Carriers Impose Surcharges as Iran Conflict Disrupts Shipping Routes
Carriers Impose Surcharges as Iran Conflict Disrupts Shipping Routes
By Oliver M. Krischik and John H. Kester
Over the course of the weekend, the U.S. and Israel launched strikes against Iran-related targets, and Iran responded by striking against U.S.- and Israel-related targets in the region. The armed conflict and ongoing military actions have unsurprisingly caused disruption to shipping routes as commercial vessels come under attack and ocean carriers respond to the situation.
Specifically, amid strikes in at least eleven countries: Iran, Israel, Bahrain, Cyprus, Iraq, Kuwait, Lebanon, Qatar, Saudi Arabia, Syria, and United Arab Emirates, at least five of the largest vessel-operating common carriers (“VOCCs”) have announced they have suspended nearby service and/or had imposed surcharges tied thereto. While there is not much certainty with regard to the ongoing hostilities, it is possible that the hostilities may continue for several weeks or months.
Ocean carriers are responding differently to the situation at the present time, and the actions will have consequences for: (i) acceptance of new bookings; (ii) routing, delivery, and costs for shipments in transit; and (iii) pricing for new bookings. As we saw with the Red Sea surcharges in late 2023 and early 2024, some ocean carrier actions may not be compliant with the Shipping Act of 1984 (as amended) and the Federal Maritime Commission’s (“FMC’s”) regulations. Nonetheless, Ocean Transportation Intermediaries (“OTIs”) would be prudent to (a) monitor the actions taken as applicable to ongoing shipments; (b) inform customers of the ongoing situation and the OTI’s position in that regard; (c) take note of new surcharges and routing rules applicable to new bookings with various ocean carriers; and (d) take the additional tangible steps described in greater detail below (e.g., reviewing tariff and contractual force majeure pass-through language) in order to ensure they are not the party responsible for such charges.
Relevant Developments in the Region
Iran, according to the BBC, told ships not to transit the Strait of Hormuz, through which cargo passes between Oman and Iran and into the Persian Gulf. Iran said there were three U.S.- and U.K.-originating tankers “‘struck by missiles and…burning’” as of Sunday, according to the BBC. Some 150 tankers or more had dropped anchor in the Gulf, thereby avoiding movement through the Strait, BBC said. In addition to containerized cargo, roughly one-fifth of the world’s oil, and one-fifth of its liquified natural gas consumption traveled through the Strait in 2024, according to the U.S. Energy Information Administration.
Insurance prices for Gulf ships could surge by half, jumping from $250,000 to $375,000 for a $100 million ship, according to the Financial Times (“FT”). Costs already had ballooned in recent months as uncertainty in the region translated to skyrocketed war risk insurance rates and massively increased container spot rates. Insurers informed shipowners Saturday of their intent to cancel policies and raise prices, FT reported.
Summary of Ocean Carrier Announcements and Actions
While ocean carriers may continue to announce changes or revise their actions as the situation develops, the following includes some significant announcements from ocean carriers over the past several days:
- CMA CGM:
- On Saturday, CMA CGM said, “[a]ll vessels inside Gulf, and bound to Gulf, have been instructed with immediate effect to proceed to shelter,” and that Suez service was suspended.
- On Sunday, it announced an “Emergency Conflict Surcharge” of $2,000 per dry 20-foot container, $3,000 per dry 40-foot container, and $4,000 for reefers or special equipment. It said the surcharge applies to “cargo already afloat” as well as bookings Monday or later.
- Also on Sunday it said it immediately would cease reefer bookings to or from “Iraq, Bahrain, Kuwait, Yemen, Qatar, Oman, United Arab Emirates, Kingdom of Saudi Arabia, Jordan, Egypt (Port of Ain Sokhna), Djibouti, Sudan and Eritrea.”
- Hapag-Lloyd:
- Hapag-Lloyd on Sunday announced a “War Risk Surcharge” effective Monday, March 2, costing $1,500 per standard TEU, and $3,500 for reefers and special equipment. It said the charge would apply to goods already on the water in addition to new bookings Monday or later.
