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NEW YORK-While elected officials hash out a plan for securing U.S. ports in the aftermath of Sept. 11, retailers and suppliers are facing higher insurance premiums and surcharges for shipped goods.

Insurance fees of up to $1,000 per container are becoming commonplace, according to Erik Autor, vice president and international trade counsel for the National Retail Federation. Several of the major shipping companies have seen their premiums jump 30 percent or more, increases that are usually passed on to the supplier or retailer.

Norman Axelrod, chairman and chief executive officer of Linens 'n Things, told The Record of Hackensack, N.J., his company has been hit with a "war risk" surcharge of $300 per container for goods shipped from Pakistan.

Autor said the surcharges and cost increases might only be temporary. "My guess is that if the broader security [plan] pushes through, if there's a system in place to get adequate security measures in place, it may actually lower rates," he said.

The heightened security has also disrupted the flow of goods as customs officials continue to make targeted inspections of ship containers. Sources added that there has been a marked reduction of shipping delays since the first few weeks following the terrorist attacks.

Several bills have been introduced in Congress, addressing the issue of increasing port security. Legislation is expected to be passed over the next few months.

The most talked about bill is H.R. 3983, drafted by Rep. Don Young (R-Alaska) and tagged the "Maritime Transportation Anti-terrorism Act of 2002." It aims to put in place anti-terrorism measures after assessing the vulnerability of U.S. ports.

NRF has taken a strong position against Young's bill, which places inspection supervision under the auspices of the Department of Justice. In letters to President Bush and other elected officials, NRF has recommended that the U.S. Customs Service is better suited to play the the lead role in coordinating border security.

"Having justice personnel rather than treasury personnel conduct commercial compliance audits would be analogous to the FBI conducting IRS audits of taxpayers," NRF said. Under Young's plan, there would be no role for the Customs Service.

Meanwhile, the Customs Service continues to conduct inspections by targeting "high-risk" shipments. This involves inspecting containers from hot spot countries such as Pakistan or Afghanistan. The process is time consuming. But two weeks ago, the service launched a program designed to get goods moving more swiftly through the port. If an importer can show that the goods were secure along each leg of the shipment, the shipment is "fast-tracked" through the process.

But there are still delays, and some suppliers are doling out more money than they did before Sept. 11. Still, there have been improvements. For example, shipping rugs by sea has almost, but not quite, returned to normal.

Importers say insurance rates are up and small delays still occur, but it is nothing like the weeks right after Sept. 11. Gene Newman, president of NooNoo Rug Co., said customs inspections might add delays of two days to a week.

"My experience is that they look at goods from Iran and Pakistan more carefully than they do goods from India or China," said Newman. He described the inspections as random. "They are not checking because of terrorism, but for drugs. In a shipment of 30 bales of carpets, they may open one or two bales to make sure there is nothing else but carpet in there."

Newman said the cost of insurance has increased. "We insure our own shipments," he said, adding that rates have gone up. He expects an increase of approximately 25 percent when he renews his policy, which covers shipments, inventory and warehouses.

Safavieh's warehouses in Secaucus, N.J., are 20 minutes from Port Elizabeth, which helped when shipping was delayed up to two weeks. But now, delays are only a day to a week or so, said Arash Yaraghi, vice president.

"When our brokers tell us that they are holding for inspection, it could be for many different reasons," Yaraghi explained. "They never are told specifically why. After all, it's for security reasons."

Yaraghi said much depends on the arrangements made with the shipping company. "Our deal is from the destination to our warehouse," he said. If there are any extra fees being charged at port for customs inspections, Yaraghi didn't know about it. "The shipping company is eating any extra charges if the deal is port to port."

Autor said the biggest concern to retailers is disruptions to the supply chain.

"Retailers are now sourcing globally," Autor said. "Just-in-time delivery is as important as ever, especially as fashions change. So an efficient supply chain is also important. And any disruptions to the supply chain are going to create real difficulties."

At the same time, NRF understands the need for increased port security. Autor said it would be impossible to check every container. But there are technologies, such as using X-rays, which could be used to keep the process moving smoothly. In the meantime, stepped-up Coast Guard patrols will continue and U.S. Customs Service officials will continue to make targeted inspections.

Ira Kalish, chief retail economist at Retail Forward, based in Columbus, Ohio, said he expects the higher security costs to remain in the long term while also "dragging down the efficiency of the supply chain."

In June, Richard E. Bennis, associate undersecretary for maritime and land security at the Transportation Security Administration, is expected to announce legislation regarding port security at the Institute for International Research's Seaport Security Conference.

NRF hopes the legislation will be sound. "But I just don't think members of Congress understand how U.S. Customs works or how companies manage their supply chains," Autor said.

Shipping in a nutshell

Total number of U.S. ports: 361

Total miles of U.S. coastline: 95,000

Number of berths for deep-draft ships: 3,214

Number of public and private marine terminals where cargo and passengers are transferred: 1,941

Source: American Association of Port Authorities and the U.S. Customs Service.
COPYRIGHT 2002 MacFadden Communications Group LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2002 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:insurance premiums rise
Comment:HIGHER PORT SECURITY MEANS HIGHER SHIPPING COSTS.(insurance premiums rise)(Brief Article)
Author:Zaczkiewicz, Arthur; White, Jennifer
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Article Type:Brief Article
Geographic Code:1USA
Date:May 6, 2002

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