Maersk to Add ‘One-Time’ Charge for Damaged Containers

You break it, you buy it. Or, at least, under a new Maersk Line container damage policy, you will pay a bit more to fix it.

Starting May 1, Maersk Line will begin charging an ‘out-of-service’ fee of $150 per dry container and $350 per reefer to cover additional costs associated with the repair of damaged containers.

Maersk had been absorbing these additional costs, which include lifting, transporting, repairing and various administration costs related to repairing a damaged container. 

Beginning in May, parties responsible for damaging containers will be billed for the ‘out-of-service’ costs, as well as for the actual costs or repairing the container. 

"We sincerely believe the ‘out-of-service’ charge is the fairest way to cover the costs of damaged containers -- as it means that only parties who are responsible for damage will have to shoulder the costs," said a spokesman for the shipping line.

‘Out-of-service’ charges were calculated to be as close as possible to the actual costs incurred by the company, said Maersk. Terms and timing of the new policy may differ slightly from country to country based on regional pricing schedules already in place. 

The new policy is expected to improve overall service, the shipping line said, by increasing equipment availability and reliability.

CEO: Maersk May Sell some Units, Buy other Firms in 2010

After suffering its first annual loss since World War II, Transportation giant A.P. Moeller-Maersk, may be looking toward selling off some less profitable business units while acquiring others during 2010, according to Chief Executive Nils Smedegaard Andersen, quoted in Monday’s Maersk Post, the company’s company newsletter.

Andersen made it clear that the Danish firm, parent to the world's largest container carrier Maersk Line, has moved well away from "survival mode" and is now looking at becoming more competitive. "I hope we will be able to make an interesting acquisition or buy some distressed assets," Andersen said through the newsletter. Anderson favors acquisitions for the firm's oil and gas exploration division and its port operations unit. 

However, the firm is still planning to cut another $500 million in costs this year, bringing total announced spending reductions by the firm since last year to $2.5 billion. The firm reported a $1.29 billion net loss in 2009, the first in more than 60 years for the 105-year-old conglomerate. Andersen said the firm may sell off some of its less profitable assets as part of the overall cost cutting plan. 

Despite the cost cutting, Andersen said he believes that A.P. Moeller-Maersk is poised to have a "reasonable result" by year's end due to the firm's ability to turn a "far better profit" in 2010 than its competitors.

Andersen said that following the already extensive cost-cutting measures already taken, the firm will have to look at "fruits that hang higher" and for "smaller items and areas" to achieve the needed cuts this year.

Guam Port Gets DOD Funds to Begin Modernization Work

The United States Department of Defense has agreed to pay $50 million to complete upgrades at the Port Authority of Guam (PAG), according to Guam Congressional Delegate Madeleine Bordallo.

Speaking to a Rotary Club group on Monday, Bordallo said that the PAG has identified just under $160 million in infrastructure projects needed to meet the requirements of an impending U.S. military buildup on the island.

The port is undergoing a rapid expansion as it prepares for the U.S. government’s transfer of all military operations and personnel from Okinawa, Japan to Guam later this year. In May, 2008, Guam’s Governor Felix Camacho signed-off on an estimated $195 million 2007 Master Plan aimed at modernizing the PAG to accommodate the expanded military presence. An estimated 8,000 U.S. Marines and 9,000 dependents from Okinawa is expected to increase traffic through the Guam port by more than 100 percent, an increase that many fear the current infrastructure at the port will not be able to handle without serious modernization efforts.

Bordallo said that the PAG applied for $100 million in grants and loan programs through the U.S. Department of Transportation including a request for $50 million in national recovery grant funds, but the DOT denied request. Without the start-up funds, the PAG can not qualify for a $49 million low-interest loan from the U.S. Department of Agriculture.

Following the rejection of funding, Bordallo and Guam Gov. Felix Camacho took up the case directly with the Department of Defense. Bordallo said once she gave an impassioned explanation of what caused the failed grant applications, DOD officials said they would pay the $50 million in start-up funds. The money is expected to be available in the next several weeks. In addition, the DOD agreed with Bordallo's request that she be named "buildup czar," taking on a role as head of the buildup program on Guam.

Woodland Port Hires New Executive Director

The governing board for the inland Columbia River Port of Woodland has announced that Nelson Holmberg will take the helm as the port's new executive director effective April 12.

