Ocean shipping: Transpacific Stabilization Agreement members set to raise rates, effective September 1

Staff -- Logistics Management, 8/26/2008

OAKLAND, Calif.—Floating bunker fuel surcharges for container lines in the Transpacific Stabilization Agreement (TSA) will hit record levels as of September 1, according to TSA officials.

These surcharges are adjusted on a monthly basis, said the TSA, and are based on a formula that tracks world fuel prices at key loading locations. The organization added that the higher fuel surcharge reflects record-breaking fuel prices that hit $767 per ton in July, which was up from $500 in the beginning of 2008 and $296 at the beginning of 2007.

The TSA said in a statement that its surcharge is posted by the organization as a “guideline” for the market, although service contracts with customers—including bunker surcharge terms—are addressed individually by member carrier lines.

N.Y.K. Line vice president and TSA revenue policy committee member Bill Payne said that each month’s surcharge reflects average fuel prices during a reporting period 30-60 days earlier, noting that this is done to comply with U.S. law requiring a minimum 30 days’ advance notice to the market in the event a particular rate or surcharge is to be raised.

“Carriers pay the higher fuel costs out of pocket as those costs rise, cushioning the impact on shippers, and then must pass them through after the fact,” Payne said in a statement. “The good news with a floating formula is that, as prices fall, customers will start to see savings 30 to 60 days out.”

The TSA is an organization made up of 11 container shipping lines, moving freight from Asia to ports and inland points in the United States. Member companies include: American President Lines, Ltd., COSCO Container Lines, Ltd., Evergreen Marine Corp. (Taiwan), Ltd., Hanjin Shipping Co., Ltd., Kawasaki Kisen Kaisha, Ltd. (K Line), Mitsui O.S.K. Lines, Ltd., Nippon Yusen Kaisha (N.Y.K. Line), Orient Overseas Container Line, Inc., and Yangming Marine Transport Corp.

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