) and rail cars, and increasing cargo volume combined with a shortage of truck drivers has slowed transportation activity. All of this adds to the amount of demurrage penalties being assessed at every port.
PortVision uses advanced AIS-based vessel tracking to improve supply chain management and improve marine terminal efficiency, reducing demurrage by improving transparency of marine operations to all stakeholders. To learn more, visit www.portvision.com.