MSC, the world’s largest ocean carrier, has joined the list of ocean carriers suspending the delivery of diverted out-of-port containers to shipping customers as a result of the container ship incident off the Port of Baltimore that led to the tragic bridge collapse. With the Port of Baltimore closed indefinitely, the ruling places the burden on the shipper to load the cargo at a diverted port and transport it to its final destination.
In an email to customers obtained by CNBC on Thursday, MSC explained that for customer containers already afloat bound for the Port of Baltimore, the cargo will be diverted and unloaded at an alternate port where it will be made available for pickup.
“For these shipments, the contract of carriage will be declared terminated at this alternate port and storage, D&D and carriage costs to the original intended destination will be borne by the sole cargo,” the MSC advisory said.
MSC added that “passage to and from Baltimore is currently impossible and will not be restored for several weeks, if not months.”
CMA CGM, COSCO and Evergreen were the first carriers to announce such moves, and in some cases formally declared “force majeure,” a legal term that refers to the right to renege on contractual obligations when events beyond a party’s control occur.
MSC said in its communication with customers that it “apologies for the disruption caused by this contingency plan, which is necessary in response to events beyond our control but which is undertaken in accordance with the terms of the contract of carriage”.
MSC did not immediately respond to CNBC’s request for comment.
Maersk is the only major carrier to say it will provide transport from diverted ports for customers.
Maersk was the charterer of the 10,000 container ship Dali, which lost control and crashed into the Francis Scott Key Bridge in the early hours of Tuesday.
Following a pandemic boom that led to historic profits, ocean carriers have gone through a period of financial and operational challenges, with vessel overcapacity reducing profits and Houthi attacks in the Red Sea and on land in the Panama Canal leading to costly diversions from major global trade routes.
Logistics companies have been scrambling since the incident to make alternate transportation plans and deal with carrier diversions, and executives told CNBC on Wednesday that the next few days will be critical for the movement of diverted trade out of the Port of Baltimore.
The Port of Baltimore, the nation’s eleventh largest port, is the #1 U.S. import and export port for automobiles/light trucks and farm tractors, in addition to handling apparel, household goods, building materials, electronics and appliances, and produce.
Among the outstanding issues, logistics executives pointed to ocean carriers not updating their ships’ transits quickly enough to alert them to the new diverted port so they can schedule container pickups from their customers.
Major ports up and down the East Coast, including Savannah, Brunswick, Virginia, Charleston and New York/New Jersey, as well as rail and truck chassis companies, told CNBC they have the capacity to ramp up operations to meet demand of the incoming cargo.
In a series of updates, MSC sent a list of 23 ships arriving at the diverted ports from March 28 to April 29. Eight have an unknown port of diversion, 11 are heading to the port of New York/New Jersey; three to Norfolk; and one to Philadelphia.
On Thursday, Transportation Secretary Pete Buttigieg held a meeting with supply chain professionals about the crisis and how to mitigate any congestion. The meeting included ocean carriers CMA CGM, Maersk, MSC, Evergreen and railroads CSX and Norfolk Southern. The Port of New York/New Jersey, Georgia, Baltimore, Philadelphia, Jacksonville, South Carolina and Virginia were also present. Meeting delivery clients include John Deere, Stellantis, Home Depot, Under Armor and Volkswagen.
“We are much better equipped to mitigate supply chain disruptions than we were just a few years ago, thanks to increased supply chain coordination and new efforts to strengthen both our physical and digital infrastructure,” Buttigieg said , according to information from a meeting.
National Economic Adviser Lael Brainard, who was also in attendance, noted that in previous disruptions, the lack of complete information across the various components of the private and public sectors has hampered decision-making and responses. She cited the recent DOT FLOW initiative as a difference maker. “It has now been activated to bring the full capacity of all agencies across the federal government to ensure we are helping ocean carriers, port managers, railroads, shippers and unions come together to assess the potential impacts on the supply chain. supplies and then work together to deal with them.”
Paul Brashear, vice president of transportation and intermodal transportation at ITS Logistics, said the biggest challenges may be experienced by smaller companies that coordinate bookings themselves and may not have relationships at these diverted ports. “You want to get your diverted container out of port as soon as possible so you don’t incur any detention and demurrage fees. For some of these shippers, they are starting from scratch,” Brashear said.
Once the container arrives at a terminal, the clock starts counting the free time allocated to the container. After this grace period, detention and demurrage charges begin to apply, unless the ports agree to waive them.
“We’re looking to see if the terminals will give an extension of time off or remove the fees,” Brashear told CNBC on Wednesday. “That’s the problem right now.”
