<div class="phx-topic abstract-wrapper">China-Europe containerized rail has evolved from a niche option with infrequent service and a small network to one attracting suppliers and second-tier companies with more and faster services to a wider array of destinations.</div>

China-Europe containerized rail has evolved from a niche option with infrequent service and a small network to one attracting suppliers and second-tier companies with more and faster services to a wider array of destinations.

<div class="phx-topic"><div class="wrapper-medium center-element"><img src="/images/phoenix/5252969_1.0.jpg"></img></div>Rail gauge changes in Poland and Kazakhstan now take two hours, a quarter of the time spent years ago. Editorial credit: whitelook / Shutterstock.comContainerized rail between China and Europe has evolved from a niche option with infrequent service and a small network, serving major high-value and time-specific shippers, to one attracting suppliers and second-tier companies with more and faster services to a wider array of destinations.The vast majority of services are still block trains where the entire train is booked by one customer and bonded for the journey. Forwarders offer less-than-containerload cargo services, but availability is limited. That’s changing, though, as more services come online, their frequency and speed increase, and rail operators on the route expand their networks. Cargo clearance has also improved and so has security, particularly through Russia, thanks to forwarders offering real-time GPS tracking, monitoring, and intervention for shipments, with some systems notifying shippers if the seal on their container is damaged or broken.David Smrkovsky, strategic procurement manager at HP, recalls “the beginning when there was nothing,” forcing the computer producer to work with rail operators, customs authorities, and others to build its own block train, with the first train leaving Chongqing for Duisburg in 2011. Now, the China-Europe rail connects 15 Chinese cities and 16 European services, with <a href="http://www.joc.com/maritime-news/first-china-bound-freight-train-rolls-out-london_20170410.html">the latest being London</a> after a train headed for the industrial center of Yiwu in the Zhejiang province in eastern China left DP World’s London Gateway terminal on April 10. And exporters in Japan, South Korea, Taiwan, Hong Kong, and Vietnam can tap forwarders’ ocean-rail service combos via Chinese ports.How much of a threat the China-Europe rail option is for air cargo carriers and, to a lesser degree, container lines, is debatable. Proponents said it’s better poised to attract cargo away from freighters and the bellies of cargo planes, as the shippers are moving pricier goods with firmer deadlines for delivery on rail, rather than on ocean. But as rail services quicken and mushroom, some see an opening for shippers to shift goods from the water to the track, particularly if ocean freight rates rebound and slot space gets tight, <a href="http://www.joc.com/maritime-news/trade-lanes/asia-europe/european-exporters%E2%80%99-asia-capacity-concerns-hits-new-high_20170404.html">as it is now for the backhaul from Europe to Asia</a>.As a result, in the last few months, forwarder Dachser “suddenly saw a surge of interest in rail from shippers that could not move cargo by sea,” Edoardo Podesta, managing director, air and sea logistics for Asia Pacific, told JOC.com.There’s limited capacity on the rails, with each service generally handling just 45 feus. Even at full use, the network could only handle between 500,000 and 1 million TEU, according to an Organization for Economic Cooperation and Development (OECD) report. Comparatively, the largest container ship traversing the Asia-Europe trade has a capacity of up 22,000 TEU.The number of routes, operators, services, and destinations make it a challenge to estimate total China-Europe landbridge volume, but the number of new services and increase in frequency show volume is rising, with transport providers and forwarders expecting more. Rail provider Eurasia Express Bridge, for example, has increased its weekly block train services from China to Europe over the last several years from 2 or 3 to 10 or 12, said Ken Asztalos, executive director of AFMS Logistics Management Group, which assists beneficial cargo owners (BCOs) in tapping the services. The services are also getting faster, with westbound transits averaging 12 to 15 days, compared with 25 days a few years ago, he said.“Service has improved by the usage of better locomotives on the China side and investments in rail infrastructure in China,” said Asztalos,who added that rail gauge changes in Poland and Kazakhstan now take two hours, a quarter of the time spent years ago. “Congestion problems at these border crossings also improved where we see no impacts anymore today. Next to that, the Russian <a href="http://www.joc.com/rail-intermodal/digitized-unified-customs-can-ease-china-eu-rail-pain-points_20170202.html">customs unity</a> between Belarus, Kazakhstan, and Russia has improved transit times due to less customs paperwork and procedures.”Those service improvements are making rail more attractive to shippers of industrial equipment, auto parts, and electronics. These are shippers that can’t work with the more than 50-day ocean transits, but can manage their inventories with rail transits as short as 12 days, depending on the origin and destination. That gives shippers more working capital by allowing them to raise cash sooner by making goods available for sale faster and respond to trends and restock shelves faster. With temperature-controlled service offerings, rail proponents see more potential for moving food stuffs, in addition to keeping heat-sensitive electronics cool. The savings via the rail option are substantial: a 40-foot container weighing about 9,600 kilograms (21,164 pounds) would cost about $3,000 via ocean transit, $4,000 via rail, and at $3.85 per kilogram, roughly $37,000 by air transport. The attractiveness of rail rates rises when air cargo capacity tightens and rates increase, as in case of the December holiday peak season. The air cargo capacity crunch spurred medium-sized and smaller shippers to take a gamble on Asia-Europe rail, with many making rail a permanent part of their transport spend even after air cargo capacity loosened, Cindy Miller, president of UPS Global Freight Forwarding, told JOC.com.“There’s nothing like extreme circumstances that will make something in the logistics chain the next best thing,” said Miller, who is overseeing the expansion of the parcel giant’s service offering from two Chinese cities to six, and the doubling of European cities to four.Like Goldilocks finding just the right porridge or bed, some shippers are doing the same with Europe-China rail, Miller said. Core Health &amp; Fitness, for example, doesn’t always place orders for its exercise machines in advance and when orders came in they found ocean transits too slow, but air transport too pricey.Forwarders say shippers are <a href="http://www.joc.com/rail-intermodal/international-rail/shippers-want-china-europe-rail-included-forwarder-service-options_20170323.html">increasingly asking for China-Europe rail options</a>. German forwarder Dachser does more westbound rail cargo out of China carrying mainly electronics and other higher priced products, but there is rapidly increasing demand for eastbound rail out of Germany by shippers of auto parts and machinery, Podesta said.“Our customers have accepted rail and are using it more and more. Last year, China-Europe rail was regarded as being special, but now they want it included in their transport options,” he said.For China-Europe rail to take the next step in its evolution, Miller said there needs to be more Chinese and European stations on the two major routes: the northern connection with Russia’s Trans-Siberian Railway and the southern connection via Kazakhstan through Russia and central Asia. She added that the rail option would benefit from the European Union realigning its rail policy to benefit freight a bit more rather than being so heavily weighted toward passenger transport.“I believe we need infrastructure improvements along the route, increased capacity at railway tracks and terminals. At current route, we already do have locations that can cause congestions and delays at peak volume periods,” said Smrkovsky of HP. “At the same time we need better coordination of customs and railways at border crossings, and to improve the westbound-eastbound balance of platforms and containers.”Because the China-Europe rail option is part of China’s multi-billion Belt and Road policy, increased investment in the network is widely expected. The Silk Road Economic Belt connects China with Central Asia, Russia, and Europe, linking China with the Persian Gulf and the Mediterranean through Central Asia and West Asia, while also connecting China with Southeast Asia, South Asia, and the Indian Ocean. The ocean element is called the 21st-Century Maritime Silk Road from China's coast to Europe through the South China Sea and the Indian Ocean on one route, and from China's coast through the South China Sea to the South Pacific on the other.<a href="http://www.joc.com/maritime-news/container-lines/maersk-line/maersk-data-digitalization-has-%E2%80%98humongous%E2%80%99-potential_20170228.html">Digitalizing the supply chain</a> would also speed up clearance for unbonded shipments and make it more attractive to shippers since they would be able to better track the journey of their cargo, Wolfgang Lehmacher, global executive and director at the World Economic Forum, wrote in a blog last year. “When companies ship by air they only need to deal with the red tape of customs and inspections at the beginning and end of a journey,” he wrote in the blog. “Ground transportation is less expensive, but it stalls each time you cross a border. Products not only move slowly, but are also subject to increased costs, including potentially moving from one truck or train to another. There are also tariffs, arbitrary delays, and possible system manipulation.”Lehmacher said a digital revolution would level the playing field for small- and medium-sized shippers, enabling them, for example, to adapt production plans to product supply and demand dynamics or identify new markets. With the right IT in place, on-demand manufacturing and warehouse management platforms could connect makers with factories.“The revived railway, combined with wise technology investments, creates exciting prospects,” he said. “Imagine how half-empty container cars traveling across a desert in Central Asia could advertise their available space in real time — and at a discount — connecting en route with potential shippers looking for a low-cost way to send their wares.”More volume moving eastbound is also needed, as there’s little backhaul other than some shipments of cheeses, wines, and other European exports. Chinese subsidies support the movement of the empty containers for repositioning, according to people familiar with the matter. Russia’s retaliatory embargo of food against the European Union for imposing sanctions hasn’t helped, and the embargo, which began in the summer of 2014, has been extended through 2017.“More eastbound business is needed to both make the business more viable and less reliant on government subsidies,” Podesta said. “At the same time, additional eastbound revenue should allow prices on the westbound route to drop, thus making rail more competitive.”Contact Mark Szakonyi at <a href="mailto:mark.szakonyi@ihsmarkit.com">mark.szakonyi@ihsmarkit.com</a> and follow him on Twitter:<a href="http://twitter.com/szakonyi_joc"> @szakonyi_joc</a>. JOC Editors Greg Knowler and Turloch Mooney contributed to this report. </div>

