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Ocean shipping hike may be higher

Thomas Russell -- Furniture Today, February 15, 2004

HIGH POINT — A planned rate increase for overseas shipping could be higher than industry officials were estimating last month.

The Journal of Commerce, which covers the shipping trade, now projects the increase will range from $450 to $600 per container or FEU (40-foot equivalent unit). It also said carriers could impose a $400 peak-season surcharge between June 15 and Oct. 31.

Earlier, logistics and furniture industry officials were estimating an increase of around $300 per container, about a 10% hike.

Any rate changes will be proposed by the Transportation Stabilization Agreement, which represents 14 major carriers that ship product between Asia and the United States. Once finalized, new rates would take effect May 1.

Chad Rosenberg, CEO of Global Link Logistics, said rates are rising because of higher demand. "It's because the ships are pretty full this year," he said. "Most are at 90%-plus capacity."

For a furniture importer that ships 1,000 containers a year, the increase could mean $450,000 to $600,000 in added freight expense, not including any surcharge.

But the move's effect on furniture depends on whether the rate increase holds throughout the year. In the past, rates have dropped during the year, largely because of price competition between carriers.

"Each contract is negotiated on its own merit depending on volume," said Richard Mihalick, a vice president of operations for importer Legacy Classic Furniture. Large-volume shippers can often negotiate lower rates, he said.

"I would hope that we would not be hit with that high a cost," he said. "Our intent is to negotiate the best we can to get it lower. I think we will be successful."

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