- On Monday it announced “[a] Contingency Surcharge…for all sailings commencing on March 3 until further notice” in the same amounts. Also on Monday it highlighted “[o]perations may be affected” for shipments to or from the United Arab Emirates, Saudi Arabia, Kuwait, Qatar, Bahrain, Iraq, and Oman and said it had ceased bookings between “Mauritania, Senegal, Gambia, Guinee, Sierra Leone, Liberia, Ivory Coast, Ghana, Togo, Benin, Nigeria, Cameroon, Gabon, Equatorial Guinea, Congo Brazzaville, DR Congo, Angola, Namibia, South Africa, Kenya and Tanzania, Sudan, Djibouti” to, g., the United Arab Emirates, Iraq, Kuwait, Qatar, and the “Eastern Province of Saudi Arabia.” It further said it would stop all reefer bookings to or from Iraq, Bahrain, Kuwait, Qatar, United Arab Emirates, “Eastern Province of Saudi Arabia,” and Oman.
- MSC:
- Maersk:
- Maersk announced on Sunday it will reroute all Middle East-India to Mediterranean and Middle-East-India to East Coast US shipments around the Cape of Good Hope and had chosen to “pause future Trans-Suez sailings through the Bab el-Mandeb Strait,” through which ships pass to the Red Sea and onto the Suez Canal.
- On Monday, it announced that, “[e]ffective immediately,” it was “suspending reefer, dangerous / special cargo acceptance in and out of UAE, Oman, Iraq, Kuwait, Qatar, Bahrain and Saudi Arabia until further notice” and “suspending all new bookings between the India Subcontinent (India, Pakistan, Bangladesh and Sri Lanka) and the Upper Gulf markets of UAE, Bahrain, Qatar, Iraq, Kuwait, and Saudi Arabia (Dammam and Jubail only).” It said, “[c]onfirmed bookings accepted prior to this advisory will be reviewed on a case-by-case basis in light of the current operational constraints.” As of Monday, it had not announced a related surcharge.
- Ocean Network Express (“ONE”):
- ONE on Monday said it “will temporarily suspend acceptance of new bookings for cargo moving both to and from the Persian Gulf until further notice.”
Monitoring Actions and Compliance
- New Charges: As carriers impose global actions to address the situation, it may be that they apply new surcharges, rates, or other changes to U.S. trade shipments in a manner that is not compliant or enforceable under the FMC’s regulations. Non-vessel operating common carriers (“NVOs”) may face the same issue when imposing their own actions or passing through noncompliant ocean carrier charges.
- Rerouting Existing Shipments: Existing shipments may be rerouted in practice, but the lawfulness of such changes will depend on the applicable tariffs, contracts, and terms and conditions, as will the lawfulness of charging shippers for expenses related to re-routing.
- Force Majeure: Ocean carriers may claim force majeure under their tariff, bill of lading terms and conditions, or Service Contract terms. To the extent that ocean carriers claim force majeure, OTIs may also be able to claim force majeure depending on whether a force majeure clause exists in applicable tariffs, contracts, or terms and conditions, and, if so, how those clauses are written.
Thus, in light of VOCC announcements and uncertainty with regard to the conflict, OTIs and shippers would be prudent to:
- Review their Service Contracts with ocean carriers, and any NSAs or NRAs with NVOs and customers, as well as governing bill of lading terms and conditions;
- For NVOs, review (and update) their tariffs as soon as possible to ensure that new ocean carrier charges can be passed through to shippers/consignees;
- Understand and assess alternatives in light of service disruption in the area of the Strait of Hormuz;
- Coordinate with ocean carriers and other parties with regard to any affected shipments, particularly where shipments are re-routed or diverted to new destinations; and,
- For OTIs, alert their customers to these charges, related service disruptions and delays, and how the OTIs will be handling them.
We hope this is helpful, and please contact us should you have any questions. As we have during prior disruptions (COVID, port strikes, Red Sea attacks, etc.) we can assist in drafting notices to customers, tariff reviews/updates, reviewing the validity of new surcharges and routing imposed on shipments, and discussing those issues with ocean carriers.
Oliver M. Krischik okrischik@gkglaw.com
John H. Kester jkester@gkglaw.com
