ILWU/PMA Negotiations, Rail and Dockworker Labor Talk/White House Involvement, German Port Strike, Import Demand Not Dropping?

From Peter Tirschwell, Twitter (@petertirschwell):

“Among sources close to the ILWU/PMA negotiations there are strong differences of opinion. Some believe a deal will come quickly, as early as Aug, with minimal or no disruption, big pay increase & status quo on automation. Others are not nearly ready to jump to that conclusion.”

White House Keeping Distance from Critical Rail and Dockworker Labor Talks For Now

Excerpted from Bloomberg.com, July 13, 2022, by Augusta Saraiva and Ngai Yeung (Bloomberg)

The White House is monitoring labor talks in the logistics industry as unions representing 115,000 rail workers and 22,000 West Coast dockworkers negotiate fresh contracts, but won’t get directly involved in either bargaining process now, its supply-chain envoy said.

“The administration is watching as closely as it can be watched without being a point of interference, which would not be appropriate,” Stephen Lyons said in a virtual briefing Wednesday. “Negotiations are at a place where you’d think the negotiation should be at this particular point.”

Labor impasses are spreading across the US logistics network in the busiest months of the year for shipping, as retailers stock up on back-to-school and year-end holiday goods. Dock- and railroad-worker unions are currently negotiating contracts with employers, with the latter threatening to strike as soon as July 18. 

Talks between the nation’s largest railroads and workers — which started in January 2020 — are in a 30-day cool-off period after a union rejected a binding mediation offer from the National Mediation Board. Next, the Biden administration could appoint a presidential emergency board to resolve the dispute.

Rail Congestion Threatens Nationwide Logjam, LA’s Seroka Says

“We’ve got to get these folks some wage increases; we’ve got to address some of these issues,” Lyons said, adding he doesn’t want to get ahead of President Joe Biden as he makes a decision. “We’ll see what happens on the 17th. But I do think there’s a commitment there.”

Contract Discussions

Separately, the International Longshore and Warehouse Union and the Pacific Maritime Association, which represents about 70 employers, began discussing a new contract in May and are continuing to do so after their previous pact expired July 1. Officials from the ILWU and the PMA, which represents employers, met with Biden when he visited the Port of Los Angeles last month and have recently reaffirmed their commitment to keeping cargo moving despite the lack of a contract.

Any slowdown in operations at the two ports that are responsible for 42% of all containerized trade with Asia could stoke annual inflation that’s running at the fastest pace since 1981, and damp economic growth. Biden, who’s pledged to be the most pro-union president in US history, has directed Cabinet members and logistics-area experts to smooth out pandemic-era port logjams that spurred shortages and delays. Lyons and Labor Secretary Marty Walsh have been in touch with both parties, the port envoy said.

Port of Los Angeles Kicks Off Peak Season with Record June

Meanwhile, about 70,000 truck owner-operators in California — home to the nation’s biggest port complex at Los Angeles and Long Beach — are now in limbo as a local gig-work law starts applying to them. 

California’s Assembly Bill 5 requires workers satisfy a three-part test to be considered independent contractors, or else be seen as employees entitled to job benefits. The state’s truck owner-operators must now comply with AB5 after the Supreme Court on June 30 refused to review a case challenging the legislation that sets out the tests for employment-status classification.

‘So Critical’

On Wednesday, truckers demonstrated against the changes at the port gateways of Los Angeles, Long Beach and Oakland, according to the Harbor Trucking Association.

L.A. operations weren’t affected, and the port had planned for the protest days ahead Executive Director Gene Seroka said. 

“We gave them the breadth and depth and space they needed to voice their opinions but kept this cargo moving; these drivers are very respectful of just that,” Seroka said at the virtual briefing Lyons also attended. “They have a message to put out there and are continuing to do so. I applaud them for coming out here today.”

The Biden administration is still assessing the AB5 issue in California, Lyons said.

“The truckers are so critical to their supply chain — we’ve got to make sure that we’re setting the conditions to take care of them to the best of our ability.”

German Ports: Strike

There is a strike in the German ports for the third time within a few weeks. Against the backdrop of the ongoing collective bargaining negotiations, the service sector union ver.di has once again called on employees in the German seaports to take part in a warning strike. This was announced at short notice for the period from Thursday, July 14, 2022, with the start of the early shift until the end of the night shift on Friday, July 15, 2022 (end of the night shift on the morning of July 16, 2022). As a result of the expected work stoppages, significant disruptions to operations at the German seaports are to be expected. Please take this situation into account in your planning and disposition.

We will continue to monitor the situation.

