Carriers operating in the transpacific lanes are sifting through thousands of service contracts to find those with clauses allowing them to automatically impose rate hikes.
Carriers operating in the transpacific lanes are sifting through thousands of service contracts to find those with clauses allowing them to automatically impose rate hikes or force shippers to go back to the bargaining table.
The 14 member Transpacific Stabilization Agreement last week said it wanted to reopen annual Asia-North America contracts and impose $500 per feu increases across the board.
The contracts" clauses vary, with some ruling out any rate increases. But many can be reopened, according to shippers and the executive director of the carriers" discussion group.
New talks are triggered if carriers file general rate increases and carriers have already filed tariffs hikes at the US Federal Maritime Commission.
Their customers, however, are in no hurry to concede higher payments.
?I can"t get excited about it,? said US Shippers Association project director John Chinn. ?We have talked about this extensively with our members and the clear feeling is that rate increases are going to be turned down.?
Although shippers have sympathy for the carriers, both sides are struggling. Mr Chin said logistics managers were unlikely to suggest to upper management that they increase their costs in such an environment.
Food Shippers" Association of North America administrator Bob Weiss said most contracts he had seen contain boilerplate language that triggers new talks following a general rate increase filing by a carrier.
?Almost all of them have a clause that says if the two parties don"t mutually agree to the increase the contract is terminated on 10 days notice.?
That means that shippers can either agree to the increase or look around for another carrier. Mr Weiss said he expected his members to take the second route and look for a carrier that does not insist on such a large increase.
?I"ve watched carriers try to overcome supply and demand for many years and I"ve never seen it work, ever. Two or three years ago the carriers started taking smaller increases, like $50 a container. When they try for a big one, they get nothing. That"s my observation.?
The carriers have not been in a rush to restart talks. Mr Chinn said he had heard from just one carrier about an increase ?and it was rejected?.
Summit Logistics International vice president Belle Morales said she had not yet been approached by any of the 14 carriers with contracts with the freight forwarder.
?Because we haven"t been approached by the carriers, we don"t know what to say to our customers yet,? she said.
Shippers are enjoying incredibly good rates, she said, and even a $500 per feu increase would leave rates significantly below levels 12 months ago.
Nevertheless, the situation was frightening because carriers might apply the increases unevenly, she said.
?If they decide to single out the beneficial cargo owners and not force them to take increases, it could cost freight forwarders a lot of business.?
TSA executive administrator Brian Conrad said that would not happen.
?The carriers are very aware that the approach they take has to be across the board. They are not targeting any type of customer.?
Ms Morales said there was one scenario in which shippers would agree to increases.
?Believe it or not, we"ve had cargo off-loaded in the last few weeks. If capacity gets really tight, the shippers are going to have to eat the increases if they want the cargo moved.?
Representatives for two carriers said their companies were still working out details of how they would handle the proposed increases and what message they would give to customers. Mr Conrad said that did not signal that carriers were rethinking the idea of the rate increases.
?This was not a pricing level discussion, but one taken to the chief executive level,? Mr Conrad said. ?We had a conference call with carriers and I think what carriers are doing now is figuring out the mechanism of how to get it done and the content of each contract.?