Rail gauge changes in Poland and Kazakhstan now take two hours, a quarter of the time spent years ago. Editorial credit: whitelook / Shutterstock.com Containerized rail between China and Europe has evolved from a niche option with infrequent service and a small network, serving major high-value and time-specific shippers, to one attracting suppliers and second-tier companies with more and faster services to a wider array of destinations. The vast majority of services are still block trains where the entire train is booked by one customer and bonded for the journey. Forwarders offer less-than-containerload cargo services, but availability is limited. That’s changing, though, as more services come online, their frequency and speed increase, and rail operators on the route expand their networks. Cargo clearance has also improved and so has security, particularly through Russia, thanks to forwarders offering real-time GPS tracking, monitoring, and intervention for shipments, with some systems notifying shippers if the seal on their container is damaged or broken. David Smrkovsky, strategic procurement manager at HP, recalls “the beginning when there was nothing,” forcing the computer producer to work with rail operators, customs authorities, and others to build its own block train, with the first train leaving Chongqing for Duisburg in 2011. Now, the China-Europe rail connects 15 Chinese cities and 16 European services, with the latest being London after a train headed for the industrial center of Yiwu in the Zhejiang province in eastern China left DP World’s London Gateway terminal on April 10. And exporters in Japan, South Korea, Taiwan, Hong Kong, and Vietnam can tap forwarders’ ocean-rail service combos via Chinese ports. How much of a threat the China-Europe rail option is for air cargo carriers and, to a lesser degree, container lines, is debatable. Proponents said it’s better poised to attract cargo away from freighters and the bellies of cargo planes, as the shippers are moving pricier goods with firmer deadlines for delivery on rail, rather than on ocean. But as rail services quicken and mushroom, some see an opening for shippers to shift goods from the water to the track, particularly if ocean freight rates rebound and slot space gets tight, as it is now for the backhaul from Europe to Asia . As a result, in the last few months, forwarder Dachser “suddenly saw a surge of interest in rail from shippers that could not move cargo by sea,” Edoardo Podesta, managing director, air and sea logistics for Asia Pacific, told JOC.com. There’s limited capacity on the rails, with each service generally handling just 45 feus. Even at full use, the network could only handle between 500,000 and 1 million TEU, according to an Organization for Economic Cooperation and Development (OECD) report. Comparatively, the largest container ship traversing the Asia-Europe trade has a capacity of up 22,000 TEU. The number of routes, operators, services, and destinations make it a challenge to estimate total China-Europe landbridge volume, but the number of new services and increase in frequency show volume is rising, with transport providers and forwarders expecting more. Rail provider Eurasia Express Bridge, for example, has increased its weekly block train services from China to Europe over the last several years from 2 or 3 to 10 or 12, said Ken Asztalos, executive director of AFMS Logistics Management Group, which assists beneficial cargo owners (BCOs) in tapping the services. The services are also getting faster, with westbound transits averaging 12 to 15 days, compared with 25 days a few years ago, he said. “Service has improved by the usage of better locomotives on the China side and investments in rail infrastructure in China,” said Asztalos,who added that rail gauge changes in Poland and Kazakhstan now take two hours, a quarter of the time spent years ago. “Congestion problems at these border crossings also improved where we see no impacts anymore today. Next to that, the Russian customs unity between Belarus, Kazakhstan, and Russia has improved transit times due to less customs paperwork and procedures.” Those service improvements are making rail more attractive to shippers of industrial equipment, auto parts, and electronics. These are shippers that can’t work with the more than 50-day ocean transits, but can manage their inventories with rail transits as short as 12 days, depending on the origin and destination. That gives shippers more working capital by allowing them to raise cash sooner by making goods available for sale faster and respond to trends and restock shelves faster. With temperature-controlled service offerings, rail proponents see more potential for moving food stuffs, in addition to keeping heat-sensitive electronics cool. The savings via the rail option are substantial: a 40-foot container weighing about 9,600 kilograms (21,164 pounds) would cost about $3,000 via ocean transit, $4,000 via rail, and at $3.85 per kilogram, roughly $37,000 by air transport. The attractiveness of rail rates rises when air cargo capacity tightens and rates increase, as in case of the December holiday peak season. The air cargo capacity crunch spurred medium-sized and smaller shippers to take a gamble on Asia-Europe rail, with many making rail a permanent part of their transport spend even after air cargo capacity loosened, Cindy Miller, president of UPS Global Freight Forwarding, told JOC.com. “There’s nothing like extreme circumstances that will make something in the logistics chain the next best thing,” said Miller, who is overseeing the expansion of the parcel giant’s service offering from two Chinese cities to six, and the doubling of European cities to four. Like Goldilocks finding just the right porridge or bed, some shippers are doing the same with Europe-China rail, Miller said. Core Health & Fitness, for example, doesn’t always place orders for its exercise machines in advance and when orders came in they found ocean transits too slow, but air transport too pricey. Forwarders say shippers are increasingly asking for China-Europe rail options . German forwarder Dachser does more westbound rail cargo out of China carrying mainly electronics and other higher priced products, but there is rapidly increasing demand for eastbound rail out of Germany by shippers of auto parts and machinery, Podesta said. “Our customers have accepted rail and are using it more and more. Last year, China-Europe rail was regarded as being special, but now they want it included in their transport options,” he said. For China-Europe rail to take the next step in its evolution, Miller said there needs to be more Chinese and European stations on the two major routes: the northern connection with Russia’s Trans-Siberian Railway and the southern connection via Kazakhstan through Russia and central Asia. She added that the rail option would benefit from the European Union realigning its rail policy to benefit freight a bit more rather than being so heavily weighted toward passenger transport. “I believe we need infrastructure improvements along the route, increased capacity at railway tracks and terminals. At current route, we already do have locations that can cause congestions and delays at peak volume periods,” said Smrkovsky of HP. “At the same time we need better coordination of customs and railways at border crossings, and to improve the westbound-eastbound balance of platforms and containers.” Because the China-Europe rail option is part of China’s multi-billion Belt and Road policy, increased investment in the network is widely expected. The Silk Road Economic Belt connects China with Central Asia, Russia, and Europe, linking China with the Persian Gulf and the Mediterranean through Central Asia and West Asia, while also connecting China with Southeast Asia, South Asia, and the Indian Ocean. The ocean element is called the 21st-Century Maritime Silk Road from China's coast to Europe through the South China Sea and the Indian Ocean on one route, and from China's coast through the South China Sea to the South Pacific on the other. Digitalizing the supply chain would also speed up clearance for unbonded shipments and make it more attractive to shippers since they would be able to better track the journey of their cargo, Wolfgang Lehmacher, global executive and director at the World Economic Forum, wrote in a blog last year. “When companies ship by air they only need to deal with the red tape of customs and inspections at the beginning and end of a journey,” he wrote in the blog. “Ground transportation is less expensive, but it stalls each time you cross a border. Products not only move slowly, but are also subject to increased costs, including potentially moving from one truck or train to another. There are also tariffs, arbitrary delays, and possible system manipulation.” Lehmacher said a digital revolution would level the playing field for small- and medium-sized shippers, enabling them, for example, to adapt production plans to product supply and demand dynamics or identify new markets. With the right IT in place, on-demand manufacturing and warehouse management platforms could connect makers with factories. “The revived railway, combined with wise technology investments, creates exciting prospects,” he said. “Imagine how half-empty container cars traveling across a desert in Central Asia could advertise their available space in real time — and at a discount — connecting en route with potential shippers looking for a low-cost way to send their wares.” More volume moving eastbound is also needed, as there’s little backhaul other than some shipments of cheeses, wines, and other European exports. Chinese subsidies support the movement of the empty containers for repositioning, according to people familiar with the matter. Russia’s retaliatory embargo of food against the European Union for imposing sanctions hasn’t helped, and the embargo, which began in the summer of 2014, has been extended through 2017. “More eastbound business is needed to both make the business more viable and less reliant on government subsidies,” Podesta said. “At the same time, additional eastbound revenue should allow prices on the westbound route to drop, thus making rail more competitive.” Contact Mark Szakonyi at mark.szakonyi@ihsmarkit.com and follow him on Twitter: @szakonyi_joc . JOC Editors Greg Knowler and Turloch Mooney contributed to this report.

