Shipping companies have declared “force majeure” over the Port of Baltimore bridge crisis, telling US logistics companies and shipping companies including retailers that once goods are dropped off at alternative ports, it is their responsibility to pick them up.
In an alert to customers on Tuesday, CMA CGM wrote, “Those (containers) on the water will be unloaded at an alternate port where they will be available for pickup, and CMA CGM’s bill of lading will be terminated.”
It was the first trans-oceanic airline to declare force majeure – a clause in a contract that releases parties from obligation due to events beyond their control.
COSCO announced on Wednesday morning that its services “will end” once the transferred container arrives at the alternative port. Evergreen announced the same action.
In return, Maersk provides transportation. Instead, Maersk said in an alert to clients. Although it should be noted that the situation remains fluid. “We are still working through various emergencies with our customers and will continue to provide specific and general guidance to customers as the matter progresses,” she said.
Shipping companies Hapag Lloyd and MSC did not respond to requests for comment on their plans.
Logistics executives tell CNBC the next 36 hours will be crucial in trade traffic diverted away from the Port of Baltimore after the fatal accident involving the 10,000-teu container ship Daly that collided with the Francis Scott Key Bridge in the early hours of Tuesday.
According to ImportGenius, the Dali ship unloaded cargo on March 24 that included clothing and household goods that could be on board the converted ships, and also ranged from about 80 containers of Satsuma mandarin oranges, about 74 containers of IKEA products and furniture to 104 containers of Electrolux products. Including chest freezers, air conditioners, and microwaves.
The Port of Baltimore is also No. 1 in the United States for imports and exports of cars/light trucks and farm tractors.
The supply chains of major shingle importers, including Lumin Forest Products, Sudati and Arauco, rely heavily on Baltimore.
“The impact of the Port of Baltimore shutdown on construction and contractor supply chains could be significant,” said William George, research director at ImportGenius.
One problem, according to logistics managers, is that shipping companies are not updating their ship transits quickly enough to alert them to the new diverted port so they can plan to pick up their customers' containers.
Paul Brashear, vice president of transportation and intermodal at ITS Logistics, tells CNBC she's been getting calls from customers asking where their containers are going. “They are concerned that containers will be charged demurrage fees [detention and demurrage] “If they don't get their containers out of the terminals as soon as possible.”
The urgency to pick up diverted containers increased with shipping companies declaring “force majeure” on containers bound for Baltimore as soon as the boxes arrived at the diverted port, and companies that imported their products needed to find a means of transportation to move the goods before the container was delayed. Fees are charged.
“The biggest thing we're seeing from our data integration with ocean carriers is that we haven't seen the port of discharge modernize yet,” Brashear said, citing ITS Logistics' ContainerAI platform. “So what we do now is we will have to manage the logistics of the containers through the data that the terminals give us. But that means we are alerted when the container actually arrives, versus planning while the container is still on its way to a port.”
Once the container arrives at the terminal, the clock starts ticking on the free time allotted to the container. Once this free time expires, the detention fees and late fines begin.
“We are looking to see if the terminals will grant an extension of free time or waive the fee,” Brashear said. “That's the problem now.”
Track containers transferred from Baltimore
To help overcome supply chain slowdowns during crises and disruptions, the U.S. Department of Transportation created a private/public digital supply chain monitoring platform called Freight Logistics Optimizations Works (FLOW). It was created two years ago and has since expanded to include more than 70 participating platforms, with an additional 60 companies waiting to join.
FLOW has partnered with retailers including Home Depot, Nike, Walmart, and Target; Railroad · Union Pacific · and BNSF; and logistics service providers CH Robinson, DHL and FedEx. Aggregating data from these engagements provides a platform from which to analyze real-time data on port congestion and inland networks and can monitor unexpected cargo shifts caused by global events, such as the incident at the Port of Baltimore.
Officials from the Department of Transportation's Office of Intermodal Freight told CNBC that they have heard from FLOW carriers and shipper members and are evaluating near- and medium-term options for diverting their cargo given the collapse of the Francis Scott Key Bridge.
“Because FLOW helps us see real, forward-looking data on 15-, 30-, 45- and 60-day ocean bookings, participating in this data sharing program means we can begin to see industry-wide where these rebookings are gravitating,” Matt said. Castle, vice president of global shipping at CH Robinson, adding that all ocean bookings in and out of Baltimore will have to be rescheduled until the port is operational again. “Before we send our customers’ shipments to those ports, it should be helpful in ensuring that they have enough equipment, have enough appointments and are working accordingly,” he said.
While the FLOW program has expanded significantly over the past two years, not all East Coast ports are in the database. Among the converted ports, New York/New Jersey and Savannah are included.
“But this is the beginning,” Castle said.
Rail and truck service concerns
C. H. Robinson expects rail service to Baltimore to return later this week, but Castle added that “ocean containers bound for the port, primarily from Chicago, will pile up and will not be able to move out for export.”
Val Noel, chief operating officer of TRAC Intermodal, the largest provider of marine structures and pool manager and member of FLOW, tells CNBC that boxes headed east out of Chicago, either export loads or empty revenue, will be held for a while at rail stations in Chicago.
Officials from the Department of Transportation's Bureau of Intermodal Freight told CNBC that FLOW has not yet taken possession of export cargo. However, available booking data will enable participants to see changes in trends regarding truck bookings versus rail bookings coming into affected major ports receiving diverted trade.
One of the biggest concerns among logistics companies is the availability of chassis for both trucks and rail to handle transferred goods. The ports of Savannah, Brunswick, Virginia, Charleston and New York/New Jersey are expected to receive the diverted shipments, logistics managers told CNBC. The ports told CNBC they can receive the additional cargo, but logistics managers are concerned about the availability of the structure to receive the additional cargo.
“For our company, we have plenty of supplies in Philadelphia and New York/New Jersey to handle any diverted shipment,” said Val Noel, COO of TRAC Intermodal, the largest marine structure provider and pool manager and member of FLOW. “We don't supply the chassis in Norfolk or Charleston, and those are the chassis docks in the port.”
“If cargo is diverted, it should also go to New York and Norfolk, and we should be able to serve the ports of Wilmington, Savannah and Jacksonville,” said Mike Wilson, CEO of Consolidated Chassis Management (CCM), the sole manager and chassis provider for SACP 3.0.
“Once the Steamship Line (SSL) finalizes the diversion plan to clear the import volume, the SSL will reroute the outgoing crates located in Chicago to allow the outgoing vessel to be fully photographed. Although there may be an initial delay, the supply chain should : “We should be able to focus on the switched gateways and reduce any major congestion issues.”
Alan Baer, CEO of OL USA, told CNBC that he has containers on Dali.
“We have goods destined for the United Arab Emirates, Saudi Arabia, Doha, India and Bangladesh,” Bayer said. “For our US customers, our imports are being diverted to New York/New Jersey and Virginia (Norfolk), and goods destined for the Midwest were originally going to Norfolk. We believe our Midwest exports will be sent to New York and Norfolk as well, in addition to Montreal.”
Stephen Edwards, CEO of the Port of Virginia, said his operating team is already working with ocean carriers whose ships were scheduled to call in Baltimore and provide the capacity to unload cargo on demand. “The Port of Virginia has a great deal of experience handling significant increases in import and export shipments, and stands ready to provide any assistance we can to the team at the Port of Baltimore,” Edwards said.
