How Port Congestion and Port Fees Affect You
No one likes port congestion. It causes supply chain delays and missed deadlines, but, worst of all, port congestion can lead to additional ocean carrier and drayage carrier fees.
Ocean carriers refer to the vessel and vessel operators physically transporting goods between international ports. The next step in the supply chain are drayage carriers, which transport goods from ports to their destination. Drayage often refers to trucking and short distances known as “the first mile” on an export or “the last mile” on an import. Unfortunately, both ocean carriers and drayage carriers charge extra fees for delays, wait times, and more.
The federal government is looking to help alleviate the pressure of some of these charges with the passage of the Ocean Shipping Reform Act of 2022 (OSRA 2022). This bipartisan law is designed to help American importers and exporters, especially agricultural exporters, save on costs. The Ocean Shipping Reform Act of 2022 applies to ocean carrier fees, so it is important to understand the distinction between ocean carrier and drayage carrier fees.
Charges from the Ocean Carrier
There are several key terms to know when discussing charges and fees from an ocean carrier.
Per diem, also known as detention, is the fee from an ocean carrier for each day past the number of “free” days a container can be away from port. Ocean carriers charge per diem/detention fees as an incentive for customers to return their shipping containers as quickly as possible, so the containers can be used again.
The reverse of detention is demurrage. This refers to the fee assessed by the terminal if your cargo remains at port past the Last Free Day.
The Last Free Day is the last day of a predetermined period of free storage time in which the goods can be picked up by a drayage carrier before incurring a demurrage fee. Free days depend on your contract and type of drayage carrier (rail, truck, or air), but are typically 2-3 days.
Charges from the Drayage Carrier
Likewise, here are a few definitions to be aware of when looking over drayage carrier fees.
A pre-pull is when a container is picked up from the port and stored at a different location, instead of being delivered immediately. Pre-pulls are used when free days at the port will run out. They are less expensive than costly demurrage fees.
Wait time is an hourly charge, also known as a trucking wait fee, for each hour it takes to the full container to be updated or unloaded on the truck. Most trucking companies and drivers will allow a small amount of free wait time before charging for additional time.
As you can see by now, a seamless workflow between ocean carriers and drayage carriers is key to keeping costs down. That’s where a managed transportation expert like SiShips can make a huge difference on your bottom line.
Another common set of fees assessed by drayage carriers have to do with the chassis. Chassis are the specialized trailers that are used by trucks to transport ocean containers on the road. Drayage carriers charge a rental fee for these chassis, and an additional fee known as a chassis split, if the truck driver must go to an extra location to pick up a chassis before arriving to pick up the container from the port.
How the Ocean Shipping Reform Act of 2022 Can Help You
Ocean carrier and drayage charges are linked and have a large effect on each other. However, they are separate fees from separate entities and, while logistically they affect each other, the charges are not related.
President Biden signed OSRA 2022 into law on June 16, 2022. This law created new oversight for the Federal Maritime Commission to address unfair charges and unreasonable denial of American exports. In short, OSRA 2022 was made to combat detention and demurrage charges incurred due to port congestion and shipping uncertainty. Additionally, California Gavin Newsom signed AB 2406 into law on September 30, 2022. AB 2406 will go into effect on January 1, 2023. This law will prevent detention and demurrage fees due to circumstances beyond the control of drayage carriers. Reactions to the California law are mixed. Truckers and cargo owners are pleased with the law, but the terminals are concerned about loopholes in the nuance of the law.
However, it is clear that federal and state level governments are taking upheaval in the shipping industry seriously and are looking for both short and long term solutions.
How SiShips Gives You the Advantage
Sheltered International combines expertise with state of the art software to bring you quality domestic and international shipping solutions. SiShips puts the shipper in control, offering efficient and cost effective ways to ship your product.
To learn more about managed transportation with SiShips, or to view a demo of our software, contact us today.