International rail

China-Europe rail attracts smaller shippers as services expand

<div class="phx-topic abstract-wrapper">The most disruptive energy shock in modern history has reawakened the debate over whether emergency fuel surcharges are a fair way for ocean carriers to recoup unexpected costs or blatant “double-dipping” that angers shippers.</div>

The most disruptive energy shock in modern history has reawakened the debate over whether emergency fuel surcharges are a fair way for ocean carriers to recoup unexpected costs or blatant “double-dipping” that angers shippers.

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<div class="phx-topic">The speed and severity of the jump in global oil prices amid the war in the Middle East has reignited long-standing suspicions by cargo owners that fuel surcharges levied by ocean carriers are used as a revenue stream rather than a cost recovery mechanism. Container lines defend the fees, ranging from $30 to $300 per TEU depending on the trade lane, arguing that what’s widely seen as the most significant energy shock in history has forced them to recoup costs with fees beyond the lagging quarterly bunker adjustment factor (BAF). And while the traditional linkage between fuel costs and BAFs has fractured due to the rapid escalation of the war and the effective closure of the Strait of Hormuz, according to a Vizion analysis, shippers nonetheless are retaining a cynical view of the emergency fuel surcharges. “Shipping lines always seem to manage to turn a crisis into a cash-grab,” was the blunt message from James Hookham, director of the Global Shippers Forum. “This apparent ‘double-dipping’ brings the whole sordid practice of surcharging into further disrepute.” Emergency bunker adjustment factor (EBAFs) on top of quarterly fuel price adjustments to recover costs in what is a core operational expense were acceptable for the current contract period ended March 26, but going forward, increased bunker costs should be recovered by the quarterly BAF review, said Antonios Rigalos, managing partner of shipper network ShiftX, “The BAF reviews executed for Q3 will reflect the higher bunker costs for the previous quarter (March/April/May), and an EBAF plus BAF review would create a double charging of customers,” Rigalos said. “While we understand the situation of carriers and that increased bunker costs have a big impact that somehow needs to be recovered, it needs to be carried out in a fair way and not by double charging BCOs and clients.” Several carriers have announced emergency bunker fuel surcharges (EBAF) on top of quarterly fuel price adjustments to recover costs in what is a core operational expense, but the moves have sparked growing concern from shippers. An Asia-Europe shipper based in Hong Kong said he negotiated contracts based on the the Shanghai Containerized Freight Index (SCFI) that covers both BAF and EBAF surcharges. “We adjust the bunker fuel surcharge bi-monthly and as far as we are concerned, we will fight any additional emergency fuel surcharge from the carriers,” the source said. <h3>Long hauls hit with surcharges </h3>CMA CGM this week announced an upwards review of its “emergency fuel surcharge” imposed on March 16 that will increase from $150 per TEU to $265/TEU on all long-haul trade lanes. OOCL said it will impose a temporary emergency bunker surcharge (EBS) from March 23 to manage global challenges to fuel availability because the increased costs are “beyond the scope of existing fuel cost recovery and low sulfur adjustment mechanisms.” Cosco Shipping has also announced emergency bunker surcharges on various trades between Europe, South America and Africa, while Mediterranean Shipping Co. MSC) introduced a temporary emergency bunker surcharge on March 16 that varies from $30 to $300/TEU depending on the trade lane. Maersk on March 10 announced it would implement an emergency bunker surcharge of $200/TEU on all long hauls “to safeguard cargo integrity and maintain the stability of our network.” “This surcharge covers the impact of fuel availability, cost and mix outside of what is covered in our fossil fuel fee (FFF),” the carrier said in a statement. “This means we are better positioned to have the necessary access to fuel and the ability to move it to necessary locations.” Maersk CCO Karsten Kildahl said the carrier was being forced to take the unprecedented step of <a href="https://www.joc.com/article/maersk-forced-to-ship-fuel-from-us-europe-as-asia-bunkers-start-to-run-dry-6184651">filling ships with fuel in the US and Europe and transferring the bunkers to vessels in Asia as supplies at bunkering hubs dried up</a>. Most of the emergency fuel surcharges will be reviewed by carriers every two weeks, but with the Strait of Hormuz — through which about 20% of global oil and liquefied natural gas supplies move each day — out of bounds to commercial shipping, there is little chance the EBAF will be dropped anytime soon. The speed with which the fuel surcharges were imposed by carriers made it “nigh impossible” for shippers to recover costs from their own customers or suppliers, Hookham told the Journal of Commerce. “For smaller businesses, that cash flow hit can be fatal when payments are likely to be late due to late or non-delivery of cargo,” he said, noting that the number of surcharges being introduced made it difficult for shippers to track which ones applied to their shipments. “The US got it right when the (Federal Maritime Commission) <a href="https://www.joc.com/article/fmc-says-closely-monitoring-carrier-rate-moves-tied-to-middle-east-war-6184781">required 30-day notice periods</a> before surcharges could take effect on US services,” Hookham said. “The current surcharging behavior will only hasten demands for similar notice periods to become mandatory worldwide.” <h3>Fractured fuel links </h3>While carriers roll out their fuel surcharges to try to recover rising costs, freight tracking platform Vizion believes the traditional linkage between fuel costs and BAFs has fractured due to the rapid escalation of the war and the effective closure of the Strait of Hormuz. In a recent review of bunker surcharges, Vizion noted that average very low sulfur fuel oil (VLSFO) prices of $535 per metric ton in 2025 were down 14.4% year over year, the lowest since 2020, with BAF contributing just 10% to 20% to total freight costs. The launch of US and Israeli strikes on Iran on Feb. 28 triggered a 73% fuel price spike to $939/mt in under two weeks, and carriers within days responded with emergency surcharges of $60 to $190/TEU, far faster than standard quarterly BAF adjustments. That shows the traditional BAF-fuel price correlation has weakened as carriers shift to emergency mechanisms to manage extreme volatility, according to Vizion. But Vizion said a deeper trend was emerging with a market fracture in progress as carriers divided into two camps: immediate risk transfer vs. contract stability. Carriers such as Maersk initially absorbed the volatility to protect long-term contract relationships, although the carrier has subsequently announced an emergency fuel surcharge. A more aggressive strategy was taken by MSC and CMA CGM, with both adopting a rapid pass-through of fuel spikes to protect their margins immediately. Shippers with locked-in rates will enjoy a short-term cost advantage, but it will be a temporary relief before fuel adjustments hit. Vizion warned that over the next three to six months, shippers can expect aggressive Q2 BAF corrections to capture the remaining fuel cost delta. Chantal McRoberts, director and head of advisory at Drewry Supply Chain Advisors, said shippers understand they will pay an increased fuel cost in the third quarter as that is part of the BAF policy that enables carriers to recover fuel costs over time. “The concern around the introduction of EBAF is the potential for double recovery,” McRoberts told the Journal of Commerce. “In practice, a shipper may pay an EBAF during Q2 to reflect higher fuel prices and then see its underlying BAF increase in Q3 as the formula catches up with those same Q2 fuel costs. At that point, the EBAF risks becoming revenue‑generating rather than purely cost‑recovering. “This is the dilemma currently facing shippers,” she added. “As a result, those operating under transparent, formula‑based BAF mechanisms are, in many cases, pushing back on EBAF charges.” Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

