The Hidden Fees Making Your Bananas, and Everything Else, Cost More
by Michael Grabell, photography by John Francis Peters for ProPublica
June 16, 7 a.m. EDT

A cadre of ocean carriers are charging exorbitant, potentially illegal, fees on shipping containers stuck because of congestion at ports. Sellers of furniture, coconut water, even kids’ potties say the fees are inflating costs.

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THE STORY YOU’RE ABOUT TO READ is bananas, and it’s also about bananas.

Last fall, a company called One Banana loaded 600,000 pounds of the fruit from its plantations in Guatemala and Ecuador onto ships bound for the Port of Long Beach in California. Once they arrived, the bananas, packed in refrigerated containers, were offloaded by cranes for trucking to a nearby warehouse, where the fruit would be sent to supermarkets nationwide.

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But in the midst of a global supply chain crisis, none of the trucking companies the importer normally worked with were willing to come and get the containers.

As the bananas sat at the marine terminal, a logistics specialist for One Banana scrambled, contacting more than a dozen trucking firms.

With each passing hour, the bananas grew closer to spoiling.

“We need to pull out 15 containers from Long Beach Port,” the logistics specialist wrote in an email to one firm. “Please let me know if you could help me with this.”

A trucking company finally said it could — but only if One Banana first paid $12,000 per container on top of already higher transportation costs.

This is where the plot ripens.

If One Banana were to accept that additional fee and pass the full cost along to consumers, the bananas could go from 60 cents a pound to 90 cents a pound. That alone might not break your budget, but rising prices of everyday items are adding up to the worst inflation in 40 years. Many of the causes may seem obvious. Massive consumer spending and pandemic shutdowns have strained supply chains. The war in Ukraine is driving up the price of gas. But the extra fees for transporting bananas — and countless other products — are a hidden and mind-boggling source of inflation controlled by ocean carriers.

Simply put, as ballooning costs hit the wallets of American families, the global ocean shipping industry is enjoying its most profitable period in recent history. In the first quarter of 2022, the biggest carriers’ operating margins hit 57%, according to one industry research firm, after hovering in the single digits before the pandemic.

The hauler that wanted $12,000 per container to move the bananas told the One Banana logistics specialist that it needed the money to cover a slew of fees the ocean carriers were tacking onto freight bills. Hapag-Lloyd, the German shipping giant that owned the containers the bananas were sitting in, had become particularly notorious in the freight industry, leading to multiple complaints to the Federal Maritime Commission.

In normal times, the fees, known as detention and demurrage, make a lot of sense. Importers who don’t pick up their stuff on time get charged demurrage for storage at the marine terminals. Truckers who don’t return an empty container on time pay late fees, or detention. The purpose of the penalties is to incentivize the various players in the supply chain to keep goods flowing.

Most of the imported goods Americans buy are carried by ship and unloaded at ports like Long Beach for transportation by truck or rail toward their final destination.
But as supply chains snarled last year, the ports of Long Beach and Los Angeles ran out of room and became clogged with shipping containers that importers, often big-box retailers and brands, weren’t able to retrieve. Surrounding truckyards and streets were flooded with empty containers, temporarily dumped there by trucking companies that couldn’t get appointments to return them to the ports.

Hapag had made it “extremely difficult” to return empty containers, the trucking company said, and it was often left holding them for a month, all while Hapag continued to charge the firm $400 a day for each container that wasn’t returned on time. One trucking company that the importer contacted said it almost had to shut down temporarily because all the chassis — the steel frames with wheels that attach to trucks — that it needed to pull new loads from the ports were sitting under 70 empty containers that Hapag refused to take back.

Essentially, One Banana and several trucking companies said Hapag had created the situation it was now profiting from.

“It’s like renting a car at the airport, and when you try to return it, they’re saying, ‘No, you have to hang on to it for us, and we’re gonna continue to charge you,’” said Fred Johring, the CEO of one of the trucking firms, Golden State Logistics.

Hapag declined to comment, but in filings with the Maritime Commission, it denied One Banana’s allegations that the fees were unfair.

