By John Gallagher, of Freight Waves,
Brokers booking freight on behalf of their customers say they have no choice but to pass through charges assessed by ocean carriers — charges that some shippers claim are unjustified.
That was one of the main takeaways from the only three public comments filed in response to an Advanced Notice of Proposed Rulemaking issued by the Federal Maritime Commission (FMC) in April.
The National Customs Brokers and Forwarders Association of America (NCBFAA), the New York New Jersey Foreign Freight Forwarders & Brokers Association (NYNJ/FFF&BA), and the Association of Food Industries (AFI) weighed in on an issue that has been one of the biggest criticisms of U.S. exporters since the start of the pandemic: unfair rates and deteriorating service from ocean carriers.
Caught in the middle
The two broker associations responding to the FMC’s petition represent non-vessel-operating common carriers (NVOCCs) that broker freight on behalf of the asset-based ocean carriers. They assert that they are at the mercy of the same rapidly swinging surcharges and fees that are affecting shippers — and that the FMC should uphold brokers’ ability to pass those charges through.
“In the current market environment, NVOCCs typically pass on charges at cost because they are faced with the near-impossible task of attempting to include in their freight rates an almost infinite variety of additional fees and charges — the assessment of which they cannot reliably predict and over which they have no control,” according to the NCBFAA. “Many of these additional charges and fees are established with little or no notice and/or are constantly changing.”
Middletown, New Jersey-based NYNJ/FFF&BA said its members need the flexibility to charge these “out of control” pass-through rates without having to use exact terms for each charge because they differ among carriers.
“Shipper customers need their cargo to move or risk stopping production or losing sales,” the group stated. “As a result, they have accepted increased costs and the risk of additional charges outside the control of the NVOCC. Regulations currently require a pass-through charge to be specifically named. An NVOCC should not be obligated to use a precise term that may be unknowable at the time of the quote to the shipper. A general description of a charge that would be passed through at cost should be sufficient for shipper acceptance.”
Effect on shippers
NCBFAA said restricting the ability of brokers to pass through charges could force them to increase their own rates. “Faced with incurring substantial and unpredictable costs over which they have no control but cannot efficiently pass through to their customers, NVOCCs would have little recourse but to substantially increase their rates and charges to shippers in an attempt to ensure that their tariff charges are sufficient to recover charges, surcharges and fees imposed by carriers, terminals, governmental agencies and other parties,” the group warned.
“Doing so would be an inefficient cost recovery mechanism that would likely lead to higher overall shipping costs to shippers than currently available based on the use of pass-through charges.”
AFI President Bob Bauer, who represents U.S. food importers and exporters, said his members are facing rates from carriers that are two to three times what they were a year ago, along with “a host” of added charges, significant delays, and no guarantee that their cargo will be loaded onto its scheduled vessel.
“While we understand steamship lines weren’t immune to cost increases due to the pandemic, the record profits they’re reporting bely justification for such drastic increases and added pass-through fees,” Bauer wrote.
“There’s also a need — with help from Congress and government agencies within and outside the U.S. — to limit carriers’ ability to levy charges,” he added. “The entire ocean carrier/port operations/logistics puzzle needs to be reviewed.” The National Industrial Transportation League has called on Congress to require that the FMC initiate such a review to potentially give the agency more oversight of carrier-shipper transportation contracts.
Consumers to share the pain?
The ultimate victim of these pass-through charges could be the consumer, AFI cautions, and not just in the food sector.
“While businesses did their best initially to absorb the increased costs, they can’t continue to do that and survive. Prices of many often-cited items (gasoline, lumber, automobiles, etc.) have increased over the past several months and without some relief in the shipping arena, similar price increases will be seen across the board.”
An FMC spokesman said the agency would not comment on the points raised in the proposal. “Comments that were filed will be reviewed and considered to determine whether the Commission will proceed with a proposed rulemaking,” he said.