PACIFIC LINES STAND FIRM AT $300 RAISE

PACIFIC LINES STAND FIRM AT $300 RAISE

In a display of unity, shipping lines that carry cargo from Asia to the United States have notified one of the largest U.S. importers that they will stand firm on their proposed rate increase of $300 a 40-foot container.

The Asia-North America Eastbound Rate Agreement last week rejected an offer in which Wal-Mart Stores Inc. proposed a sizable rate increase, but less than the $300 that Anera members have been quoting.Wal-Mart and Anera representatives met last week in Los Angeles. Neither party would discuss what transpired, but Anera's letter was reportedly sent on Friday.

Since then, Wal-Mart, which most importers of Asian merchandise look to as the benchmark for rates, has been approaching non-conference carriers about carrying the majority of its cargo in the coming year.

Wal-Mart, however, also may find it difficult dealing with the independent lines, especially those that are members of a talking group known as the Transpacific Stabilization Agreement. The TSA is comprised of 13 conference and non-conference lines.

''Don't underestimate the resolve of the independents to get the full GRI (general rate increase),'' said Clifton Hickok, assistant general manager of marketing and pricing at Hanjin Shipping Co., a non-conference line.

CONCESSION UNLIKELY

''I don't think they're going to get much of a concession from the non-conference lines,'' said Tony Micena, assistant vice president of import sales at Solar International Shipping, the agent for Yangming Marine Transport Corp.

''They're firm about the increase at the presidents' level, so the sales and marketing guys have to live with it,'' Mr. Micena said.

Contract negotiations between trans-Pacific shipping lines and U.S. importers are again going down to the wire. The 1997-98 contracts under which the lines are carrying imports from Asia will expire May 1. In past years, Anera lines would propose an increase, normally in the $300 range, and then begin backing off that figure in April as the largest U.S. importers negotiated better deals.

That has not happened this year. The strong U.S. economy and the currency devaluations in Asia have acted as a magnet for imports.

Ships are steaming at near-capacity, and shipping executives expect imports to surge this summer as holiday merchandise begins pouring in.

BIG SPENDERS

With this year's mild winter in the Midwest and the East, shoppers were in a spending mood.

Retailers have had to increase their buying just to replenish their stocks, said Frank Butters, vice president of marketing and pricing at ''K'' Line America Inc.

Soon the back-to-school merchandise will start coming in, followed immediately by the Christmas cargo. The peak season should be especially strong, he added.

Importers have gotten the message that in this environment, shipping lines are not in a bargaining mood.

Even the independent lines, which normally undercut Anera lines by 5 percent to 10 percent, do not want to break ranks.

''The TSA independents are under enormous pressure to stick with the increase,'' said Barry Horowitz, vice president of Cargo Management Services in Portland, Ore.

Mr. Horowitz said Pacific carriers appear poised to get the full amount.

''Maybe it's time to say, 'OK, guys, let's be real. Let's give them the increase and get on with our lives,' '' he said.

2 WEEKS LEFT TO TALK

However, there are still two weeks left to negotiate and most large importers continue to resist the full $300.

They, like Wal-Mart, are submitting proposals to Anera that call for increases between $200 and $240.

''The carriers need a GRI, but $300 is too hard to take at one time,'' said the distribution manager at a large retailer. ''For us, that would be a 20 percent increase.''

Over the past two years, rates plummeted by as much as $1,200 a 40-foot equivalent container unit because carriers flooded the Pacific with large ships.

With the strong imports this year, the new capacity is being rapidly absorbed.

Several smaller importers, worried that they will not be able to secure vessel space during the peak season if they wait too long, have already signed with Anera lines and independents, accepting the $300 increase.

Carriers are now focusing on the so-called champion accounts like Wal-Mart.

Any champion account will suffice, shipping executives say.

''It's unfair to put all of this pressure on Wal-Mart. We just need one large customer like K-Mart or Penney's to sign,'' said a marketing executive at an Anera member line.

''The others don't carry the weight of Wal-Mart, with its 50,000 to 70,000 FEUs, but a benchmark is a benchmark,'' said another marketing executive.

ALL SHIPPERS UNDER PRESSURE

All shippers are under pressure to sign contracts soon or they will face a $100 peak season surcharge to take effect June 1 and last until Nov. 1. The TSA announced the surcharge in March, but said that any importer who has a contract in place by June 1 will not have to pay it.

Importers are enraged. The surcharge would be on top of the tariff rate, which itself is much higher than the volume discount rate most importers pay in their service contracts.

''They're forcing you to sign a contract before June 1 with a $300 rate increase, or you will pay a peak season surcharge of $100. That's blackmail,'' said Mike Gray, manager of corporate logistics at K-Swiss Inc., an athletic footwear manufacturer.

''I can't believe the FMC (Federal Maritime Commission) hasn't looked into that yet.''

Florence Carr, deputy director of the FMC's Bureau of Economic Analysis, said the commission is aware of the surcharge, but has received no formal complaints yet.

Even if importers do not challenge the surcharge on antitrust grounds, they say it has further strained their relations with carriers.