The case is ongoing, but on this late October day in the Port of Long Beach, hundreds of thousands of dollars’ worth of bananas hung in the balance.

FOR MORE THAN A YEAR, retailers and brands have complained of crushing costs as the rate to ship a container from China to the West Coast skyrocketed from less than $2,000 before the pandemic to over $20,000 last year. Ninety percent of the stuff Americans buy from overseas arrives by ship, and nearly all of it is carried by a small number of ocean carriers that work together in three alliances that dominate the trade.

The Federal Maritime Commission, which regulates the ocean shipping industry, recently concluded that the spike in freight rates was driven by the surge in spending and record congestion, not monopoly power.

But the federal government said what’s happening with the additional detention and demurrage fees isn’t simple supply and demand. Instead, it said ocean carriers have taken advantage of the crisis and “contributed to the pain” by imposing billions of dollars in “purposeless” and illegal fees that violate the Shipping Act.

Now, the arcane matter of detention and demurrage has made its way into corporate earnings reports. Companies ranging from Bed Bath & Beyond and Havertys Furniture to Vita Coco beverages and Summer Infant, which makes baby strollers and potties, have blamed detention and demurrage fees for hurting their bottom lines or leading them to increase prices.

“Most people didn’t even know what those things were,” Trevor Lang, chief financial officer for Floor & Decor, said in an earnings call in February.

In comments to federal regulators in April, the Home Furnishings Association wrote, “These demurrage and detention fees have become a significant part of furniture retail costs in the last 2+ years.”

The trade association representing toymakers like Hasbro and Mattel called the charges “unethical,” while a group representing meatpackers like Tyson Foods and Cargill accused ocean carriers of “near-constant predatory and unreasonable behavior” and “a clear abuse of market power.”

Cranes move containers off ships and into the port. Containers are typically owned by the ocean carriers, which can charge fees for storage at marine terminals or when containers are returned late.
One Banana called the fees “unjust and unreasonable” in a complaint to the Maritime Commission. But other fruit importers went further in agency comments.

“Demurrage charges are one way in which ocean carriers abuse their monopoly power over ocean transport,” the fruit importer William H. Kopke Jr. Inc. wrote to the commission. “Particularly when the cargo is perishable, it is as if the cargo is held hostage. If the receiver does not pay any charges demanded immediately, not only does the cargo rot while the charges are under dispute, but demurrage charges will continue to accrue.”

In an interview, John Butler, president of the World Shipping Council, said the ocean carriers that the trade group represents have been dealing with historic demand and congestion and, with the millions of boxes that they’re moving, disputes are bound to erupt.

“In the eyes of their customers, do they get it right all the time? Of course not,” he said. “Does that make it unreasonable? Sometimes it might be. Sometimes it might not be. It really is case by case. So you can't generalize about practices because it really does come down to the situation.”

In particular, Butler said, many big-box retailers and other importers have been using the ports as storage because their warehouses are full or they can’t get truckers to move their cargo.

The fee controversy is pitting the Maritime Commission, with 128 employees and a $31 million annual budget, against a global shipping industry that raked in $214 billion in profits last year.

In recent months, the commission has been trying to crack down on the fees by inviting complaints like One Banana’s and proposing tougher rules on ocean carriers. And on Monday, Congress approved the Ocean Shipping Reform Act, giving the commission more teeth.

The Maritime Commission rebuked Hapag in one case involving Golden State Logistics, proposing the biggest fine in the agency’s history: $16.5 million.

The proposed fine was still less than the profit Hapag made in a single day last year, but the commission hoped it would send a message. In late April, an administrative law judge agreed that Hapag had violated the Shipping Act, and last week the company agreed to settle the case for $2 million — about what Hapag made in 98 minutes.

Hapag declined to comment on the commission’s case but told the judge that its practices were reasonable and that any fees were the trucking firm’s fault.

As U.S. regulators spar with the global behemoths who control the shipping trade, the inefficiencies of a supply chain that once seemed blazingly efficient are becoming clear.