A Supreme Court Decision, Rate Increases, And Our State-Of-The-Art Software.
Your weekly All-Ways round-up of supply chain news.
The End Of An Era
Last week the Supreme Court issued a unanimous decision allowing New Jersey to exit a 70-year compact with New York that created a singular police force overseeing labor operations in both states.
The terms of the compact did not require New Jersey to cede sovereignty to New York nor do they prohibit either state from terminating, which, according to the opinion of the court, “indicates that either state may unilaterally withdraw.”
After 90-day notice given by New Jersey, we can expect the dissolution of the 70 officers of the Waterfront Commission, who have, until now, been charged with the responsibility of conducting background checks and criminal investigations on the labor force of the Port of New York and New Jersey.
New Jersey has been seeking to exit the compact since 2015, citing the significant reduction of the longshore workforce since 1953 and the fact that 90% of the freight moves their side of the port.
The ruling is mutually celebrated by the New Jersey government as well as the International Longshoremen’s Association (ILA) and Shipping Association of New York and New Jersey (SANYNJ), who agree that the background checks and procedures performed by the Waterfront Commission made it difficult to hire new labor.
Going forward, the commission’s law enforcement and regulatory responsibilities will be taken over by the New Jersey State Police.
A Rise In Rates
Retailers and importers are motivated to sign service contracts for the coming year, thanks to the April 15 general rate increase (GRI) by trans-Pacific carriers. With most deals expiring April 30, there has been a significant increase in contract signings, though the level is still lower than that of last year.
According to the Journal of Commerce, 2023-24 service contracts start at a floor of about $1,200 per FEU to the West Coast and $2,200/FEU to the East Coast for major customers that ship more than 100,000 TEU a year, with rates ranging from $1,350 to $1,500/FEU to the West Coast and about $1,000 higher to the East Coast for mid-size customers shipping at least 10,000 TEU annually.
This year’s contracts, beginning May 1, show rates significantly lower than the 2022-23 contracts signed during severe supply chain disruption and port congestion caused by the pandemic – last year’s contracts had rates of $6,000 to $8,000/FEU to the West Coast and $8,000 to $10,000/FEU to the East Coast.
Shippers were in no rush to sign contracts this year, rather waiting to see if rates would continue to fall leading to some of the longest contract negotiations carriers have ever seen. However, the April 15 GRI created a sense of urgency and led to contracts being signed out of fear that rates would continue to climb.
A second GRI has been announced for May 1 but its success is still in question as demand in the eastbound Pacific is low, and many carriers have extended their spot rates through May 14.
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