The 43-year-old Holmberg, who has served as the communications manager for the Washington state Port of Vancouver for the past three years, will replace outgoing executive director Erica Rainford who announced in February that she is leaving the port after two years in the top executive slot.

In his new position, Holmberg will take a small cut in pay, earning $61,000 compared to his $64,170 salary at Vancouver. Holmberg will also become one of only two full-time employees on the Port of Woodland staff, compared to a total of 80 staff at Vancouver and more than 400 employees at each of the nation's two leading ports in Long Beach and Los Angeles. 

Located about 85 miles inland from the Pacific Ocean, the Washington state Port of Woodland has about 200 acres of industrial property serviced by Interstate Highway 5, BNSF and Union Pacific main lines, and a federally maintained deep-draft water channel that is 40 feet deep and 600 feet wide.

House Panel to Discuss Changes to Trucking Deregulation Language

The House of Representatives Transportation Subcommittee on Highways and Transit has set May 5 as the date for a hearing to discuss possible changes to a key portion of federal trucking deregulation legislation.

The panel plans to take testimony from proponents and opponents of language in the Federal Aviation Administration Act of 1994, or F4A, that grants federal supremacy on the regulation of "routes, rates, and service" related to interstate trucking and commerce.

Officials from the ports of Los Angeles, New York/New Jersey and Oakland have joined with a group of elected officials, labor organizations, and environmental groups to demand changes to the F4A language that would provide local government authorities with the power to set trucking and commerce regulations.

Opponents, including the trade group representing leaders of the rest of the nation's ports, argue that the changes would create a patchwork of local regulations like that that existed before trucking deregulation.

The challenge to the existing language of the F4A began with Los Angeles officials after the port lost a court injunction battle with the American Trucking Associations over the port's Clean Truck Program. The court, in granting the injunction against portions of the port's truck plan – including a requirement that all port drayage drivers be per-hour employees – cited language from the F4A that states that federal law preempts local law in the case of interstate commerce. The port and the ATA head back to court to argue the entire case on April 20.

Proponents of the F4A language change are pleading their case directly to the chair of the House panel, Rep. James L. Oberstar, D-Minn., and asking Oberstar to insert the change into a multi-year "must pass" surface transportation bill currently working through the House. This would eliminate the more difficult task of changing the F4A directly.

Oberstar has yet to weigh in publicly on the proposed F4A changes.

Grand Alliance, Maersk Boost Transpac Capacity

The Grand Alliance and shipping line Maersk have announced they will add at least six additional vessels to their transpacific routes over the next two months, boosting the total per-steaming transpacific capacity by more than 32,000 TEUs.

The moves, along with additional indicators such as three months of across the board cargo volume growth at most United States West Coast ports, have lent credence to the argument that the transpacific lanes are beginning to recover from the global economic meltdown.

Last week, Grand Alliance partners Hapag-Lloyd, Nippon Yusen Kaisha and Orient Overseas Container Line announced that starting in May they will add a direct call at the deepwater Vietnamese port of Cai Mep to their South China Sea Japan Express, or SCX, service. This will boost the service to eight 6,000 TEU vessels.

The eastbound SCX service port rotation will be: Cai Mep, Vietnam; Laem Chabang, Thailand; Singapore; Kobe; Nagoya; Tokyo; Sendai; and Los Angeles. The westbound rotation will be Oakland; Tokyo; Nagoya; Kobe; Kaohsiung, Taiwan; Shekou, China; and, Cai Mep.

Grand Alliance members Hapag-Lloyd, NYK and OOCL announced this week that they will revert their CCX service, which had been turned into an inter-Asia loop as part of the Alliance's winter program, back into a transpacific service.

Since December the CCX service's single 4,600-TEU vessel has been confined to inter-Asia service at five Asian ports. Starting May 4, the service will expand to a transpacific rotation utilizing five 6,000-TEU vessels. Along with Grand Alliance members, APL will also utilize slots on the service.

The eastbound CCX rotation will be: Qingdao; Ningbo; Shanghai; Busan; and, Los Angeles. The westbound rotation will be: Oakland; Busan; Qingdao; Ningbo; and, Shanghai.

Ocean carrier Maersk also announced this week that it will add the Vietnamese port of Cai Mep as an additional call on its TP6 eastbound service rotation and begin using at least one 9,000-TEU vessel as part of the 14 vessel fleet allotted to the service.

