In the wake of the Francis Scott Key bridge collapse in Baltimore, Mediterranean Shipping Company (MSC), the world’s largest ocean carrier, has made the pivotal decision to terminate container contracts at diversion ports, placing the responsibility for cargo logistics squarely on the shoulders of U.S. companies.
This move signals a significant shift in shipping dynamics following a disaster that has disrupted a critical node in the global supply chain.
MSC joins other major carriers such as CMA CGM, COSCO, and Evergreen, who have also taken steps to alter their standard operations in response to the unforeseen calamity.
By invoking the force majeure clause, these companies absolve themselves of contractual obligations to deliver cargo to the intended destinations once the containers are rerouted to alternative ports.
An email obtained by a news source from MSC to its customers revealed the company’s approach: “For these shipments, the contract of carriage will be declared terminated at this alternate port and storage, D&Ds and on-carriage costs to the initially intended destination will be for the sole cargo’s account.”
This means that the shippers will be liable for additional costs related to transport from the diversion port to the final destination, as well as potential delay charges.
MSC said in its customer communication that it “apologizes for the disruption caused by this contingency plan which is required in response to events beyond our control, but which is taken in compliance with the terms of the contract of carriage.”
The impact of the Baltimore port crisis reaches far beyond the immediate logistics sector. The port, ranking as the nation’s eleventh-largest and a leading hub for the imports and exports of automobiles, light trucks, agricultural tractors, and other commodities, is facing an indefinite closure.
The alternative ports expected to absorb the redirected cargo include prominent East Coast locations such as New York/New Jersey, Virginia, and Philadelphia.
However, the sudden influx of shipments could potentially strain these ports’ capacities despite assurances of their readiness to handle the surge.
Logistics companies and shippers are now in a scramble to adjust to the rapid changes and ensure that the movement of goods continues with minimal disruption.
The financial and operational challenges resulting from this incident add to the pressures the shipping industry has been facing post-pandemic, including vessel overcapacity and declining earnings.
Transportation Secretary Pete Buttigieg has engaged with supply chain professionals to address the crisis, focusing on mitigating congestion and ensuring continued flow of trade.
National Economic Advisor Lael Brainard pointed to the importance of the DOT FLOW initiative in coordinating a government-wide response to support the affected stakeholders.
Nevertheless, smaller businesses without established connections at these ports may face the greatest difficulties, as Paul Brashier, vice president of drayage and intermodal at ITS Logistics, highlighted: “For some of these shippers they are starting from scratch.”