Ocean Carrier Giants Invoke ‘Force Majeure’ Following Baltimore Bridge Collapse

Glenn Taylor
·4 min read
19

In the wake of the deadly Francis Scott Key bridge collapse in Baltimore, container shipping giants are wasting no time in forcing shippers to foot the bill for products that will no longer be dropped off at the Maryland city’s port.

Mediterranean Shipping Company (MSC), Maersk, CMA CGM, Hapag-Lloyd and Cosco Shipping are among the ocean carriers that have declared “force majeure,” a clause that frees the liners from fulfilling contract obligations due to events entirely out of their control.

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In this case, once the diverted cargo is dropped off at an alternative port, the carrier no longer has to assist with the movement of goods, leaving them off the hook for storage and transportation costs. This means importers become fully responsible for finding transportation to move the cargo to its final destination before container late fees are charged.

While the Federal Maritime Commission (FMC) enacted select rule changes in the post-Covid era in responses to accusations from shippers that ocean carriers were excessively charging demurrage and detention fees—resulting in a series of fines imposed on the ocean carriers— force majeure-related fees are unlikely to get the same treatment from the agency.

According to Andrew Lazaroff, senior vice president of sales at New Jersey-based freight forwarder Worldwide Logistics Group, the force majeure provision traditionally isn’t something that carriers are willing to waive in times of crisis.

“In cases like this, I don’t know how far shippers will get, because what, realistically, is a carrier holding container supposed to do? That’s why force majeure exists,” Lazaroff told Sourcing Journal. “They have to hold themselves somewhat harmless when they can’t go where they were supposed to go. This is just this is just why people should have a lot of diversity in their supply chain.”

On a positive note, Lazaroff said that some steamship lines are waiving change of destination (COD) fees, which will give shippers breathing room if they are diverting cargo from the Port of Baltimore to other ports.

Since the Tuesday morning incident, Worldwide Logistics Group has sought to mitigate any added costs for importers, helping them divert impacted freight along the East Coast while leveraging its two transloading facilities in New Jersey and Savannah, Ga. But according to Lazaroff, even freight forwarders haven’t seen enough information from customers yet to determine the timeline of how long the diversions will last, and the total range of impact on trade.

“Anybody importing into the U.S. right now will in some way be affected, specifically the East Coast, but probably even the West Coast,” said Lazaroff. “There’ll be some knock on effect. Hopefully it’s a short lived situation. Hopefully they open the channel and vessels can get back into Baltimore, and we’re not sitting here for weeks and weeks, but you’re probably going to see delays at East Coast ports as this cargo disperses.”

While the apparel industry doesn’t appear to be incurring any imminent impact from the incident and the ensuing blockage of the Port of Baltimore, furniture companies are expected to deal with delays and added costs resulting from containers being diverted to another port.

Ikea may be one of the major players impacted by the force majeure declaration. The Swedish home furnishings retailer had unloaded approximately 74 containers of products and furniture from the Maersk-chartered Dali container vessel on March 24, two days before the incident, according to ImportGenius.

Sourcing Journal reached out to Ikea.

Companies that are now needing to pay up extra for the transportation services will likely will be diverting container shipments to local hubs such as the Port of New York & New Jersey, the Port of Virginia and the Port of Philadelphia. While there are concerns of some of these East Coast ports being overcongested, both the N.Y./N.J. and Virginia ports have pledged their support to house the extra cargo.

On Thursday, the New York Governor Kathy Hochul and New Jersey Governor Phil Murphy issued a joint statement saying “The Port Authority of New York and New Jersey can take on additional cargo, and we have directed the Authority to further evaluate all available resources to minimize supply chain disruptions.”

And the Port of Virginia said Tuesday it began working with the ocean carriers so they can discharge containers at the port.

“The Port of Virginia has a significant amount of experience in handling surges of import and export cargo and is ready to provide whatever assistance we can to the team at the Port of Baltimore,” according to the gateway.

According to Asees Bajaj, an associate in the strategic intelligence practice of S-RM, a global corporate intelligence and cybersecurity consultancy, these ports offer greater capacity than the Port of Baltimore, and as such can absorb Baltimore’s incoming and outgoing vessel traffic.

“In this instance, port authorities are not having to contend with a build-up of shipping vessels on either side of the bridge,” Bajaj said. “Only seven other container ships had been scheduled to arrive at the Port of Baltimore through March 30, nothing close to the March 2021 Suez Canal block caused by the Ever Given container ship, where a queue of 369 ships built up on either side of the canal.”