Congestion and import delays are frustrating importers. Photo / Michael Craig
New Zealand importers, already struggling with a shortage of cargo capacity and steep rises in freight rates, are increasingly footing bills for a local glut of empty shipping containers.
Industry players warn that the new costs will flow through to consumers through higher prices for imported goods, and say the problem is so intractable that the government should intervene.
A global snarl of container shipping, the local epicentre of which is Ports of Auckland, has resulted in container depots that are full, and sometimes overflowing with empty containers.
The problem for importers and their agents is that they are contractually obliged to return emptied containers to these nominated yards to avoid incurring "detention charges" by the global shipping lines that own (or lease) them.
Access to the yards to "dehire" containers is now so limited that the freight handlers who act for importers often cannot return them on time.
Chris Edwards is chair of the Customs Brokers and Freight Forwarders Federation (CBAFF) and managing director of GO Logistics.
"If you couldn't return your rental car because the rental car's offices were shut, you wouldn't expect to keep paying charges. But that's essentially what we're facing," he said.
Detention fees are charged, in the first instance, to freight handlers and shipping agents.
The agents' contracts typically specify that their importer clients are liable, but passing on the extra cost has become the source of considerable friction.
Edwards said he is currently disputing charges with two shipping lines, which he declined to name. This week he lodged one complaint with the District Court disputes tribunal, he said. And he is still contesting a second bill for over $20,000.
Other freight handlers are passing the costs on.
This month agent and freight handler Oceanbridge emailed a letter to customers warning them that "container detention invoices are now appearing and are liable by the importer".
"Once containers are devanned by importers, they go to an Empty Container Depot for repair/re-use," the letter read.
"Because incoming ships are not able to load these empty containers due to limited time in port the empty stocks have been building to the point where all depots in Auckland are now full to overflowing ... Each container needs a truck booking to get into [an] Empty Container Depot and as the depots have filled these bookings are being reduced.
"We have also had situations where our trucks have turned up at the depot with a legitimate booking only to be turned away as there is no space."
Importers typically have seven days of "free time" once containers arrive in New Zealand to unload and return them. Thereafter, charges apply.
In some cases importers pay to relocate empties to less affected ports (the problem is centred in Auckland, the entry point for the largest volume of imports to the country). But the cost is considerable and truck and rail capacity is often deficient.
Detention tariffs posted on shipping company ANL's website (ANL is owned by the French CMA CGM Group) cite a detention tariff of $80 per day for the first seven days for which a standard 20 foot container is overdue. The cost rises to $110 per day for the subsequent seven days.
Thereafter, the cost increases to $140 per day. The rates are 50 per cent higher for 40 ft containers. And higher again for specialised containers like those with refrigeration.
Making changes
The Ministry of Transport had scheduled an industry-wide meeting of shipping representatives and transport and logistics players this week to consider a wide range of industry problems and possible solutions. However, it was postponed because of Auckland's move to Covid Alert Level 3.
CBAFF executive director Rosemarie Dawson said more action is needed. "We need active government support to get communication with shipping line principals in head offices overseas. We are not getting results talking to the local New Zealand managers, though we are continuing to talk to them."
Industry insiders said Geneva-based MSC and Danish Maersk have been the most difficult lines with which to negotiate charges. Neither company responded to Herald request for comment.
In the United States, marine regulator the Federal Maritime Commission is set to publish the results of an investigation into "potentially unreasonable practices" by shipping lines. Edwards said he hopes the findings could improve systems worldwide.
He also acknowledged another bright spot. Shipping lines have undertaken to bring in — at their cost — two empty "sweeper vessels" to help clear containers. The first ship is due in Auckland at the end of the month.
The other side of the empty container glut is a corresponding container shortage elsewhere in the world, particularly in export centres like China.
The knock-on effects are both higher freight costs and long wait times to get goods offshore. The result has been the delayed arrival of supplies, and higher prices in some cases, across New Zealand and around the world.
A backlog of container ships waiting to berth in Auckland has also resulted in hefty "peak season" and "congestion" charges to importers.
The backdrop
Auckland's problem of empty shipping containers is unfolding against a backdrop of worldwide logistics problems for cargo transport.
The container shipping industry, and the system of transport logistics that supports it, is the mainstay of the world goods trade.
Last year it suffered a shocking whiplash. In the early part of the Covid-19 pandemic, shipping lines heavily reduced sailings in response to a sudden drop in demand.
However, a subsequent boom in e-commerce drove a worldwide jump in demand, even as social distancing rules and increased sickness and precautionary isolation reduced staffing across transport networks and the goods supply chain, and haphazardly lowered productivity.
A huge reduction in air freight has also contributed to the problems. And New Zealand's local circumstances include a shortage of specialised staff at the Auckland port, owned by the city's council. A new automation programme at the port has also been blamed for lower productivity as the system was implemented and adjustments continue.
Retaining a premium price in the future could be a problem, Zespri warns.