Port Congestion Surcharge - Why It Happens and How to Avoid It

Port Congestion Surcharge (PCS) is one of the most troublesome "invisible killers" for companies in recent years. In order to cope with the additional operating costs caused by port congestion, shipping companies usually charge port congestion surcharges, which brings additional transportation costs and fulfillment challenges to B2B companies and cross-border e-commerce sellers. According to industry statistics, the average congestion surcharge of major ports in the world in 2023 increased by 35% year-on-year, and some routes even had an additional charge of more than $2,000 per container.

As a professional international logistics service provider, Chinadivision will start from the underlying logic to dismantle the causes of PCS for you, and provide practical solutions to help you stabilize costs in the fluctuations of the global supply chain.

What is the Port Congestion Surcharge (PCS)?

The port congestion surcharge is a temporary fee charged by shipping companies or freight forwarders to cargo owners when the destination port/transit port is severely congested, causing ship delays and increased operating costs. Its core purpose is to share the additional costs caused by waiting for berthing, storage detention, equipment shortages, etc.

Simply put, a port is like a large cargo transfer station. When a large number of cargoes arrive in a concentrated manner, exceeding the normal handling capacity of the port, resulting in longer waiting time for ships to load and unload, shipping companies will face problems such as increased shipping delay costs and additional fuel consumption. In order to make up for these increased costs, shipping companies will charge PCS to cargo owners.

PCS usually occurs when ships are queued for berthing, or when containers are detained for longer than expected due to slow unloading or customs clearance. The amount of the surcharge depends on the severity and duration of the congestion. The surcharge per container ranges from US$150 to more than US$1,000, which will seriously affect the shipping budget.

What causes port congestion surcharges?

A surge in cargo during the peak trade season

During the peak trade season, such as around holidays, the market demand is strong and a large amount of cargo flows into the port. Port facilities, manpower and other resources are limited and cannot handle so many cargoes in a short period of time, which will cause congestion problems such as ship queues, insufficient berthing areas, and delays in loading and unloading operations. For example, on the eve of the Christmas shopping season, a large number of Chinese-made goods need to be shipped to the local area, and the port cargo throughput increases significantly, which is easy to cause port congestion and thus PCS.

Influence of weather factors

Bad weather, such as typhoons, heavy rains, and heavy fog, may hinder ships from entering and leaving the port. If the ship cannot dock or leave the port on time, it will wait at the port, resulting in delays in the ship schedule and increasing the operating costs of the shipping company (such as ship rental fees, fuel costs, etc.), which will lead to the generation of PCS. For example, Southeast Asia is often affected by typhoons during the rainy season, and ports may be temporarily closed. Ships can only wait for the weather to improve in the open sea, which is easy to cause port congestion.

Inefficient port management

Inefficient port management will also aggravate congestion. For example, unreasonable scheduling results in the inability of ships to berth in time; slow document processing prolongs the customs clearance time of goods, etc. These problems will increase the time that ships stay in ports, which in turn leads to the emergence of PCS.

Managing supply and demand imbalance

In some cases, shipping companies may manage the flow of goods by charging PCS, encouraging shippers to use relatively idle ports, thereby alleviating congestion at specific ports.

Why are port congestion surcharges so frequent?

Global supply chain imbalance

Fluctuations in e-commerce demand have led to radicalization of inventory strategies and cyclical surges in port throughput. Or empty containers are stranded inland, chassis shortages and other issues extend port storage time.

Aging port infrastructure

Most ports in Europe and the United States have lagging equipment updates and low automation (for example, only 30% of US ports are automated), and efficiency is difficult to match cargo growth.

Labor disputes and strikes

In 2022, a strike at the Port of Hamburg in Germany caused 100,000 TEUs of cargo to be stranded, and shipping companies were forced to levy PCS $1,200/container.

