Port of Baltimore Closure Impacts


The tragic collision of container vessel DALI with the Francis Scott Key bridge has rightly dominated headlines.  First for the sad loss of life, but conversation is now moving to the business continuity concerns due to the currently inaccessible Port of Baltimore.  Vessels within the port are unable to depart, including US Navy warships and vessels with scheduled port calls at the port of Baltimore must be rerouted.  While capacity at other ports to receive additional vessels can be an issue, of greater concern is the Roll On / Roll Off capacity that is an important specialty of the port of Baltimore.

Tangential to rerouting to alternative ports of loading/unloading, the rerouting Inland transportation for the movement of import cargo to locations surrounding Baltimore from the alternative sea port will likely cause inland congestion.  This could be amplified by the additional inland transportation congestion resulting from the absence of the Key bridge.  Export freight that has already arrived or arriving at the port of Baltimore will be delayed and likely rerouted.  Given the initial estimates of the time to clear the harbor, any cargo destined to Baltimore will be re-routed and rebooked, likely resulting in significant delays and additional costs.

With little doubt, ocean freight costs are expected to increase as any reduction in shipping capacity, real or perceived, generally results in freight rate increases.  

There is already talk of the US Federal government taking control of the bridge rebuild and the finances for it while the rest of the commercial market sorts out who is to blame and whose insurance will be paying how much for the reimbursement to the Federal government should that happen.  There are estimates already out in the press that the costs and losses will be in the billions, much covered by insurance and some most likely not.  What has not been discussed much in the press is the cost of damage to the vessel itself – and who will pay for it.  The vessel operator will (or already has) declare a General Average.  This means that the cost of damage will be averaged and shared across all of the shippers with cargo on the vessel.   Those shippers who had selected to carry Marine Cargo Insurance will be insulated from the monetary damage and delays caused by putting surety bonds in place, while those who chose to decline purchased Marine Cargo Insurance and chose to self-insure, will be obligated to put surety bonds in place to allow the release of the cargo that was off-loaded from the damaged vessel.  

In addition to the General Average declaration for the damaged vessel, many steamship lines are declaring “force majeure” events with respect to cargo bound for Baltimore.  The effects of such declarations have varied across carriers and should be researched straight away to ensure the cargo does not get discharged at an alternative port, leaving little time to effect a change and mitigate the additional charges associated with the cargo being dropped somewhere other than planned.