The speed and severity of the jump in global oil prices amid the war in the Middle East has reignited long-standing suspicions by cargo owners that fuel surcharges levied by ocean carriers are used as a revenue stream rather than a cost recovery mechanism. Container lines defend the fees, ranging from $30 to $300 per TEU depending on the trade lane, arguing that what’s widely seen as the most significant energy shock in history has forced them to recoup costs with fees beyond the lagging quarterly bunker adjustment factor (BAF). And while the traditional linkage between fuel costs and BAFs has fractured due to the rapid escalation of the war and the effective closure of the Strait of Hormuz, according to a Vizion analysis, shippers nonetheless are retaining a cynical view of the emergency fuel surcharges. “Shipping lines always seem to manage to turn a crisis into a cash-grab,” was the blunt message from James Hookham, director of the Global Shippers Forum. “This apparent ‘double-dipping’ brings the whole sordid practice of surcharging into further disrepute.” Emergency bunker adjustment factor (EBAFs) on top of quarterly fuel price adjustments to recover costs in what is a core operational expense were acceptable for the current contract period ended March 26, but going forward, increased bunker costs should be recovered by the quarterly BAF review, said Antonios Rigalos, managing partner of shipper network ShiftX, “The BAF reviews executed for Q3 will reflect the higher bunker costs for the previous quarter (March/April/May), and an EBAF plus BAF review would create a double charging of customers,” Rigalos said. “While we understand the situation of carriers and that increased bunker costs have a big impact that somehow needs to be recovered, it needs to be carried out in a fair way and not by double charging BCOs and clients.” Several carriers have announced emergency bunker fuel surcharges (EBAF) on top of quarterly fuel price adjustments to recover costs in what is a core operational expense, but the moves have sparked growing concern from shippers. An Asia-Europe shipper based in Hong Kong said he negotiated contracts based on the the Shanghai Containerized Freight Index (SCFI) that covers both BAF and EBAF surcharges. “We adjust the bunker fuel surcharge bi-monthly and as far as we are concerned, we will fight any additional emergency fuel surcharge from the carriers,” the source said. Long hauls hit with surcharges CMA CGM this week announced an upwards review of its “emergency fuel surcharge” imposed on March 16 that will increase from $150 per TEU to $265/TEU on all long-haul trade lanes. OOCL said it will impose a temporary emergency bunker surcharge (EBS) from March 23 to manage global challenges to fuel availability because the increased costs are “beyond the scope of existing fuel cost recovery and low sulfur adjustment mechanisms.” Cosco Shipping has also announced emergency bunker surcharges on various trades between Europe, South America and Africa, while Mediterranean Shipping Co. MSC) introduced a temporary emergency bunker surcharge on March 16 that varies from $30 to $300/TEU depending on the trade lane. Maersk on March 10 announced it would implement an emergency bunker surcharge of $200/TEU on all long hauls “to safeguard cargo integrity and maintain the stability of our network.” “This surcharge covers the impact of fuel availability, cost and mix outside of what is covered in our fossil fuel fee (FFF),” the carrier said in a statement. “This means we are better positioned to have the necessary access to fuel and the ability to move it to necessary locations.” Maersk CCO Karsten Kildahl said the carrier was being forced to take the unprecedented step of filling ships with fuel in the US and Europe and transferring the bunkers to vessels in Asia as supplies at bunkering hubs dried up . Most of the emergency fuel surcharges will be reviewed by carriers every two weeks, but with the Strait of Hormuz — through which about 20% of global oil and liquefied natural gas supplies move each day — out of bounds to commercial shipping, there is little chance the EBAF will be dropped anytime soon. The speed with which the fuel surcharges were imposed by carriers made it “nigh impossible” for shippers to recover costs from their own customers or suppliers, Hookham told the Journal of Commerce. “For smaller businesses, that cash flow hit can be fatal when payments are likely to be late due to late or non-delivery of cargo,” he said, noting that the number of surcharges being introduced made it difficult for shippers to track which ones applied to their shipments. “The US got it right when the (Federal Maritime Commission) required 30-day notice periods before surcharges could take effect on US services,” Hookham said. “The current surcharging behavior will only hasten demands for similar notice periods to become mandatory worldwide.” Fractured fuel links While carriers roll out their fuel surcharges to try to recover rising costs, freight tracking platform Vizion believes the traditional linkage between fuel costs and BAFs has fractured due to the rapid escalation of the war and the effective closure of the Strait of Hormuz. In a recent review of bunker surcharges, Vizion noted that average very low sulfur fuel oil (VLSFO) prices of $535 per metric ton in 2025 were down 14.4% year over year, the lowest since 2020, with BAF contributing just 10% to 20% to total freight costs. The launch of US and Israeli strikes on Iran on Feb. 28 triggered a 73% fuel price spike to $939/mt in under two weeks, and carriers within days responded with emergency surcharges of $60 to $190/TEU, far faster than standard quarterly BAF adjustments. That shows the traditional BAF-fuel price correlation has weakened as carriers shift to emergency mechanisms to manage extreme volatility, according to Vizion. But Vizion said a deeper trend was emerging with a market fracture in progress as carriers divided into two camps: immediate risk transfer vs. contract stability. Carriers such as Maersk initially absorbed the volatility to protect long-term contract relationships, although the carrier has subsequently announced an emergency fuel surcharge. A more aggressive strategy was taken by MSC and CMA CGM, with both adopting a rapid pass-through of fuel spikes to protect their margins immediately. Shippers with locked-in rates will enjoy a short-term cost advantage, but it will be a temporary relief before fuel adjustments hit. Vizion warned that over the next three to six months, shippers can expect aggressive Q2 BAF corrections to capture the remaining fuel cost delta. Chantal McRoberts, director and head of advisory at Drewry Supply Chain Advisors, said shippers understand they will pay an increased fuel cost in the third quarter as that is part of the BAF policy that enables carriers to recover fuel costs over time. “The concern around the introduction of EBAF is the potential for double recovery,” McRoberts told the Journal of Commerce. “In practice, a shipper may pay an EBAF during Q2 to reflect higher fuel prices and then see its underlying BAF increase in Q3 as the formula catches up with those same Q2 fuel costs. At that point, the EBAF risks becoming revenue‑generating rather than purely cost‑recovering. “This is the dilemma currently facing shippers,” she added. “As a result, those operating under transparent, formula‑based BAF mechanisms are, in many cases, pushing back on EBAF charges.” Contact Greg Knowler at greg.knowler@spglobal.com .