BOC and Gebrüder Weiss Air & Sea Team Germany

Currently we wait for new updates on the USWC Labor Port negotiations. At this stage, we are still in a holding pattern for more news from ILWU and PMA, who have been silent. We are also facing growing global port congestion and a massive increase in blank sailings. Please see the articles below, and let your BOC Representative know if you have any questions.

Boxport Congestion Spreads Across The Globe Again

‘We are at the beginning of the peak season and the global fleet is already lacking more capacity, than was the case at the same point in time in 2021’

Excerpted from Splash247.com – Sam Chambers, July 4, 2022

Boxport congestion is growing across multiple continents. Clarkson’s containership port congestion index shows that as of last Thursday 36.2% of the global fleet was at port, up from 31.5% in the pre-pandemic years from 2016 to 2019, with Clarksons observing in its latest weekly report that congestion on the US east coast has recently risen to near record levels.

“Ongoing disruption caused by port congestion remains extremely supportive to the charter market, despite trade volumes in 2022 so far having come under pressure from a combination of factors,” Clarksons noted.

An operational update from German carrier Hapag-Lloyd, issued on Friday, highlighted the myriad congestion issues facing carriers and shippers around the world.

Across key Chinese ports such as Ningbo, Shenzhen and Hong Kong terminals are under pressure with yard and berth congestion thanks to ongoing covid measures and the typhoon season.

At other key Asian ports, yard density is reported hitting 80% in Singapore, and is higher still, at 85%, at South Korea’s top port, Busan.

In Europe, the start of summer holidays, rounds of strikes, growing covid cases, and bunching of vessels coming from Asia have all transpired to create congestion at many ports, including Antwerp, Hamburg, Le Havre and Rotterdam.

In Latin America, ongoing nationwide protests have hampered port operations in Ecuador, while further north, a cyber-attack, which took out Costa Rica’s customs systems two months ago, is still causing trouble, while Mexico is one of the worst hit by the port congestion contagion with a number of ports reported to be suffering yard density of 90% leading to severe delays.

Reports of delays at North America’s terminals have dominated shipping headlines throughout the pandemic and remain a cause for concern going into July with Hapag-Lloyd noting waiting times for berths are running upwards of 19 days at New York/New Jersey, while the queue off Savannah is approaching record levels with waiting times there in the region of seven to 10 days.

On the west coast, while the spotlight is off Los Angeles and Long Beach for once, Oakland is suffering, with the German carrier warning ships can wait from anywhere between seven to 27 days for a space to open up at Oakland International Container Terminal.

In Canada, the situation is dire on the west coast thanks largely to limited rail availability with Vancouver facing “significant delays” according to Hapag-Lloyd, and yard density hitting 90%. At Prince Rupert, meanwhile, the yard is heavily utilized at 113%, and average rail dwell presently stands at 17 days. The increased dwell is due to lack of available railcars.

AIS ship tracking data analyzed by British consultants Drewry has revealed that the number of containerships waiting outside of major ports is indeed growing.

“With no changes to our expected supply chain recovery timeline the market will continue to be denied capacity that it otherwise would have had access to,” Drewry stated in a recent report, adding: “We estimate that effective containership capacity will be about 15% below potential this year, following on from a 17% reduction last year.”

The level of capacity removed from the market in May 2022 is still higher than in 2020 and 2021.

“This means we are at the beginning of the peak season and the global fleet is already lacking more capacity, than was the case at the same point in time in 2021,” Sea-Intelligence warned.

Port Congestion Impacts Continue with Blank Sailings in June

Excerpted from Clearfreight.com

If we needed any more proof that the world has yet to return to a state of normalcy, it’s been given to us in the form of further blank sailings announcements. The reason cited for these planned blank sailings is the continued congestion of North American ports and the resulting schedule delays.

Congested Ports Still Plaguing North American Trade

Since the height of the COVID-19 pandemic, North American ports have been overwhelmed with traffic and inundated with congestion issues due to a variety of factors. Chief among those factors are blank sailings and increased demand for empty containers leaving US ports bound for Asian countries. A premium is being placed on empty containers to the point that US exports are being delayed in favor of sending back the more profitable empty containers over those filled with trade goods.

While the West Coast was hit particularly hard by port congestion at the onset, shippers diverting to East Coast ports has resulted in those ports becoming congested as well. Case in point, the Port of Charleston has struggled under the weight of a record number of containers having arrived in the first quarter of this year, leading to it being named the world’s most congested port by major logistics companies.

Charleston is far from the only US port that finds itself in the top 10 most congested ports around the globe currently. The ports of Oakland, Long Beach, Los Angeles, Houston, and New York all find themselves among the company of ports with the current longest import container dwell times. The primary metric used for assessing port delays and congestion, dwell time is defined as how long it takes for cargo to leave the port premises after its arrival.

