The Forwarder Online Magazine

The Perils of Congestion: New Surcharges Add to Port of Montreal Woes

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Closely following an announcement February 5 that Maersk will introduce a Congestion Fee Destination (CFD) for all cargo discharging at Montreal, CA, effective February 8 for non-regulated countries and March 6 for regulated countries, CIFFA received a February 8th notice originating from OOCL that as of February 15, 2019, a Port Congestion Surcharge (PCS) will apply for all westbound containers (Dry & Reefer) destined to or via the port of Montreal.

This “in view of the ongoing disruption to maritime traffic in the St Lawrence River resulting in congestion at the port of Montreal and incremental schedule delays over and above the seasonal norm”, the notice said.

Our first, instinctive response was to draft an eBulletin, haranguing the carriers and crying shame that carriers ‘automatically’ pass their problems onto the cargo.  However, after some sober second thought and a lengthy conversation with a senior marine carrier executive, we have tempered our response somewhat.

That said, the congestion surcharges, and the manner in which they were communicated, do raise several points of concern.

Reasonable Notice

Whatever happened to reasonable notice? How can forwarders (or other cargo interests) make routing decisions/carrier selection based on three days’ notice… or even seven days’ notice of a surcharge?  And what is the effective date? In the OOCL notice, there was no indication of ‘where’ the PCS becomes effective. In the Maersk notice at least, the effective place/ date is ‘cargo receipt’…. So, three days’ notice from February 5th to February 8th. In all likelihood, the cargo has been quoted and booked days or weeks before the surcharge was announced and in many cases the cargo will be en route to the port of origin/ place of receipt. It is unconscionable that carriers give such little notice of a surcharge – to non-regulated countries.

Transparency

And, as usual, there is no transparency in how carriers arrived at these surcharges. What was the trigger for the surcharge? Why now and why these amounts? The notices have no explanatory notes or contextual information and so one automatically jumps to the conclusion that carriers are simply taking advantage of an opportunity to add to the woes and costs of the cargo interest – by arbitrarily implementing a surcharge.

Of course, on reflection, one should naturally come to the conclusion that no carrier would want to introduce a congestion surcharge – because there isn’t a customer in the world who would want to pay it.  We have been assured that at least one carrier has conducted in-depth analysis of its additional costs and took the only step available to it to recover some of those costs., issuing the surcharge, even knowing that customers would be upset.

How hard would it have been for the carriers to share these rationalizations with their customers, to explain the costs of lying at anchor in the Saint Lawrence waiting to dock, of additional fuel spend on fast steaming to try and catch up to schedules, costs of lost opportunity and all of the other costs that are associated with congestion delays?

And, just as we don’t know how the surcharges were triggered, we don’t know what will trigger the removal of the surcharges.

Carriers Contribute to Congestion

All of that aside, it is imperative that steps be taken to reduce the congestion and get the Port of Montreal back to its historic, high levels of service.

Lack of schedule integrity among some liner players, partly due to weather in the North Atlantic and winter in Canada, is one big contributor. (What a surprise). As the Port of Montreal’s Vice President, Growth and Development, Tony Boemi, pointed out so succinctly at this year’s Cargo Logistics Show in Vancouver February 7, the issue is not the size of the ships, it’s the infrastructure needed to handle them. Lack of schedule integrity causes a lot of problems. To a large extent, he pointed out, things have evolved to a model of ships “arriving at the port when they arrive”, with the expectation that when they arrive at the port, everyone will be ready to handle them.

At the end of the day, carriers arrive on schedule or they don’t. If they don’t arrive on schedule, the terminal operators – who are hired by and paid by the carriers – may not be able to work a vessel because labour is working a vessel that did arrive on schedule. If four liner services are scheduled to call at the port and three have good schedule integrity and even one has poor on time performance, all of the carriers suffer. Perhaps the Port of Montreal should begin to penalize those carriers who fail to adhere to their agreed schedule – by not working those vessels until resources are available or by assessing penalty costs to those carriers.

In 2018 the Port of Montreal saw its 5th year of record growth on the container side, with volumes up over 9% year over year. Boemi said the port is taking a technology and innovation focus, working toward the use of more predictive analytics, and a truck app sending alerts to truckers on wait times. But, Boemi stressed, “I can have the most efficient port in the world, but if I can’t get my cargo in or out I’m no further ahead.”

Putting everything together – increased volume at the port, vessels fully loaded, lack of carrier schedule integrity, winter weather, labour issues, it is galling that carriers feel compelled to introduce a surcharge that penalizes the cargo interests …. when that cargo interest is already paying dearly for delays and congestion.   Insult added to injury as the saying goes.