Container lines

Container Shipping News

Maritime

War reignites tussle between ocean carriers, cargo owners over fuel surcharges

<div class="phx-topic abstract-wrapper">Signs of stress are emerging as boxes pour into a land transport network crucial for the flow of cargo across the war-torn region. </div>

Signs of stress are emerging as boxes pour into a land transport network crucial for the flow of cargo across the war-torn region.

<div class="phx-topic">The injection of containerized cargo by ocean carriers into a land-based transport network not set up to handle such volume is placing road and rail options in the Middle East under increasing pressure. CMA CGM is the latest ocean carrier to deploy road, rail and feeder solutions to shippers with cargo stranded in the war-torn Middle East, joining carriers such as Hapag-Lloyd, Maersk, Ocean Network Express and Zim Integrated Shipping Services. “The infrastructure was not originally designed to accommodate such a high level of incremental trucking demand, particularly given the longer distances resulting from cross-country movements,” a spokesman for Hapag-Lloyd told the Journal of Commerce. “We are partnering closely with our logistics partners to ensure reliable service for our customers in the United Arab Emirates [UAE],” he added. Crane Worldwide Logistics said in a Middle East update Tuesday that road freight was largely operational but faced growing customs delays and capacity pressure as air and sea cargo shifted to land. “A trucking capacity shortage is growing across the Oman, Fujairah and Saudi corridors with the scarcity compressing resolution timelines for stranded and in-transit cargo looking for alternatives to air and ocean,” the update noted. DHL Global Forwarding is also reporting rising congestion across ports and road networks with ships calling at Khor Fakkan in the UAE facing 10-plus day delays and long truck queues, and high demand for road freight driving up transit times and costs. Commercial shipping remains unable to pass through the Strait of Hormuz as the US-Iran war enters its third week and container traffic destined for the Middle East is being offloaded at strategic entry points outside the Persian Gulf, such as Khor Fakkan and Fujairah in the UAE and Sohar in Oman. <h3>Alternative transport solutions </h3>Countries in the Persian Gulf import more than 90% of their products and the disabling of ocean access represents a significant threat. Trucking is the next best option and CMA CGM is offering shippers alternative transport solutions connecting the UAE, Saudi Arabia, Oman, Iraq, Qatar, Bahrain, Kuwait and Jordan via the ports of Khor Fakkan, Fujairah, Sohar and Jeddah in Saudi Arabia. The carrier is using logistics corridors to serve the main hubs in the UAE (Khalifa, Jebel Ali and Sharjah) and other countries bordering the Arabian Gulf via a combination of regional road and maritime transport. From the Red Sea port of Jeddah, CMA CGM has established road corridors, with or without maritime connections, for onward delivery to Saudi Arabia (Dammam), the UAE, Qatar, Bahrain, Kuwait and Iraq. This setup also allows flows to connect to the Mediterranean and Asia without exposure to the Strait of Hormuz. A third option is via the Omani ports with road and feeder connections to the UAE and northern Gulf countries. Before the war started, most of the container lines were offering carrier or merchant haulage across the Middle East but in the past two weeks have had to adapt their land-based services to handle the disruption caused by the war. For general and non-urgent cargo, MSC, CMA CGM and Yang Ming are among the carriers that have declared “end of voyage” for Persian Gulf-bound containers already onboard vessels when the war started. That cargo status means the carriers are unable to fulfil obligations on a bill of lading, and when the containers are offloaded at a port, they become the responsibility of the cargo owner. <a href="https://www.joc.com/article/maersk-forced-to-ship-fuel-from-us-europe-as-asia-bunkers-start-to-run-dry-6184651">Maersk has taken a different approach</a>, offering shippers three options: keeping the cargo in temporary storage, having it returned to the port of departure, or delivering it to another destination for onward transport by another mode. “We are using Salalah and Khor Fakkan for cargo that comes from the east and are securing trucking capacity to take it into the Gulf,” Maersk CCO Karsten Kildahl told the Journal of Commerce in an interview last week. “For cargo that comes from Europe, we focus mainly on Jeddah and are deploying trucks to take the cargo across the Arabian Peninsula through the desert,” he added. Many of the global forwarders, such as Kuehne + Nagel, DHL Global Forwarding, Crane and DSV are actively using road freight to move cargo between consumer markets in the Middle East. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