Major Carriers’ Blank Sailings Announcements for June

According to Drewry’s Cancelled Sailings Tracker, 74 of the 741 scheduled sailings for the month of June have been canceled. Twenty- six of these cancellations were announced by 2M Alliance, while 22 and 14 cancellations were announced by THE Alliance and Ocean Alliance, respectively.

The ongoing congestion issues in North American ports have gone on so long that major ocean carriers are making plans based on the expectation that the congestion will remain a factor. In light of this, a significant number of scheduled port calls have been and will continue to be canceled.

More Supply-Chain Disruptions Are Coming

West Coast ports are negotiating a new labor contract, and it’s likely to cause major slowdowns, which could worsen inflation.

Excerpted from WSJ.com, by Peter Tirschwell

Things look as if they’re almost back to normal at the West Coast ports at the heart of the great supply-chain disruption that began rolling across the U.S. last year. But a new wave of disruption might soon come crashing down. While the ill effects of Covid have dissipated, the ports’ increasing need for automation to stay competitive has sharpened the labor strife that has long afflicted them.

On Friday the collective-bargaining agreement covering longshore labor along the West Coast expires, and with it the contract’s “no strike” clause. This will allow 22,400 dockworkers to walk off the job at any time until a new contract is ratified. Negotiations began in May and could take months. A strike would shut down 29 ports, including the adjacent Los Angeles and Long Beach complex, which handles 47% of containerized imports from China and other Asian manufacturing centers.

The threat of disruption is serious enough that earlier this month President Biden did what no previous president has done. He met personally with the heads of the International Longshore and Warehouse Union and of their management counterpart, Pacific Maritime Association, in the middle of their negotiations. The reason was clear. What’s at stake for the economy, and for Mr. Biden, is new supply disruptions that would further fuel inflation and boost Republicans in November.

An actual strike isn’t probable. More than half a century has passed since the last dockworker strike on the West Coast. Much more likely are local labor disruptions. There was no strike at West Coast ports in 2014 and 2015, when the contract was last up for negotiation (it was extended in 2019). But there were nearly six months of labor disruption, leading to billions of dollars in losses for agricultural exporters. Local units of the ILWU disrupted individual ports over local grievances they felt weren’t being addressed in the negotiations. Port employees’ main tactic—which they’ve employed since the 1990s—was to work “to the letter of the contract,” loading and moving containers very slowly. It’s not possible to stop a dockworker from driving equipment at a snail’s pace, and it can severely disrupt cargo flow.

It’s the possibility of this sort of protest that most worries officials. The ILWU and PMA said in a June 14 update on negotiations that “neither party is preparing for a strike or lockout.” But they made no mention of slow-rolling tasks.

Because such disruptions originate at a local level, it’s hard for the union’s leadership to maintain control. ILWU President Willie Adams pledged his support for a disruption-free negotiation when he and PMA President Jim McKenna met with Mr. Biden, but Mr. Adams may prove powerless to stop unrest from smaller units within his own union. Small organizations of workers don’t necessarily care that the White House and businesses across the world will be watching these negotiations carefully, fearing heightened inflation and shipment disruptions.

These local issues could exacerbate tensions over the big coastwide problem on the table: port operators’ desire to automate cargo handling. Since it is nearly impossible to get approval to expand the footprint of the Los Angeles-Long Beach ports, the only way they can grow is by “densifying”—moving more containers through the existing facilities. That requires robotic shuffling of the container stacks, which the union—which agreed to allow automation in an earlier contract—sees as an existential threat. But the West Coast ports risk becoming uncompetitive if they don’t automate. Other ports have done so and it’s one of the reasons some of the notable West Coast facilities are at the bottom of global port-productivity rankings.

Importers and retailers, fearing disruptions, are already pre-emptively diverting significant volumes of Asian-produced goods to ports on the East and Gulf coasts. That tactic helped unclog the backups that all but crippled the Southern California ports for much of last year and into this year. As of June 24 there were only 16 ships waiting for a berth, down from a record 109 in early January. But the diversions simultaneously led to worsening backups at East and Gulf coast ports, which were already struggling amid a deluge of arriving inventory. And worried retailers are stockpiling goods, including for the holiday season, increasing container flows and creating backups extending into the interior U.S.

Management and union leaders may offer reassurances, but be prepared for turbulent supply chains this summer.

Mr. Tirschwell is vice president of maritime, trade and supply chain at S&P Global Market Intelligence and chairman of the TPM conference.

No Deal in West Coast Port Labor Negotiations as Deadline Passes

Excerpted from GCaptain.com, by Mike Schuler

Negotiations for a new labor contract for more than 22,000 dockworkers at U.S. West Coast ports have failed to reach a new agreement by today’s deadline, as both sides promise to keep cargo moving until the two sides can reach a deal.