The reconfigured TP6 eastbound service, utilizing a slow-steaming schedule, will increase from a 16-day whole rotation transit to 22 days. The TP6 westbound rotation, also utilizing a slow-steaming schedule, will tighten from a 28-day full transit to a 25-day full transit.

The TP6 eastbound rotation will include: Tanjung Pelepas, Malaysia; Cai Mep, Vietnam; Yantian, China; Hong Kong; and, Los Angeles. The TP6 westbound service will include: Los Angeles; Yokohama; Nagoya; Shanghai; Ningbo; Xiamen; Hong Kong; Yantian; and, Tanjung Pelepas.

On the TP6 westbound rotation, Vietnam will be served via feeder service following transshipment at Hong Kong.

SoCal Ports' Meeting Cautiously Optimistic About Cargo Recovery

The Port of Long Beach's annual "Pulse of the Ports" event Wednesday offered two predominant points of view: those that see the recent three-month uptick in Southern California port cargo traffic as short term inventory-filling increases and those that believe the increases are signaling a more permanent long-term cargo volume recovery.

Both camps, however, agreed that growth of any kind is good news after suffering through 2009 – a year many are calling the worst in the shipping industry since the advent of containerization.

Joseph Magaddino, chair of the Department of Economics at California State University, Long Beach told the more than 500 attendees that, “While the recession is over, the recovery remains weak.”

One of seven panelists to address the crowd, Magaddino said that the ports of Long Beach and Los Angeles might see some growth in 2010, it will not be enough to counter the number of jobs lost in the sector since the global economic collapse began in late-2007. Magaddino, who said there are more than 300,000 logistics sector employees in the region, pegged the sector job losses at 50,000.

Port of Long Beach Executive Director Richard Steinke pointed out that history has proven that the shipping industry always rebounds and that port officials are "cautiously optimistic about an upward trend.”

"By a lot of estimates, about $20 billion was lost by the ocean carriers," said Steinke, "so as you move to 2010, people are replenishing inventories. Our last three months of volumes at the Port of Long Beach have been up, so there’s a little bit of optimism." He predicted modest growth for the port in 2010.

Speaker Fred Malesa, vice president for international intermodal for BNSF, also saw the recent upturn in volumes as a good sign.

"The prognosis for the patient – the trade sectors – looks pretty good," Malesa said. "It's heading in the right direction. 'Cautious optimism' is a fair description of where we are."

However, panelist Wolfgang Freese, president of Hapag-Lloyd (America), pointed out that the shipping industry is concerned that the three-month uptick is merely a short-term increase as warehouses replenish depleted stocks.

And while praising the advantages of Long Beach/Los Angeles and other West Coast ports, Freese said that cheaper alternatives are available and could mean greater market share loss, especially in Southern California, if expenses passed along by the ports are not addressed.

More encouraging were reports by Peter Peyton, president of the International Longshore and Warehouse Union Local 63, showing that dockers in Southern California are being assigned more work. Peyton said that union casuals, typically the last to receive assignments in the union hierarchy, are now receiving three to four days a week of work – up from two to three days a week at the same time last year.

Peyton's on-the-ground statements were backed up by Frank Capo, vice president of customer service and sales for Total Terminal International who said that vessel volumes in Southern California were increasing, albeit modestly. Last week, the Southern California Marine Exchange, which serves as the air traffic controller for the Southern California ports, also confirmed that vessel calls were up slightly over last year, including calls by container vessels.

Overseas Group and Global Express Services Announce Merger

Two self-described "mid-major" freight forwarders, Overseas Group and Global Express Services, have announced a merger of the two firms.

Commemorated at a signing ceremony in Hong Kong nearly two weeks ago, the two privately held firms publicly announced the merger Tuesday.

Freight forwarder Overseas Group is unrelated to international bulk carrier Overseas Shipholding Group, more commonly known as OSG.

Following the merger transition, both firms will maintain their individual management teams, while Globe Express Chairman and CEO Ziad Korban will serve as the merged firm's CEO and Global Express President-The Americas will retain his title on the merged firm's executive team.

The names of other members of the merged firm's executive team were not released.

Gilbert Khoury, President of Overseas Group, said, “very little overlap exists within our companies, each with its own unique areas of expertise both in terms of business segments and trade lanes served, along with geographic presence. Leveraging these non-competing strengths will enable the combined company to rapidly build size and scale, expand its corporate network and thus better serve its clients.”

Overseas Group has focused primarily on American exports to Europe and the Middle East, while Globe Express has focused primarily on Asian imports to the United States.