The injection of containerized cargo by ocean carriers into a land-based transport network not set up to handle such volume is placing road and rail options in the Middle East under increasing pressure. CMA CGM is the latest ocean carrier to deploy road, rail and feeder solutions to shippers with cargo stranded in the war-torn Middle East, joining carriers such as Hapag-Lloyd, Maersk, Ocean Network Express and Zim Integrated Shipping Services. “The infrastructure was not originally designed to accommodate such a high level of incremental trucking demand, particularly given the longer distances resulting from cross-country movements,” a spokesman for Hapag-Lloyd told the Journal of Commerce. “We are partnering closely with our logistics partners to ensure reliable service for our customers in the United Arab Emirates [UAE],” he added. Crane Worldwide Logistics said in a Middle East update Tuesday that road freight was largely operational but faced growing customs delays and capacity pressure as air and sea cargo shifted to land. “A trucking capacity shortage is growing across the Oman, Fujairah and Saudi corridors with the scarcity compressing resolution timelines for stranded and in-transit cargo looking for alternatives to air and ocean,” the update noted. DHL Global Forwarding is also reporting rising congestion across ports and road networks with ships calling at Khor Fakkan in the UAE facing 10-plus day delays and long truck queues, and high demand for road freight driving up transit times and costs. Commercial shipping remains unable to pass through the Strait of Hormuz as the US-Iran war enters its third week and container traffic destined for the Middle East is being offloaded at strategic entry points outside the Persian Gulf, such as Khor Fakkan and Fujairah in the UAE and Sohar in Oman. Alternative transport solutions Countries in the Persian Gulf import more than 90% of their products and the disabling of ocean access represents a significant threat. Trucking is the next best option and CMA CGM is offering shippers alternative transport solutions connecting the UAE, Saudi Arabia, Oman, Iraq, Qatar, Bahrain, Kuwait and Jordan via the ports of Khor Fakkan, Fujairah, Sohar and Jeddah in Saudi Arabia. The carrier is using logistics corridors to serve the main hubs in the UAE (Khalifa, Jebel Ali and Sharjah) and other countries bordering the Arabian Gulf via a combination of regional road and maritime transport. From the Red Sea port of Jeddah, CMA CGM has established road corridors, with or without maritime connections, for onward delivery to Saudi Arabia (Dammam), the UAE, Qatar, Bahrain, Kuwait and Iraq. This setup also allows flows to connect to the Mediterranean and Asia without exposure to the Strait of Hormuz. A third option is via the Omani ports with road and feeder connections to the UAE and northern Gulf countries. Before the war started, most of the container lines were offering carrier or merchant haulage across the Middle East but in the past two weeks have had to adapt their land-based services to handle the disruption caused by the war. For general and non-urgent cargo, MSC, CMA CGM and Yang Ming are among the carriers that have declared “end of voyage” for Persian Gulf-bound containers already onboard vessels when the war started. That cargo status means the carriers are unable to fulfil obligations on a bill of lading, and when the containers are offloaded at a port, they become the responsibility of the cargo owner. Maersk has taken a different approach , offering shippers three options: keeping the cargo in temporary storage, having it returned to the port of departure, or delivering it to another destination for onward transport by another mode. “We are using Salalah and Khor Fakkan for cargo that comes from the east and are securing trucking capacity to take it into the Gulf,” Maersk CCO Karsten Kildahl told the Journal of Commerce in an interview last week. “For cargo that comes from Europe, we focus mainly on Jeddah and are deploying trucks to take the cargo across the Arabian Peninsula through the desert,” he added. Many of the global forwarders, such as Kuehne + Nagel, DHL Global Forwarding, Crane and DSV are actively using road freight to move cargo between consumer markets in the Middle East. Contact Greg Knowler at greg.knowler@spglobal.com .

Surface

Asia-Europe

International ports

Rising road volume puts Middle East land-based options under pressure

<div class="phx-topic abstract-wrapper">The terminal, capable of ultimately handling 5.7 million TEUs annually, will be the global terminal operator’s third in Vietnam. </div>

The terminal, capable of ultimately handling 5.7 million TEUs annually, will be the global terminal operator’s third in Vietnam.

<div class="phx-topic">APM Terminals and its long-standing local partner Hateco Group are set for a 50-year concession to develop the $1.8 billion Lieu Chieu container terminal in the central Vietnam port city of Da Nang. The duo was approved by the People’s Committee of Da Nang on Tuesday — the local government — as the preferred bidder for a terminal with an annual capacity of 5.7 million TEUs. Work is due to start later this year, with the first two berths due to open in 2028 and full completion is expected by 2035. Container lines, supported by record profits from disruption, are investing more in marine terminals to gain better control of landside operations and mitigate port congestion. Maersk’s stakes and investment in marine terminals, such as Tanjung Pelepas in Malaysia, enable the Gemini Cooperation’s hub-and-spoke network with partner Hapag-Lloyd. US tariffs on China have made Vietnam a more attractive origin of US imports, with the latter’s share of laden inbound shipments rising to 12% last year from 9.9% in 2024, according to PIERS, a sister company of the Journal of Commerce. APM Terminals, Hateco Group and Hateco Port Company will build, operate and manage the terminal, which will have eight container berths with a total quay of 9,022 feet capable of handling 18,000-TEU container ships. There will also be a barge berth for vessels up to 5,000 metric tons to support local cargo consolidation and distribution, easing pressure on the regional road network, and reducing transport costs. The facility, midway between the major ports of Haiphong in the north near Hanoi and Ho Chi Minh in the south, is expected to become a key hub for cargo in Vietnam’s central provinces and neighboring Laos as well as transshipment traffic. The facility is the second to be jointly developed by APM Terminals division and Hateco after the two firms won a concession to build and operate the Hateco Haiphong International Container Terminal that opened last July. The two-berth terminal at Haiphong’s Lach Huyen port in northern Vietnam can handle 18,000-TEU-sized ships. Da Nang will be APM Terminals’ third facility in Vietnam — the firm operates the two-berth 2.1-million-TEU capacity Cai Mep International Terminal 31 miles southeast of Ho Chin Minh City. Contact Keith Wallis at <a href="mailto:keithwallis@hotmail.com">keithwallis@hotmail.com</a>. </div>

APM Terminals and its long-standing local partner Hateco Group are set for a 50-year concession to develop the $1.8 billion Lieu Chieu container terminal in the central Vietnam port city of Da Nang. The duo was approved by the People’s Committee of Da Nang on Tuesday — the local government — as the preferred bidder for a terminal with an annual capacity of 5.7 million TEUs. Work is due to start later this year, with the first two berths due to open in 2028 and full completion is expected by 2035. Container lines, supported by record profits from disruption, are investing more in marine terminals to gain better control of landside operations and mitigate port congestion. Maersk’s stakes and investment in marine terminals, such as Tanjung Pelepas in Malaysia, enable the Gemini Cooperation’s hub-and-spoke network with partner Hapag-Lloyd. US tariffs on China have made Vietnam a more attractive origin of US imports, with the latter’s share of laden inbound shipments rising to 12% last year from 9.9% in 2024, according to PIERS, a sister company of the Journal of Commerce. APM Terminals, Hateco Group and Hateco Port Company will build, operate and manage the terminal, which will have eight container berths with a total quay of 9,022 feet capable of handling 18,000-TEU container ships. There will also be a barge berth for vessels up to 5,000 metric tons to support local cargo consolidation and distribution, easing pressure on the regional road network, and reducing transport costs. The facility, midway between the major ports of Haiphong in the north near Hanoi and Ho Chi Minh in the south, is expected to become a key hub for cargo in Vietnam’s central provinces and neighboring Laos as well as transshipment traffic. The facility is the second to be jointly developed by APM Terminals division and Hateco after the two firms won a concession to build and operate the Hateco Haiphong International Container Terminal that opened last July. The two-berth terminal at Haiphong’s Lach Huyen port in northern Vietnam can handle 18,000-TEU-sized ships. Da Nang will be APM Terminals’ third facility in Vietnam — the firm operates the two-berth 2.1-million-TEU capacity Cai Mep International Terminal 31 miles southeast of Ho Chin Minh City. Contact Keith Wallis at keithwallis@hotmail.com .

Port News

Port infrastructure

Marine terminals

APM Terminals to build $1.8 billion terminal in Da Nang

<div class="phx-topic abstract-wrapper">Broad use of Section 301 tariffs, with 60 US trading partners now being scrutinized, provides a window into the administration’s next phase of tariff applications as it seeks to redefine US trade. </div>

Broad use of Section 301 tariffs, with 60 US trading partners now being scrutinized, provides a window into the administration’s next phase of tariff applications as it seeks to redefine US trade.