The latest coast-wide labor agreement expired Friday at 5 p.m. Pacific Time.

The International Longshore and Warehouse Union (ILWU) and employers represented by the Pacific Maritime Association (PMA), which includes port terminals and shipping lines, have been negotiating a new labor deal since May 10.

A deal by today’s deadline wasn’t exactly expected, with both sides saying for weeks that neither is planning a strike or lockout if a deal couldn’t reached by the deadline. Although neither side provides updates during the negotiations, port automation was said to be one of the big issues heading in.

“While there will be no contract extension, cargo will keep moving, and normal operations will continue at the ports until an agreement can be reached,” the two sides reiterated in a joint statement Friday.

The labor negotiations are taking place as key West Coast ports continue to grapple with congestion and an increasing amount of aging cargo on docks as summer and peak shipping season loom large. On Friday the ports of Los Angeles and Long Beach, which handle approximately 40% of inbound containerized cargo coming into the U.S., once again postponed implementing the Container Dwell Fee reporting only 27% decline in the amount of aging cargo compared to late October when the program was first announced, approximately back to where congestion was back in November.

The labor negotiations are being closely monitored by countless stakeholders across industries and government, including by the White House which has made combatting inflation its top priority. Global port congestion excacerbated by the pandemic has been perhaps the biggest driver of high container shipping freight rates that have raised prices for consumers.

In its quarterly container market update published this week, shipping researcher Drewry said port congestion is continuing to prevent the container shipping market from returning to normal and listed U.S. west coast port labor negotiations as one of the biggest wildcards facing the industry.

The last time the two sides met at the negotiating table, talks dragged on for months and turned pretty ugly with each side blaming the other for cargo disruptions and failure to reach a deal. With even greater stakes this time around, everyone’s hoping there won’t be a repeat.

Key US Ports Brace for Expiration of Dockworker Union Contract

Excerpted from Bloomberg.com, by Augusta Saraiva

A labor contract for 22,000 US West Coast dockworkers is on the verge of expiring, opening the door to strikes, lockouts or work stoppages—but both sides still appear willing to avoid such disruptions amid the busiest season of the year for shipping.

The International Longshore and Warehouse Union and the more than 70 employees represented by the Pacific Maritime Association started May 10 negotiating a fresh contract for longshoremen across 29 ports in California, Oregon and Washington. While the current agreement ends Friday, July 1, the groups have recently said they’re unlikely to reach a deal before then and reaffirmed neither side is preparing for a strike or lockout.

The ports handle just under half of the containers entering and leaving the US and are the principal gateway for shipments to and from China, the biggest source of American merchandise imports—illustrating the high-stakes nature of the negotiations.

Last November, the ILWU declined an offer by the PMA to extend the current contract until July 2023. The current pact was originally set to end in 2019, but was lengthened after roughly two-thirds of union members voted to do so in exchange for higher wages and pensions.

Now, one possible option is that both parties agree on a short-term contract extension to preserve the current deal’s no-stoppage clause as negotiations continue. At the Port of Los Angeles, Executive Director Gene Seroka isn’t expecting a strike.

“Anything’s possible but it will not happen,” Seroka said on Bloomberg Television. The port is giving the union and employers “as much room as they need to negotiate and the rest of us are just moving all this cargo through the nation’s largest gateway.”

Talks often go beyond the expiration date, and the parties’ commitments to keep cargo moving could avoid a repeat of the delays and congestion that hampered ports previously.

This time around, the negotiations are drawing attention because the nation’s largest trade hubs —the ports of Los Angeles and Long Beach—are struggling to clear pandemic-era congestion.

The economic stakes are high: July and August are typically busy months for imports from Asia as retailers stock up on back-to-school and holiday goods. The peak has arrived even earlier this year, with companies looking to pre-empt future disruptions by ordering these products even further ahead of time.

Additional transportation snarls would only add to the inflationary pressures that have helped pull down President Joe Biden’s approval ratings.

They will also test how far a major union will apply its bargaining leverage during an economic slowdown, given the country is facing a moment of unusual clout for its long-declining labor movement.

Anticipating problems, some shipping companies have rerouted services to ports on the East Coast, resulting in longer queues from Savannah to New York, according to a recent tally from Hapag-Lloyd AG, Germany’s largest container line.

The hardships of laboring through the Covid-19 pandemic, employers’ recent robust profits, and the rapid acceleration in inflation could all drive up ILWU members’ expectations for winning substantial raises.

The focus on mitigating supply-chain disruptions and the near impossibility of running the ports smoothly without these workers could embolden them to seek bigger concessions.

