This week:

• The FMC begins an investigation into carrier’s potentially unreasonable surcharges sent to shippers 
• Spot truckload rates rise on the East Coast as they drop on the West Coast 
• February US import projections reach their lowest levels since May 2020 
• Import sourcing movements continue away from China but will take some time 
• US transport providers see fewer job losses in January than BLS data projected 

FMC Begins Ordering Carriers to Justify Congestion Fees Under OSRA-22 

Late last year, the Federal Maritime Commission (FMC) began using its new powers under the Ocean Shipping Reform Act 2022 (OSRA-22) to investigate potentially unreasonable charges to shippers. On February 3, the FMC gave Mediterranean Shipping Co. (MSC) until the end of February to provide evidence and cause for why a congestion surcharge of $1,000 was sent to SOFi Paper Products on July 14 last year. 

MSC must also explain why the FMC should not penalize them through a civil penalty between $5,000 and $25,000. This is the first charge complaint that the FMC has ordered against a carrier under the new powers given to the commission on June 16, 2022. Since then, the FMC has received 219 charge complaints from shippers, with 71 resulting in a total of $700,000 in refunded or waived charges without the need for an order.

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Data Shows Improved Trans-Pacific Schedule Reliability in 2023   

Carriers in the Asia-America market are seeing improved trans-Pacific schedule reliability and on-time performance as consumer spending slows, reducing the quantity of Asia imports to America. From November to December last year, vessel schedule reliability to the West Coast increased by 0.6% to 41.2%. In terms of a year-over-year increase, trans-Pacific schedule reliability to the West Coast in December 2022 sat 31.4 percentage points higher than the 9.7% of December 2021. 

On the East Coast, schedule reliability increased by 1.7% from November to December to 37.2%, an increase of 18 percentage points from December 2021’s 19.1% on-time performance. Carrier on-time performance is expected to keep improving through the first half of 2023 as US consumer spending drops. 

US East Coast Ports See Rising Spot Truckload Rates as they Lower on the West Coast 

Data from the Journal of Commerce shows signs of a continued freight shift toward US East Coast ports. While January’s average outbound spot truckload rates remained higher on the West Coast than those on the East Coast, $2.69/mile compared with $2.47/mile respectively, six West Coast ports saw their truckload spot rates drop $0.10 with Portland and Oregon dropping by $0.18. On the East Coast, six of the largest ports reported an average $0.08 rise in spot truckload rates, $0.05 higher than the total US increase.  

Compared with three months ago, spot rates on the East Coast have fallen $0.10/mile, while on the West Coast, they have fallen $0.19/mile on average. The recent increases on the East Coast and decreases on the West Coast are possible signs of a continued freight shift among US importers. 

US Import Projections for February Are the Lowest since May 2020 

The first half of 2023 will see import numbers 19.4% lower than for the same period in 2022 due to slowing economic activity. January’s import numbers are expected to show a 17.6% drop year-over-year, while just a month ago, that number sat at 11.5%. February’s import predictions indicate a 25.5% drop from last year, changing from last month’s 23% drop. 

Current projections say that February’s import volumes will total approximately 1.57 million TEU, the lowest since May 2020. According to Global Port Tracker (GPT), import forecasts for March show a year-over-year decrease of 24.8%, April a 17.3% drop, and May a 19.9% drop. GPT expects that June will show improvements in import volumes with a projection of 2 million TEU, the highest since October last year. 

Moving Sourcing Strategies Away from China will Take Some Time 

The “China plus one” sourcing strategy that US retailers have used for the past two decades is being replaced by a more diverse global strategy, shifting production to countries in South and Southeast Asia as well as nearshoring to Latin America and the US. The move away from Chinese imports is motivated by the significant supply chain congestion seen in China throughout the pandemic, as well as China’s shrinking workforce, increasing labor costs, and recent investments in manufacturing and logistics infrastructure in countries such as Vietnam and India. 

Because no one country can replace China’s production capacity, a global sourcing strategy will need to be developed by the participating nations. Last year, China, including Hong Kong, supplied 40.7% of all US imports, the lowest US import share since 2006. That figure is down from 2021’s 42.4% as shippers began to source from nations other than China. 

Many importers of lower-cost consumer merchandise are expected to shift production to locations in Southeast Asia and India, where there are lower labor costs. The US automobile industry will likely increase co-production with Mexico, while high-tech industries that can utilize automation processes will increase production capacity in the US. 

January Saw Fewer Jobs Lost than Expected for US Transport Providers 

The US Bureau of Labor Statistics projected 311,500 transportation jobs would be lost in January as a potential recession approaches. Instead, 288,600 transportation jobs were lost last month, an employee gain of 22,900 and lower than the 295,900 job losses of January 2022.

Most of the transportation job losses were in the courier and messenger sector, where 220,800 jobs were lost in January following projections of reduced consumer demand and e-commerce deliveries. Companies in this sector were also the ones to lead 2022’s employment increases, adding 329,800 new jobs from July to December.

Trucking firms also saw losses below BLS projections, losing 19,800 jobs rather than the projected 23,900. In total, trucking employment dropped by 1.2% from December to January but was 3.7% higher year-over-year, as the JOC For-Hire Trucking Employment Index fell for the third consecutive month from 105.6 in December to 104.3 in January.