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Are you a Trans-Pacific Shipper?
As carrier contracts come up, Trans-Pacific Carriers have plans that may include reducing contract free time in 2021-2022. Carriers that are successful in reducing free time for equipment may force many shippers to either accept higher per diem charges or take potentially difficult steps to adjust warehouse operations to enable an unload and return of containers to carriers more quickly. Last year, many U.S. importers, often due to pandemic-impacted warehouse productivity, experienced widespread equipment shortages and now ocean carriers may specifically take aim at reducing contracted free time. Rates are anticipated to go up and shippers will be forced to address operational issues, such as turning containers, or they will risk the rising cost beyond the base rate and anticipated cost increases.
In previous years, carriers were compelled to agree to shipper’s requests to provide additional free time, extend credit terms, provide chassis, and make legal exceptions to retain customers. In today’s market, it appears carriers can regain ground in these areas, and many may only compromise with the more influential shippers. A Carrier Executive made a recent statement, “The balance is coming back in a way where it’s not just one-sided negotiations.” Beginning last year, carriers started to rein in credit, free time, and various aspects that were generous terms in the market.
If free time is excluded in contracts, it will result in a strained drayage market and may create an impact on the receiver’s facility. Less or no free time will impact drayage operations, as the quicker turning of containers would limit drayage drivers’ ability to handle two-way moves that are essential to trucker efficiency, which could increase truckers’ costs that may be passed on to Importers.
Peter Tirschwell states, “The focus on free time is part of a larger effort by carriers to reset expectations of shippers, who for much of the past decade enjoyed the benefits of systemic vessel overcapacity and carrier’s willingness to be competitive on contract terms to obtain shippers’ business. Carriers have signaled to U.S. Exporters, for example, not to expect free repositioning of empties to remote export origin locations.”
The bottom line for some shippers is that this will mean nothing if they manage within their free time. It rests with how effective the shipper can manage warehouse and intermodal business to return equipment to the carrier within allotted time restraints.
Please contact your Western Overseas representative if you have any further questions.