Several scenarios are possible, said Julie Gerdeman, chief executive officer of supply-chain risk analytics firm Everstream Analytics. Instead of a full strike, ports would most likely see a slowdown in loading and offloading operations, similar to 2014.

“This would slow down West Coast port operations at a time when we will likely see an uptick in imports from Asia,” Gerdeman said. Widespread Issues

Labor impasses are contributing to supply-chain disruptions worldwide. Korean industries have faced production woes due to a weeklong trucker union strike in June. Protests have also emerged in Germany, the UK and Argentina.

Meanwhile in the US, major railroads are also struggling on the labor front, as two years of unsuccessful negotiations could force the White House to intervene and prevent a strike.

If there are difficulties at West Coast ports, Biden could be forced to invoke the Taft-Hartley Act, a Cold War-era law that allows the government to call for an 80-day cool-down period amid labor impasses.

Then-President George W. Bush relied on the legislation to reopen the ports in 2002, after the PMA locked out workers for 10 days following a series of work slowdowns. When the ILWU carried out the longest strike in US longshore history for 130 days in 1972, Richard Nixon did the same.

“The administration has been watching this very closely ever since they came into office,” Seroka said, adding Biden’s June meeting with the negotiating parties was likely the first by a sitting president during contract talks.

Shanghai COVID Lockdown

This morning’s update regarding Shanghai COVID lockdown restrictions:

  • PVG airport closed from today until April 1. PVG is the main international airport for Shanghai. Hongqiao airport will close from April 1 through 5. Hongqiao is mostly for China Domestic Flights and Inter-Asia flights.
  • All Shanghai area factories will be closed. Most factories are not in Shanghai area, but are located outside the area surrounding Shanghai, in Jiangsu/Anhui/Zehjiang Provinces. But the major problem is that the factories outside of Shanghai cannot deliver freight to Shanghai Ocean Ports because trucks are not allowed to enter Shanghai area. Cargo now can only be shipped from these Provinces by either trucking to Ningbo or using river feeder ports to get to Shanghai Loading Ports (Waigaoqiao and Yangshan).

Direct Translation from official Chinese Document sent locally, as follows:

Traffic Control Notice

At present, the latest situation of Shanghai terminals, airports and port areas.

  1. After the efforts of SIPG, each truck fleet and driver:

After coordinating with relevant departments, it is now known that before 24:00 on March 28, the driver of the truck can pass by presenting the current task and the negative nucleic acid report within 48 hours with the “Shanghai Port EIR APP”. However, some on-site execution may be delayed, please actively cooperate with the truck driver and fully understand.

  • The pick-up points and return yards around Yangshan Port Area and Waigangqiao Port Area are partially open and will be closed on the evening of March 28.
  • All the warehouses in Pudong New Area are open for operation all day today, arranging packing and entering the port. The operation of picking up and returning empty containers shall be carried out quickly according to the current actual situation during the emergency confirmation with each Pudong yard.
  • Yangshan Port Area and Waigaoqiao Port Area will work all day and will not be closed.
  • The drivers of each team have successively received phone calls from their neighborhood committees that they will all return to their residences for nucleic acid testing after work is over today.
  • Drivers who have left Shanghai to pack boxes will rest in place according to the instructions of each team, and will return to Shanghai after further notice from the team.
  • At present, I have received feedback from the driver who left Shanghai in the front, and they can enter and pack boxes in various places and abide by the epidemic prevention policies of various places. The driver’s door is sealed, and the driver cannot get out of the car.
  • The airport warehouse is currently receiving goods normally, and the airline cargo terminal is being closed one after another. We will wait for further notice.

Shanghai locks down as COVID surges in China’s financial hub

Excerpted from Reuters.com

SHANGHAI, March 28 (Reuters) – China’s financial hub of Shanghai launched a two-stage lockdown of its 26 million residents on Monday, closing bridges and tunnels and restricting highway traffic in a scramble to contain surging COVID-19 cases.

The snap lockdown, announced by the local government late on Sunday, will split China’s most populous city roughly along the Huangpu River for nine days to allow for “staggered” testing by healthcare workers in white hazmat suits.

It is the biggest COVID-related disruption to hit Shanghai, and sent prices of commodities including oil and copper lower on fears that any further curbs could hurt demand in China, the world’s second-largest economy. Read more.

ARE YOU PROPERLY INSURED?

Every Shipper Needs Cargo Insurance

Global trading involves risk; having marine cargo insurance minimizes your financial risk. However, having general insurance often does NOT cover cargo and transportation damages and loss. Have you purchased Marine Cargo Insurance?

