MSC, the world’s largest carrier, has joined the list of shipping companies ending out-of-port container diversion delivery for shipping customers as a result of the container ship accident near the Port of Baltimore that led to the tragic bridge collapse. With the Port of Baltimore closed indefinitely, the decision puts the onus of picking up the cargo at a diversion port and transporting it to its final destination on the shipper.
In an email to customers obtained by CNBC on Thursday, MSC explained that for customer containers already in the water bound for the Port of Baltimore, the cargo will be rerouted and unloaded at an alternate port where it will be available for pickup.
“For these shipments, the contract of carriage will be declared terminated at this alternate port and storage, D&D and transportation costs to the originally intended destination will be borne by the sole cargo,” consultancy MSC said.
MSC added that “transit 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 similar moves and in some cases officially declared “force majeure,” a legal term referring to the right to waive contractual duties when events beyond a party’s control occur. .
MSC said in the customer communication that it “apologies for the disruption caused by this contingency plan, which is required in response to events beyond our control, but which is undertaken in compliance with the terms of the contract transportation”.
MSC did not immediately respond to CNBC’s request for comment.
Maersk is the only major carrier that says it will provide transportation from diversion ports for customers.
Maersk was the charterer of the 10,000-teu container ship Dali, which lost control and crashed on the Francis Scott Key Bridge in the early hours of Tuesday.
Following the pandemic boom that led to historic profits, carriers have gone through a period of financial and operational challenges, with excess ship capacity, declining profits, and the Houthi attacks in the Red Sea and the drought in the Panama Canal leading to costly diversions from major global trade routes.
Logistics companies are scrambling after the accident to make alternate transportation plans and keep up with carrier diversions, and executives told CNBC on Wednesday that the next few days will be critical in moving the diverted trade away from the Port of Baltimore.
The Port of Baltimore, the nation’s eleventh largest port, is No. 1 in the US for imports and exports of automobiles/light trucks and agricultural tractors, in addition to handling apparel, household goods, building materials, electronics and appliances and products.
Among the unresolved issues, logistics executives said carriers did not update their ship crossings quickly enough to alert them to the new port of diversion so they could schedule the pickup of containers from their customers.
Major ports up and down the East Coast, including Savannah, Brunswick, Virginia, Charleston and New York/New Jersey, as well as companies that provide rail and truck chassis, told CNBC they have the capacity to increase operations in meets the needs of the incoming cargo.
In a series of updates, MSC has sent out a list of 23 ships arriving at diversion ports from March 28 to April 29. Eight have an unknown port of diversion, 11 are bound for the port of New York/New Jersey. three in Norfolk; and one in Philadelphia.
On Thursday, Transportation Secretary Pete Buttigieg held a meeting with supply chain professionals about the crisis and how to ease any congestion. The meeting included the carriers CMA CGM, Maersk, MSC, Evergreen and the railroads CSX and Norfolk Southern. Port New York/New Jersey, Georgia, Baltimore, Philadelphia, Jacksonville, South Carolina, and Virginia were also present. Shipping customers at the meeting included John Deere, Stellantis, Home Depot, Under Armor and Volkswagen.
“We are much better equipped to mitigate supply chain disruptions than we were a few years ago, thanks to increased coordination across the supply chain and new efforts to strengthen both our physical and digital infrastructure,” he said. Buttigieg, according to a readout from the meeting.
National Economic Adviser Lael Brainard, who was also in attendance, noted that in previous shutdowns, the lack of complete information across various components of the private and public sectors has hindered decision-making capabilities and responses. He cited the recent DOT FLOW initiative as a differentiator. “It has already been activated to bring the full force of all agencies of the federal government to make sure that we are helping airlines, port leaders, railroads, shippers and unions all come together to assess the potential supply chain impacts. and then work together to address them.”
Paul Brashier, vice president of drayage and intermodal at ITS Logistics, said the biggest challenges may be faced by smaller companies that coordinate bookings themselves and may not have relationships at these diverted ports. “You want to get the diverted container out of the port as soon as possible so you don’t incur detention and decontamination fees. For some of these shippers they’re starting from scratch,” Brassier said.
Once a container arrives at a terminal, the clock starts ticking on the free time available in a container. Once this free time expires, detention and decontamination fees begin, unless ports agree to waive them.
“We’re looking to see if the terminals will either extend the free time or waive the fees,” Brashier told CNBC on Wednesday. “That’s the rub now.”