Geopolitical and policy changes

For example, the Red Sea crisis forced ships to bypass the Cape of Good Hope, and the Asia-Europe route extended the sailing time by 7-14 days, pushing up the risk of congestion at European ports.

Impact of abnormal climate

Extreme weather (such as drought in the Panama Canal) disrupted the global shipping network and increased pressure on regional ports.

Who needs to pay the port congestion surcharge?

Usually, the port congestion surcharge is charged by the shipping company or freight forwarder to the shipper. However, the specific payer may be clearly agreed upon in the trade contract.

FOB terms: Usually borne by the buyer (importer) because the cost is related to the congestion at the destination port.

CIF/CFR terms: In theory, it is prepaid by the seller (exporter), but it may be passed on through price negotiations.

Exception: If the congestion is caused by the shipping company's scheduling error (such as unreasonable port jumping), the fee reduction can be claimed.

PCS is mostly charged on a "temporary notice" basis. If the fee cap is not clearly stated in the contract, the cost may be out of control.

How to avoid or reduce port congestion surcharges?

Choose alternative ports or transportation routes

Plan a "second destination port" in advance, or adopt "sea-rail transport" or "sea-truck transport" to avoid congested hubs. Congestion may vary in different ports. When choosing a transport port, you can consider factors such as port facilities, management efficiency, and route coverage, and choose a relatively less congested port. At the same time, you can also consider using multiple ports for cargo transshipment to disperse transportation pressure.

Locking space and booking in advance

Pay close attention to market trends and seasonal demand changes, and plan the transportation time of goods in advance. Avoid peak periods such as trade peak seasons and holidays, and choose to arrange shipments when the port is relatively idle, which can greatly reduce the probability of encountering port congestion. Book 8-12 weeks in advance during the peak season, give priority to direct sailing schedules, and reduce the risk of congestion at transit ports. Sign a long-term contract agreement with the shipping company and agree on PCS exemption clauses or fee caps.

Optimize supply chain flexibility

Strengthen communication and collaboration with suppliers and logistics partners to optimize supply chain management. Ensure that the production and delivery time of goods can match the transportation plan to avoid goods arriving at the port too early or too late. At the same time, keep abreast of the transportation status of the goods, and adjust the transportation plan in time if possible port congestion is found. Establish a "regional warehouse + cross-border small package" hybrid fulfillment model to reduce dependence on a single port. Deploy transit warehouses in near-shore markets (such as Mexico and Eastern Europe) to deal with sudden congestion.

Digital monitoring and emergency response

Access port operation data platforms (such as Port Optimizer at the Port of Los Angeles) to predict congestion trends. Purchase "supply chain interruption insurance" to cover PCS and other surcharge losses.

Cooperate with professional logistics service providers

Choose a professional international logistics order fulfillment service provider like Chinadivision to cooperate with us. With our rich industry experience and extensive resource network, we can provide you with more reasonable transportation plans and suggestions. We will pay close attention to the dynamic information of the port, adjust the transportation routes and methods in time, and help you avoid or reduce the generation of PCS. At the same time, we can also provide you with a one-stop logistics solution, including warehousing, customs declaration, transportation and other links, so that your international transportation will be more worry-free and efficient.

FAQ (Q&A)

Can the port congestion surcharge be negotiated and reduced?

If the congestion is caused by factors that the shipping company can control (such as loading errors), you can seek a reduction through formal complaints.

How long does the surcharge usually last?

It can be as short as 2-4 weeks (such as weather impact) or as long as several months (such as a strike negotiation deadlock). It is recommended to sign a "floating surcharge clause" to agree on trigger conditions and termination mechanisms.

How can Chinadivision help you deal with PCS risks?

We can effectively avoid or reduce the occurrence of PCS by planning in advance, choosing the right port, optimizing supply chain management, and cooperating with professional logistics service providers. If you have any questions about international transportation or need professional solutions, please feel free to contact Chinadivision International Logistics Order Fulfillment Service Provider, we will serve you wholeheartedly!