Bills of lading terms and conditions usually impose the following limits on liability:

Ocean Carriers……………………………$500 per shipping unit (a shipping unit may be defined as one ocean container).

Air Carriers…………………………………$9.07 per pound

Truckers……………………………………$.50 per pound

The insurance we offer is competitively priced and insures approved merchandise against physical loss or damage from external causes. By purchasing cargo insurance, you can avoid inconvenience and frustration. Contact your BOC Representative at 617-345-0050 for your free quote.

Did you know:

  • Many carriers will not take responsibility for loss or damage if a warehouse signs off clean on a POD, so it is important, before signing off, to note the condition of the cargo. Claims are usually time-barred, unless filed within a few days (standards vary by carrier). So alert your carrier to possible damage immediately. The best way to do this is by signing the delivery receipt notating damage! And be specific, for example, 8 glasses broken, 10 boxes crushed (Make ensure that you have the correct boxes or pallet count).

Shippers who rely on suppliers to furnish cargo insurance or who rely on their carriers to take responsibility for losses may be in for a big surprise. Protecting your investments by insuring your goods provides peace of mind.

According to internationally accepted trade terms, referred to as Incoterms, suppliers selling CIF are responsible for arranging cargo insurance. But just because your supplier has the obligation to arrange insurance under CIF terms, it doesn’t mean that they are ultimately responsible if your product is lost or damaged during transit. The ultimate burden of loss falls upon you, the buyer. This is why many experts recommend importers change their buying terms to control the selection, and thereby the quality, of insurance coverage.

Foreign suppliers and their forwarding agents often tack on placement fees to the insurance costs. Those added fees often inflate the cost of insurance well beyond market pricing for the same coverage purchased in the United States. Find out how much you’re really paying and then compare quotes received from BOC International.

Importers relying on their suppliers to arrange insurance run the risk of having inadequate insurance coverage. Cargo insurance policies can vary widely in levels of coverage, deductibles and special restrictions. Ask your supplier for a complete copy of the insurance policy or for a certificate of insurance detailing all the policy terms and conditions

Importers are encouraged to make certain their suppliers use insurers with a favorable financial rating supplied by a respected financial rating service. BOC’s insurance company, underwriters at Lloyd’s of London, has an A.M. Best financial rating of A (Excellent).

Ask your supplier for a list of insurance claims adjusters contracted by the insurance company. Adjuster and surveyor networks approved by Lloyd’s of London and AIMA are among the most credible. BOC has a vested interest in your insurance needs and will directly handle cargo claim documentation requirements to ensure prompt processing and timely settlement.

General Average

  • Basic principle – that which has been sacrificed for the benefit of all shall be made good by the contribution of all.
  • Applies to maritime claims only.
  • Is declared by the captain when there is imminent danger to the vessel, voyage or crew.

You are contractually obligated, via the Bill of Lading, for unknown and undetermined costs. 

How does it work?

  • Value of the voyage is determined (vessel value plus value of all cargo on the vessel.)
  • Participation is determined by the percentage that the value of your cargo bears to the overall value of the voyage.
  • The loss amount is determined, and participation percentage is applied to the loss amount to determine security deposit.
  • Shipper or their cargo insurer pay twice – first for the initial contribution, then for a bond covering future adjustments to that estimate.

Are you familiar with GENERAL AVERAGE?

Ever Given, year built 2015, 199,692 dwt Date of Blockage: 3/23/21 Part loaded with 18,000 teu (capacity 20,000 teu.) Egypt alone believes it is owed at least $1 billion in compensation for the six-day shutdown and the cost of the refloat effort.Yantian Express, year built 2002, 100,003 dwt Date of loss: 1/3/19 Part loaded with 4,000 teu
(capacity 7,551 teu.) 198 total loss, 462 damaged required survey LOF salvage – security 32.5% GA – security estimate 28%
APL Vancouver, year built 2013, 115,060 dwt Date of loss: 1/31/19 Part loaded with
(capacity  9,200 teu.) 947 containers affected LOF salvage – security 15-20% GA – security
ER KOBE, year built 2001, 68,196 dwt Date of loss: 2/24/19 GA declaration on
March 12, 2019 NO SEPARATE
SALVAGE CLAIM GA – security estimate 10%  

There are a number of notable fire cases, with many resulting in General Average!

  • Ever Given – April 2021
  • Sincerity Ace – January 2019
  • Maersk Honam – March 2018
  • Maersk Kensington – March 2018
  • Hyundai Auto Banner – May 2018
  • MOL Prestige – February 2018
  • Caribbean Fantasy – June 2018

And most recently, the ZIM Kingston, in Fall 2021. Containers fell overboard, causing damage to the vessel in the process, and all cargo owners on board the vessel had to share in the costs, based on the value of their freight on board.

