Carrier Surcharges Shouldn't Be Used for Profit, Retail Industry Official Tells Congress
Members of the National Retail Federation are seeing a rise in freight rates and ocean carrier transportation costs and want to make sure that those new fees and surcharges "actually cover real costs and are not intended for profit," Jonathan Gold, NRF vice president of supply chain and customs policy, told Congress this week.
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Many of the surcharges and high rates have been caused by Houthi rebel attacks on commercial ships in the Red Sea, Gold said in written testimony before a House Transportation Committee hearing Jan. 30. He said during the hearing that the NRF doesn't have an estimate on the cost to the global supply chain if the Red Sea route becomes no longer viable for shipping, and that's because there are "many variables" that could impact that estimate.
But the NRF believes some of the costs are being pushed onto "small and medium-sized enterprises" that don't have the ability to negotiate to "push those costs off," Gold said.
He also noted that high rates are appearing on other routes, including between Europe and the U.S., because of "equipment availability" issues. The NRF is concerned that continued disruption could lead to port congestion as cargo shifts to the U.S. West Coast (see 2401180050), Gold said, adding that the trade community needs to make sure "our ports, terminals, railroads, drayage providers and warehouses are ready for the increased volumes."
NRF members also are concerned about the impact of long-term disruption on their next ocean freight contract, Gold said; the new cycle for contract negotiations is beginning and the NRF hopes not to see significant cost increases similar to what it saw during the COVID-19 pandemic.
The NRF is already hearing that "rail dwell times" are starting to rise and that there are challenges making terminal appointments, Gold said. "Efforts need to be made now to convene the right stakeholders to plan accordingly to address these issues to ensure we don’t see a significant congestion challenge in the coming weeks," Gold said. This congestion could begin "within the next 4-6 weeks" after the Chinese Lunar Year.
Another challenge NRF members have been dealing with is vessels and equipment being out of position due to the longer transit times, Gold said. This could impact "empty container availability" overseas, he said (see 2401180050).
Gold also pointed to additional disruptions, including the ongoing issues with low water levels at the Panama Canal and labor negotiations at the East Coast and Gulf Coast ports are also escalating shipping disruptions.
The House Transportation and Infrastructure Committee hearing was focused on threats to shipping as a result of the attacks on ships in the Red Sea (see 2312200045). The Federal Maritime Commission already has approved a request to add a Rea Sea surcharge earlier than the 30 days' notice required by law (see 2401290052). Consider changing to: (The Federal Maritime Commission has already approved several requests by carriers to immediately begin imposing emergency Rea Sea surcharges (see 2401290052, 2401110024 and 2401050066).