The newly merged firm is currently working to streamline back office operations, develop a mutual corporate identity, and maintain consistency in service during the merger.

Financial terms of the deal were not released, and based on statements issued by Global Express, it is unclear if the merged firm will eventually operate under a new name.

Fidley Watch: Foreign Aid

In May of last year, the National Science Foundation (NSF) announced the awarding of a contract to build the Alaska Region Research Vessel (ARRV), a 242-foot research ship designed to operate in seasonal Arctic sea ice and open waters surrounding Alaska.

The Foundation touted the project, funded by NSF through the University of Alaska Fairbanks (UAF), as its first major award under the American Recovery and Reinvestment Act, which, the foundation website notes, “…is an unprecedented effort to jumpstart our economy, create or save millions of jobs, and put a down payment on addressing long-neglected challenges so our country can thrive in the 21st century.”

The vessel is to be built at an American shipyard in the Midwest, utilizing American labor, thereby stimulating the economy of that part of Wisconsin.

On the West Coast, Seattle’s Markey Machinery is interested in providing the package of winches and scientific handling systems for the vessel. Markey has manufactured and sold deck machinery for more than 100 years, and has been working on the NSF project since 2005, in close partnership with a Seattle-based Naval Architecture Firm.

Baline Dempke, president of Markey, believes the company was the front runner to win the order, worth more than $3 million, until last fall, when a foreign manufacturer “…waltzed in at the 11th hour and somehow convinced the shipyard to go with their equipment.”

In October of last year, Marinette asked Markey to consider submitting a revised (less expensive) bid, to which Markey agreed. Two days later, the shipyard changed its mind, telling Markey, “We have no issues with the current technical-commercial offer at this time.” Markey nevertheless submitted an unsolicited best-and-final reduced price offer.

Last month, Dempke received a letter from Marinette Marine, informing him that Marinette had removed Markey from the submittal to the client, selecting the foreign manufacturer “based on …considerable risk analysis.” Marinette assured Dempke that “MMC understands the importance of the American Reinvestment Recovery Act and has engaged in considerable review and dialog with our integrator and UAF on the topic of Buy American.”

While the foreign manufacturer who has been assigned the contract maintains an office and service facility in the United States, all of the company’s engineering and manufacturing is performed in Europe and Asia.

“I don’t mind losing orders on price,” says Dempke. “But in this specific instance, being funded by the US taxpayer, and seeing this money go to a foreign firm, is just beyond my comprehension.” This raises the question of whether there was ever the intention to use a US systems integrator for the Alaska Region Research Vessel. “I can’t help but feel that if the competition had been conducted in such a way that we had an equal opportunity at a best-and-final offer we may well have won the work based on price alone,” he says.

The damage doesn’t end there, Dempke notes. “The systems required for this project are developmental, meant to set the stage for systems to come. It would have been developmental for us, and also for the foreign manufacturer… so now in a way the American taxpayer is funding a foreign company’s research and development.”

Dempke has contacted his elected representatives, including Senators Murray and Cantwell, with no meaningful response.

“In the mid 1990’s Senator Cantwell used Markey Machinery’s vacated factory at 79 South Horton Street in Seattle as the backdrop for a news conference about the decline of manufacturing in America,” says Dempke, from his newly renovated 20,000 Square foot facility. “Markey Machinery is currently midway through a Lean Manufacturing process, which will be followed by the process necessary to become ISO-9001 Certified,” he says. “We are expanding and creating jobs during a time when nobody else is. We feel that this particular project could serve as the turning point for our future as suppliers to the Oceanographic market, and we believe that if we lose this work that we will suffer lasting negative effects to our basic business model and ability to provide jobs for American workers.”

Dempke says, “While Marinette’s inclusion of foreign deck-machinery may meet the contractual requirements of the ARRA, it most definitely must not meet the intent of the Act.” He notes that at least three other American companies could have been tasked with the Research and Development to create the systems for the project, and wonders why this group of American suppliers wasn’t part of a competitive group used to further American technology, while also achieving the lowest possible price? Of note is the fact that, as of January 1st, 2009, Marinette Marine has become a wholly owned subsidiary of the Italian enterprise Fincantieri-Cantieri Navali Italiani S.p.A.

“Of at least four possible US suppliers of this equipment, only we were solicited to participate, says Dempke. “And then kicked to the curb.”

Chris Philips, Managing Editor