U.S-to-Asia Container Lines Seek Relief from High Fuel Costs

Transpacific shipping lines are responding to an 80 percent increase i
n marine fuel and diesel oil over the past year by adjusting fuel surc
harges built into current tariff rates and service contracts with frei
ght shippers.
An analysis of the market done through the Westbound Transpacific Stab
ilization Agreement(WTSA) reveals that lines operating in the U.S to A
sia trade have seen their fuel costs rise to more than $24,000 per shi
p per day. Fuel price increases since April 1999 alone have cost conta
iner carriers an estimated $500 million, including not only higher pri
ces for vessel fuel but also for diesel oil used in terminal equipment
and increased trucking chargers paid as moter carriers pass through t
heir own higher-fuel costs.
WTSA lines noted that, while they have absorbed steadily rising fuel c
osts over the past several months in their contacts, they must now beg
in to recover at least a portion of those lost revenues.
As a result, individual WTSA carriers intend to include in their new a
nd existing contracts, effective May 1, 2000 a US$80 per 40-foot conta
iner, $64 per 20-foot container and $4 per revenue ton interim fuel as
sessment (IFA). The IFA will also be applied to tariff cargo moving un
der “all-inclusive” tariff rates that have pre-established fuel char
ges built in.
Shippers moving cargo under standard tariff rates, with a separate fu
el adjustment factor (FAF) surcharge that has been allowed to float in
line with fluctuating fuel prices, are already paying the added charg
e as part of the FAF, and will see no change in their freight charges.
The IFA, as with the FAF now paid by standard tariff customers, will c
ontinue to float in both “all-in” tariff rates and in service contra
cts, under an established formula that tracks marine fuel prices on a
weekly basis and adjusts the surcharge quarterly. Surcharges are calcu
lated and adjusted for the calender quarters beginning January 1, Apri
l 1, July 1 and October 1 of each year.
WTSA pointed to the lag time that has taken place between the initial
sharp rise of fuel prices nearly a year ago and the expiration of cont
racts and all-in tariff rates with fuel surcharges locked in at lower
levels. This, members said, has given contract customers a considerabl
e price advantage beginning in mid-1999.