Hidden Costs

  • LCL Freight – Freight is not released until all payments received.

Difficulties of preventing and extinguishing fires on the open sea, include:

  • Ships are larger with more varied cargo.
  • Crew are ill equipped to deal with these fires.
  • Fire-fighting tugs are often days or weeks away.
  • Prevention is difficult, with rising problems with mis-declared cargo.
  • IMDG Code is evolving to impose stricter rules on dangerous goods (DG.)

Problems Facing the Industry

  • Stricter rules on DG will lead to higher costs and more incentive on the part of shippers to avoid proper declarations
  • Ship owners and shipbuilders need to improve fire-fighting capabilities with CO² systems being shown to be inadequate – cost benefit analysis
  • National Cargo Bureau in NY found in 2017 that of 1,721 stowage plans inspected, 20% showed errors with DG

General Average will never go away

  • Awareness across all business units that losses & delays are part of any supply chain. Mission-critical shipments need more risk analysis to determine transport mode.
  • Understanding of what to do when General Average occurs. This is best led by your cargo insurance provider meeting with your ‘team,’ not just the risk manager or CFO.
  • Have a contingency plan or at least an understanding of how the event will unfold.

MAKE SURE YOU ARE COVERED! Ask the questions. Do not assume.

Evergreen Containership Aground Near Baltimore

PUBLISHED MAR 14, 2022 4:08 PM BY THE MARITIME EXECUTIVE

One of Evergreen Marine’s large containerships, the 12,118 TEU Ever Forward grounded overnight on the Chesapeake Bay shortly after departing Baltimore, Maryland bound for Norfolk, Virginia. The U.S. Coast Guard Fifth District reports that the vessel remains aground while they are coordinating with the shipowner to refloat the vessel.

The 1,095 foot Ever Forward, built in 2020, departed Baltimore with AIS data showing it was traveling between 8 and 13 knots. The vessel was proceeding with a pilot aboard. The Coast Guard reports that it was informed around 9:00 p.m. March 13 that the vessel was aground off Gibson Island in the Craighill Channel. Local experts on the Chesapeake Bay are suggesting that the vessel is outside the channel possibly having missed a turn. Captain Matt Benehoff of the Annapolis School of Seamanship visited the site and in a video on social media highlights the channel markers. They are reporting that the low water in the area averages 24 feet and the vessel normally draws 42 feet. Pictures show the vessel heavily loaded.

Wednesday March 2, 2022 11:OOam – 11:45pm (PST)

Alternative Gateways as Options Amid Continuing Disruption

With continuing congestion affecting major US container gateways, many shippers have turned their attention to alternative ports such as Boston, Jaxport, Philadelphia,and others that are not experiencing vessel backups and excessive numbers of containers on the yard, impacting productivity and flow. But questions persist about smaller ports’ ability to provide the necessary end-to-end infrastructure to support supply chains such as truck and chassis capacity and proximity to distribution centers. Boston, for example, cites the dredging of Boston Harbor to 47 feet, building its new Berth 1O with 3,300 feet of linear berth space, and three new ship-to-shore cranes able to accommodate 14,000 TEU vessels. Jaxport this summer will complete a $484 million project to deepen its channel to 47 feet, and construction is underway on $200 million in berth and terminal improvements at the SSA Jacksonville Container Terminal at Blount lsland, while Ceres Terminals is investing an additional $15 million to modernize the port’s Dames Point facility. At Philadelphia, $1 billion in port-related infrastructure improvements is completed or underway,and truck turn times of under 50 minutes are typical for a dual move. In this TPM case study, representatives of the ports and customers will discuss how the ports can be seen as viable alternatives for shippers looking to diversify ports of entry.

Chair:

Michael Angell Associate Editor, Northeast and Gulf, JOC, Maritime & Trade, IHS Markit

Speakers:

Patrick Fay Co-founder , President BOC lnternational

Lauren Gleason Deputy Port Director, Business Development Massachusetts Port Authority

Debb Minskey Operations Developer IKEA

Robert Peek Director and General Manager, Business Development Jaxport

Sean Mahoney Director of Marketing PhilaPort

How Russian Invasion could influence rates and services of air, ocean and land transportation:

1. Increasing fuel/BAF costs

2. Higher Insurance War time surcharges

3. Sanctions on Russia will lead to more cyber attacks.

Cyber attacks will likely go after critical infrastructure and logistic service providers, ie, ocean shipping lines, air carriers, rails, ports, trucking companies, terminals, freight forwarders, NVO’s, etc.  If these critical infrastructures and service providers are disrupted, we could see crippling outcomes that will challenge supply chains.