<div class="phx-topic">Importers buoyed by a February US Supreme Court decision that overturned billions of dollars of tariffs they paid are now coming to grips with a new wave of tariffs that are likely to burden their inventory replenishment and holiday shipping plans. The US Trade Representative (USTR) last week launched two separate Section 301 investigations covering a total of 60 countries: one related to “structural excess capacity and production in manufacturing sectors” and a second aimed at forced labor. Should the investigations result in additional tariffs — widely expected to be the outcome — those duties will heap more cost pressure and customs administrative work on US importers, as well as reduce the appeal of sourcing from countries seen as lower-tariff alternatives to China. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/6187602_0.1.jpg"></img></div>More immediately, the tariffs could land just as US retailers typically begin peak season ordering ahead of the winter holidays. That will have an impact on containerized US import market share. Vietnam, for example, saw its share of inbound US volumes rise to 12% in 2025 from 9.9% in 2024, mostly at the expense of mainland China, whose share fell to 36% from 40.4% in 2024, according to PIERS, a sister product of the Journal of Commerce within S&amp;P Global. <h3>Expected pivot </h3>The two sets of investigations can be viewed as the Trump administration clearly pivoting from tariffs assessed through executive order, by way of the International Emergency Economic Powers Act (IEEPA), to ones with a more straightforward track record of surviving legal challenges. The Supreme Court on Feb. 20 <a href="https://www.joc.com/article/us-supreme-court-rules-against-trump-in-critical-ieepa-tariff-case-6173568">ruled that the IEEPA tariffs had been levied illegally</a>, and the US Court of International Trade has ordered US Customs and Border Protection to <a href="https://www.joc.com/article/cbp-lays-out-initial-tariff-refund-plan-that-requires-minimal-work-from-importers-6183418">create a process to refund importers more than $160 billion in tariffs</a> they paid, plus interest. Trade experts said they expected the administration to quickly use other tools to progress with its tariff-focused foreign trade policy in the event the IEEPA tariffs were struck down. The structural capacity investigation will look into whether 16 different countries or trading blocs, including China, India, Vietnam, Indonesia and the EU, are imposing policies or practices that “burden or restrict US commerce.” The broader investigation into forced labor covers virtually every major US trading partner and can be seen as the US Trade Representative (USTR) trying to replicate the scale of President Trump’s so-called Liberation Day tariffs that were eventually struck down. In the interim, Trump has used Section 122 of the Trade Act to temporarily assess 10% tariffs on all US imports, outside of goods exempted through existing trade agreements. The pace of the investigations also hints at the administration’s desire for the new tariffs, or at least the threat thereof, to be in place by the time the Section 122 duties expire on July 27. Comments on both investigations are due April 15, with hearings for the forced labor and structural capacity inquiries scheduled for April 28 and May 5, respectively. In announcing the probes, USTR said it has requested consultations with all governments named in the investigations. All the economies named in the structural capacity inquiry are also involved in the forced labor investigations, which means the trade representative will be looking to have conversations with 60 different entities in the coming months, presumably to use the threat of tariffs as leverage. <h3>‘One of the most powerful weapons’</h3>Deborah Elms, head of trade policy at Singapore-based Hinrich Foundation, said the USTR’s use of Section 301 in this context, while likely to be effective in that it will allow the administration to impose new tariffs, runs counter to the initial intent of the statute. During President Trump’s first term, the USTR was able to assess 25% Section 301 tariffs on Chinese goods that have remained despite two changes of power in the executive branch. The scope of the new Section 301 tariffs the USTR is seeking would dwarf those previously implemented, although there has yet to be any formal discussion about the level of tariffs that might result from these investigations “Section 301 was originally intended as a tool to get countries to negotiate and remove barriers to US exports,” she wrote in a March 12 blog. “This administration appears keen to retaliate first and discuss mostly later.” For importers, the intent of Section 301 tariffs matter because they are likely to be more durable and legally defensible than either the IEEPA or Section 122 tariffs. Additionally, unless countries are able to negotiate their way out of prospective Section 301 tariffs by providing market access to US exporters or curtailing domestic production subsidies, importers will find there are fewer avenues to escape an added cost on international trade. Elms described Section 301 as “one of the most powerful weapons in the trade policy arsenal for any US executive branch pursuing aggressive unilateralism,” adding that it provides a range of options under the broad category of “relief from unfair trade practices.” Elms noted the 16 industries under investigation in the “structural capacity” probe range from steel production in China to chemical manufacturing in Germany and currency manipulation in Switzerland. The two investigations are also unlikely to be the last. USTR Jamieson Greer has previously hinted at the potential for cases focused on digital trade and digital services taxes. Contact Eric Johnson at <a href="mailto:eric.johnson@spglobal.com">eric.johnson@spglobal.com</a>. </div>

Importers buoyed by a February US Supreme Court decision that overturned billions of dollars of tariffs they paid are now coming to grips with a new wave of tariffs that are likely to burden their inventory replenishment and holiday shipping plans. The US Trade Representative (USTR) last week launched two separate Section 301 investigations covering a total of 60 countries: one related to “structural excess capacity and production in manufacturing sectors” and a second aimed at forced labor. Should the investigations result in additional tariffs — widely expected to be the outcome — those duties will heap more cost pressure and customs administrative work on US importers, as well as reduce the appeal of sourcing from countries seen as lower-tariff alternatives to China. More immediately, the tariffs could land just as US retailers typically begin peak season ordering ahead of the winter holidays. That will have an impact on containerized US import market share. Vietnam, for example, saw its share of inbound US volumes rise to 12% in 2025 from 9.9% in 2024, mostly at the expense of mainland China, whose share fell to 36% from 40.4% in 2024, according to PIERS, a sister product of the Journal of Commerce within S&P Global. Expected pivot The two sets of investigations can be viewed as the Trump administration clearly pivoting from tariffs assessed through executive order, by way of the International Emergency Economic Powers Act (IEEPA), to ones with a more straightforward track record of surviving legal challenges. The Supreme Court on Feb. 20 ruled that the IEEPA tariffs had been levied illegally , and the US Court of International Trade has ordered US Customs and Border Protection to create a process to refund importers more than $160 billion in tariffs they paid, plus interest. Trade experts said they expected the administration to quickly use other tools to progress with its tariff-focused foreign trade policy in the event the IEEPA tariffs were struck down. The structural capacity investigation will look into whether 16 different countries or trading blocs, including China, India, Vietnam, Indonesia and the EU, are imposing policies or practices that “burden or restrict US commerce.” The broader investigation into forced labor covers virtually every major US trading partner and can be seen as the US Trade Representative (USTR) trying to replicate the scale of President Trump’s so-called Liberation Day tariffs that were eventually struck down. In the interim, Trump has used Section 122 of the Trade Act to temporarily assess 10% tariffs on all US imports, outside of goods exempted through existing trade agreements. The pace of the investigations also hints at the administration’s desire for the new tariffs, or at least the threat thereof, to be in place by the time the Section 122 duties expire on July 27. Comments on both investigations are due April 15, with hearings for the forced labor and structural capacity inquiries scheduled for April 28 and May 5, respectively. In announcing the probes, USTR said it has requested consultations with all governments named in the investigations. All the economies named in the structural capacity inquiry are also involved in the forced labor investigations, which means the trade representative will be looking to have conversations with 60 different entities in the coming months, presumably to use the threat of tariffs as leverage. ‘One of the most powerful weapons’ Deborah Elms, head of trade policy at Singapore-based Hinrich Foundation, said the USTR’s use of Section 301 in this context, while likely to be effective in that it will allow the administration to impose new tariffs, runs counter to the initial intent of the statute. During President Trump’s first term, the USTR was able to assess 25% Section 301 tariffs on Chinese goods that have remained despite two changes of power in the executive branch. The scope of the new Section 301 tariffs the USTR is seeking would dwarf those previously implemented, although there has yet to be any formal discussion about the level of tariffs that might result from these investigations “Section 301 was originally intended as a tool to get countries to negotiate and remove barriers to US exports,” she wrote in a March 12 blog. “This administration appears keen to retaliate first and discuss mostly later.” For importers, the intent of Section 301 tariffs matter because they are likely to be more durable and legally defensible than either the IEEPA or Section 122 tariffs. Additionally, unless countries are able to negotiate their way out of prospective Section 301 tariffs by providing market access to US exporters or curtailing domestic production subsidies, importers will find there are fewer avenues to escape an added cost on international trade. Elms described Section 301 as “one of the most powerful weapons in the trade policy arsenal for any US executive branch pursuing aggressive unilateralism,” adding that it provides a range of options under the broad category of “relief from unfair trade practices.” Elms noted the 16 industries under investigation in the “structural capacity” probe range from steel production in China to chemical manufacturing in Germany and currency manipulation in Switzerland. The two investigations are also unlikely to be the last. USTR Jamieson Greer has previously hinted at the potential for cases focused on digital trade and digital services taxes. Contact Eric Johnson at eric.johnson@spglobal.com .

