DESPERATE TIMES CALL FOR CRAZY MEASURES ON THE TRANS-PACIFIC

DESPERATE TIMES CALL FOR CRAZY MEASURES ON THE TRANS-PACIFIC

The supply-and-demand situation in the eastbound trans-Pacific is so tight during this peak shipping season that importers and ocean carriers are doing some crazy things.

* There is such a backlog of empty containers and chassis at inland locations like Memphis, Houston and Dallas that some carriers are refusing to accept bookings for these ''OCP'' (overland common point) cities east of the Rocky Mountains.Containers and chassis shipped to these inland destinations are getting stuck there for weeks, aggravating the equipment shortages caused by the Asian financial crisis and costing shipping lines dearly to reposition the empty containers back to West Coast ports.

* Other carriers are accepting OCP bookings for imports from Asia only with the proviso that importers and consolidators unload the containers at West Coast seaports. The carrier can then send the empty containers back to Asia immediately for reloading. It is up to the importer to make its own accommodations to get the merchandise inland.

* Eastbound vessels are booked so solidly that shipping lines are receiving calls from importers offering premiums of $200 to as much as $500 per container above published rates for a guarantee of space and equipment.

* Since U.S. imports from Asia are expected to greatly exceed exports to Asia for some time to come, importers are telling carriers that future rate increases should be based on final destinations in the United States.

In May, carriers in the eastbound Pacific imposed an across-the-board $300 general rate increase. Importers and consolidators say future rate actions should be segmented so shippers who unload containers on the West Coast incur a smaller rate increase than shippers who send the containers to the East Coast. This could prevent some equipment repositioning problems.

''The carriers made a big mistake this year with their flat $300 GRI (general rate increase),'' said Cobb Grantham, managing director of Distribution Services Ltd., a cargo consolidator in South Gate, Calif. ''They knew the outbound market was drying up. They knew they were going to have repositioning problems.'' The repositioning problems are so bad, in fact, that some carriers are trying to prevent them by refusing to let certain shipments move inland in the marine container.

Mr. Grantham said some non-conference carriers have placed restrictions already on inland movements, and he says other carriers may follow.

The equipment imbalance should have a major impact on high-volume consolidators, or non-vessel operating common carriers, that consolidate the massive volumes of general department store merchandise moving inbound to fill retail shelves this Christmas.

Container and chassis backlogs in the Gulf region and the Ohio Valley are so severe that Yangming Marine Transport Corp. has had to place restrictions on OCP shipments, a spokesman for that line said.

Fritz Cos. isn't taking any bookings in areas around Memphis; Columbus, Ohio; and the Ohio Valley because it could become increasingly difficult to move containers to those points.

NOTHING DOING

''Yangming isn't accepting our OCP cargo moving east of the Rockies, but will continue to accept cargo that moves farther east on an IPI bill of lading,'' said a senior Fritz Cos. official who requested anonymity.

Overland common point is a maritime term established several years ago to distinguish between inland freight moving west of the Rocky Mountains and inland point intermodal (IPI) cargo moving farther into the interior. West Coast ports often lowered wharfage and other fees on IPI cargo to help generate intermodal traffic on trans-Pacific imports that might otherwise have moved through the Panama Canal.

''We expect to see big problems at Long Beach, Los Angeles and Seattle because our import cargo there moves into the hinterland, but not at Oakland because it ends up west of the Rockies from that port,'' said Meagan Edwards, a specialist on inbound freight for Fritz. ''We are looking at other options right now to move our cargo inland,'' she said.

Fritz handles some 35,000 40-foot containers a year from the Pacific Rim.

While many lines are refusing to accept OCP shipments, others will accept them under certain conditions. For example, Cho Yang Line is telling some cargo consolidators with a Long Beach bill of lading their containers must be returned to that location.

Ed Kelly, chief operating officer at Cho Yang Line America, said the customer then must make a decision.

After five ''free days,'' containers incur a per-diem charge until they are returned to the port. If the customer expects the container to be tied up in the Midwest for weeks, he may decide it is cheaper to unload the box at the seaport and make other accommodations for shipping the contents inland. ''We can only do what we're getting paid to do. Steamship lines can no longer be viewed as the world's biggest charities,'' Mr. Kelly said.

China Ocean Shipping Co. is giving importers four to five days to take possession of their cargo before stacking it on the ground and returning the containers to the West Coast, a Cosco official said.

TAKE IT AWAY, AND SOON

''We're telling our customers to pick up their cargo as quickly as possible because inbound cargo is moving 5- to 6-to-1 against outbound and we need those boxes in Asia,'' he said.

Some importers are voluntarily unloading containers on the West Coast and shipping the merchandise inland by truck rather than chancing delays on the intermodal rail system. ''We've been proactive about doing this,'' said Ray Camero, chief executive at the Streamline Shippers Association, which represents some 2,800 shippers, 1,000 of which import from the Pacific Rim. ''We're routing the cargo over the road because the railroads are so screwed up.'' Vessel capacity in the eastbound Pacific trade is so tight that importers are offering carriers a premium - above the $300 general rate increase that went into effect on May 1 - for guarantees of space and equipment.

''There's no question there are certain customers in such a desperate condition that they would do that,'' said Clifton Hickok, assistant general manager of marketing and pricing at Hanjin Shipping Co.

Accepting a premium of $200 to $500 above the going freight rate is perfectly legal, providing the carrier files the individual rate with the Federal Maritime Commission. However, most carriers are booked solidly, so in order to accept this extra cargo they would have to bump shipments from loyal customers. Most carriers won't do that, Mr. Hickok said.

With consumer demand in the United States strong and Asian currencies weak compared with the dollar, many importers expect 1999 will be a repeat of this year. Bracing for another freight rate increase, importers are telling carriers to be fair when the next round of contract negotiations begins in the spring.

HIGHER OUT WEST

Andy Rosener, director of international logistics at Hasbro Toys, said he has always told ocean carriers that importers who take possession of cargo on the West Coast suffer a penalty compared with customers in the Midwest or on the East Coast when shipping lines put in a general rate increase.

''A $300 GRI on the West Coast represents a much higher percentage increase than on the East Coast,'' he said.

A through shipment to New York may cost $3,000, while the same cargo moving to Los Angeles could cost $2,000. So a $300 general rate increase represents a higher percentage increase to the West Coast importer.

Shipping lines say a segmented rate increase sounds good, but every carrier has its own particular mix of requirements.