The ongoing trade war between Washington and Beijing, including decoupling tariff rates and USTR 301 increases in port fees and charges, is causing uncertainty and delaying the signing of annual service contracts between ocean carriers and importers, primarily in the eastbound trans-Pacific trade.
When will we see a reduction in the tariffs with China? As Yogi Berra once said, “I wish I had an answer to that because I’m tired of answering that question.”
The carrier contract process has historically involved three stages:
Stage 1. Carriers negotiate with big box retailers (those shipping hundreds of thousands of containers) first. This usually concludes around the end of March or early April. This then sets a floor for negotiations and space allocations with carriers.
Stage 2. Carriers negotiate with Shippers Associations who represent beneficial cargo owners, and other large beneficial cargo owners in April, and these usually conclude in late April.
Stage 3. Carriers negotiate with Non-Vessel Operating Common Carriers in May, and contracts are then signed in May.
The very large shippers have not yet signed. Currently, the timeline for signing contracts with all other participants has been pushed back by at least two weeks, and each additional week of delay could extend this further.
Our team has been working to ensure all the draft contracts have been reviewed and should be ready for signing when the logjam breaks on the large shipper/carrier negotiations.
We hope that all parties to the supply chain will gain clarity on the tariff rates soon so the carriers can quickly finalize our contracts and move quickly to get your products on the water. We know when that occurs, carriers will have to reactivate laid up vessels and move them back in service for the increased demand from shippers to replenish their supply chains.
Our Team will keep you informed as we all move together through uncharted waters.
Craig Akers
Executive Director
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