Transport, Trade and Regulation News

Supply chain

Potential new US tariffs cloud sourcing strategies, peak season demand

<div class="phx-topic abstract-wrapper">The recent increase in intermodal share in the face of declining West Coast share is intriguing, and it might be signaling a more significant change in the situation, writes Larry Gross. </div>

The recent increase in intermodal share in the face of declining West Coast share is intriguing, and it might be signaling a more significant change in the situation, writes Larry Gross.

<div class="phx-topic">The share of imports arriving in the US and Western Canada that travels inland via rail has been in a long-term decline. Changes in shipping patterns are a big reason why, with major implications as to where things are heading and the railroads’ ability to affect the result. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/6187602_0.1.jpg"></img></div>The chart below tracks two measures over the past 16 years. The first is the share of US plus Western Canadian import TEUs arriving on the West Coast. As has been well documented, this share has been in a long-term decline as importers have moved away from West Coast-centric strategies toward four- and five-corner strategies that provide greater diversification and lower costs. Twelve-month moving average West Coast share declined by over 10 points from 59% in 2010 to under 49% in 2025. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="651db556-cc65-494c-abea-84774e97a373"></dynamic-object></div>The second statistic is the percentage of import TEUs arriving that travel inland from the coast via intermodal. This includes inland point intermodal loads and South California transloads. Intermodal share has also seen a long-term decline similar to that of West Coast share. The linear trends over this period for both statistics are almost parallel. The correlation was very strong between 2014 and mid-2022. We know that intermodal share is higher off the West Coast than elsewhere, due primarily to length-of-haul effects. The longer runs from the West Coast to the consumption centers inland are much more intermodal-friendly than the short, dispersed hauls out of other port regions. It is interesting, however, to note that since mid-2022, this tight correlation has loosened significantly. Viewed on a 12-month moving average basis, intermodal share began to recover at that point from the post-pandemic surge congestion, a full year before West Coast share turned upward. In 2023, intermodal share resumed declining, while West Coast share continued to rise. Then, in 2025, West Coast share began to decline once again, but intermodal share began to move up. <h3>Inversely correlated? </h3>Does this de-coupling indicate that the basic bond has been broken between these two measures? I don’t think so. But it does indicate that other factors (congestion, surges, and so forth) have taken control for the time being. It may also say that these inter-dependent but separate systems have reacted to the recent volatility differently and each with their own timing. On the other hand, the recent increase in intermodal share in the face of declining West Coast share is intriguing. It might be signaling a more significant change in the situation and certainly bears watching. If the inter-dependence remains intact, what does that indicate for the future? At the start of the year, West Coast share could have reasonably been expected to continue the decline that resumed in 2025. The Gaza situation had stabilized, and the Red Sea/Suez routing was slowly opening back up. The East Coast option was looking better all the time. But of course, the Iran hostilities have now thrown that all out the window. The trans-Pacific trade is, at least for the moment, more isolated from the disruption. West Coast share can be expected to stabilize or even improve. This will be an intermodal tailwind for the time being. This analysis also tells us that most of what happens here is completely out of the railroads’ control. They will continue to be subject to the routing decisions of the ocean carriers and the importers. It is on the domestic side of the intermodal house where the railroads have more ability to control their destiny and their share. Larry Gross is president and founder of Gross Transportation Consulting. Contact him at <a href="mailto:lawrencejgross@gmail.com">lawrencejgross@gmail.com</a>. </div>

The share of imports arriving in the US and Western Canada that travels inland via rail has been in a long-term decline. Changes in shipping patterns are a big reason why, with major implications as to where things are heading and the railroads’ ability to affect the result. The chart below tracks two measures over the past 16 years. The first is the share of US plus Western Canadian import TEUs arriving on the West Coast. As has been well documented, this share has been in a long-term decline as importers have moved away from West Coast-centric strategies toward four- and five-corner strategies that provide greater diversification and lower costs. Twelve-month moving average West Coast share declined by over 10 points from 59% in 2010 to under 49% in 2025. The second statistic is the percentage of import TEUs arriving that travel inland from the coast via intermodal. This includes inland point intermodal loads and South California transloads. Intermodal share has also seen a long-term decline similar to that of West Coast share. The linear trends over this period for both statistics are almost parallel. The correlation was very strong between 2014 and mid-2022. We know that intermodal share is higher off the West Coast than elsewhere, due primarily to length-of-haul effects. The longer runs from the West Coast to the consumption centers inland are much more intermodal-friendly than the short, dispersed hauls out of other port regions. It is interesting, however, to note that since mid-2022, this tight correlation has loosened significantly. Viewed on a 12-month moving average basis, intermodal share began to recover at that point from the post-pandemic surge congestion, a full year before West Coast share turned upward. In 2023, intermodal share resumed declining, while West Coast share continued to rise. Then, in 2025, West Coast share began to decline once again, but intermodal share began to move up. Inversely correlated? Does this de-coupling indicate that the basic bond has been broken between these two measures? I don’t think so. But it does indicate that other factors (congestion, surges, and so forth) have taken control for the time being. It may also say that these inter-dependent but separate systems have reacted to the recent volatility differently and each with their own timing. On the other hand, the recent increase in intermodal share in the face of declining West Coast share is intriguing. It might be signaling a more significant change in the situation and certainly bears watching. If the inter-dependence remains intact, what does that indicate for the future? At the start of the year, West Coast share could have reasonably been expected to continue the decline that resumed in 2025. The Gaza situation had stabilized, and the Red Sea/Suez routing was slowly opening back up. The East Coast option was looking better all the time. But of course, the Iran hostilities have now thrown that all out the window. The trans-Pacific trade is, at least for the moment, more isolated from the disruption. West Coast share can be expected to stabilize or even improve. This will be an intermodal tailwind for the time being. This analysis also tells us that most of what happens here is completely out of the railroads’ control. They will continue to be subject to the routing decisions of the ocean carriers and the importers. It is on the domestic side of the intermodal house where the railroads have more ability to control their destiny and their share. Larry Gross is president and founder of Gross Transportation Consulting. Contact him at lawrencejgross@gmail.com .

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Ocean shipping patterns erode intermodal share from West Coast: analyst

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