4. Importers will likely try to continue to try to grow inventories to prepare for potential disruption. This pressure to increase inventory will keep the throttle on demand and high prices.

Please reach out to your BOC Representative to discuss options we have to help.

Søren Skou warns of new logistics chaos: “If it ends in strike, then it all shuts down”

A.P. Møller-Maersk watches a looming US labor conflict closely, which may worsen bottlenecks at the country’s key ports and stir up problems in the entire supply chain.

BY NIKLAS KRIGSLUND

(Excerpted from ShippingWatch.com)

Just as the world catches a glimpse of an end to the coronavirus pandemic’s logistical chaos, A.P. Møller-Maersk warns that a new challenge threatens to disrupt supply chains and keep freight rates high.

This summer, dock workers on the US west coast are up for a new labor agreement. If negotiations break down, it may result in new, serious bottlenecks that may exceed the problems which culminated towards the end of 2021.

“There is no doubt that it’s not going to be easy negotiations, and a lot is at stake,” says A.P. Møller-Maersk CEO Søren Skou, furthermore pointing out that the agreement covers all ports on the west coast.

“If it ends in strike, then it all shuts down,” predicts the top exec of the Danish group, which operates the largest terminal in Los Angeles through its port company, APM Terminals.

Bottlenecks at the two key ports Long Beach and Los Angeles are the paramount reason why it’s still very expensive and difficult to buy freight space onboard container vessels.

Therefore, the consequences of a labor conflict and new traffic congestions will quickly spread to the entire supply chain and ultimately affect Danish companies and their customers.

“When ships can’t unload in the US, then they can’t go back to China to be refilled. That will extend the delivery time and increase prices. That goes for Danish companies and customers as well,” says Nordea Group Chief Economist Helge J. Pedersen.

“A continuation of high transportation prices will also increase the pressure from inflation and limit the world economy upswing,” he adds.

Interest group the Confederation of Danish Industry (DI) also keeps an eye on the situation on the US west coast. General manager of DI’s US office Louis Funder assesses that a conflict will first and foremost affect the many Danish companies dependent on bringing goods in and out of the country.

“It will typically be production companies, which gather their goods in the US before sending them out to their US customers. I’ve also spoken to a large Danish wine importer, who has had difficulties bringing wine out of the country. So actually, it goes both ways when there are problems,” says Funder. Right now, 56 ships able to accommodate 450,000 containers are waiting outside Long Beach and Los Angeles.

When congestion was at its worst shortly before Christmas, 85 vessels were queued up, according to figures by analyst firm VesselsValue.

A strike will put even further pressure on the ports, which are already short on dock workers, truck drivers and storage space to handle the significant increase in US purchasing of Chinese goods during the pandemic.

“Therefore, any protracted strike action could conceivably cause queue numbers to spike even higher than the previous peak,” states Vivek Srivastava, senior trade analyst at VesselsValue.

It is dock workers’ union the International Longshore and Warehouse Union (ILWU) and major carriers and port companies’ organization the Pacific Maritime Association (PMA) that are negotiating a deal.

The current labor agreement was extended last year and expires in July. It applies to 29 ports and covers wages and work conditions, among other things. The biggest issue, however, is expected to be the automation of ports, which the workers are fundamentally skeptical towards.

In November 2021, PMA tried to renew the current deal for another year in order to avoid a conflict at a time when supply chains are highly vulnerable, but the attempt was rejected by the workers.

They feel that they ought to be rewarded for their effort during the pandemic during which they have struggled as never before and fought Covid contamination, while carriers such as Maersk have reeled in historic amounts of money.

In an editorial in the latest issue of ILWU’s member magazine, The Dispatcher, fronts are drawn up sharply.

“It’s time to decide which side we’re on: That of the foreign shipping companies that are profiteering from the pandemic, or that of US farmers, manufacturers, dockworkers and truckers who deserve to earn a family wage,” writes ILWU Coast Committeeman Frank Ponce De Leon.

A.P. Møller-Maersk operates the largest container terminal in Los Angeles and has been hit by protests before. In 2012, the administrative staff were unhappy because they felt that their work was being increasingly outsourced.

Previous negotiations also show that it usually has been extremely difficult to reach an agreement, and that political interference is often needed in order to land a deal and avoid ports halting operations.

In 2002, employers started a lockout lasting for ten days. And in 2014-2015, work progressed at a very slow pace for four months, while negotiations took place. Both times, the governments at the time under, respectively, George W. Bush and Barack Obama had to step in for the situation to be solved.

The current negotiations will begin properly in April and will be followed closely this time again by the US president, in this case Joe Biden, who has a major focus on putting the rogue inflation to a halt, which, according to major bank UBS, can be traced back to freight prices to a certain extent.

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