US Retailers Face a Perfect Storm: Service Contract Rates Could Double
After what seemed like a brief moment of relief, US retailers and importers are now confronting a sobering reality. Annual service contracts that were negotiated at slightly lower rates than the prior year are quickly becoming inadequate shields against a rapidly shifting freight market. The double-barrel impact of rising bunker fuel costs and soaring peak season surcharges is pushing all-in service contract rates toward a near doubling — a development that threatens to reshape supply chain budgets and retail pricing strategies across the country.
For businesses that depend on trans-Pacific and other major trade lanes to keep shelves stocked, understanding what is driving these rate increases — and how to respond — has never been more critical.
Why Service Contract Rates Are Under Pressure
Every year, large importers negotiate service contracts with ocean carriers. These agreements typically lock in a base freight rate for a set period, giving shippers some degree of cost predictability. Going into the most recent contract season, many importers celebrated modest rate reductions compared to the year prior, interpreting this as a sign of a normalizing freight market.
However, base contract rates only tell part of the story. The true cost of moving cargo — often called the all-in rate — includes a growing list of surcharges and accessorial fees that are layered on top of the contracted base price. And it is those additional costs that are now catching retailers and importers off guard.
The Rising Cost of Bunker Fuel
One of the most significant contributors to the sudden spike in all-in service contract rates is the sharp rise in bunker fuel costs. Bunker fuel, the heavy oil used to power cargo vessels, is one of the largest operating expenses for ocean carriers. When fuel prices climb, carriers pass those costs on to shippers through mechanisms known as bunker adjustment factors (BAF) or fuel surcharges.
Global energy market volatility, ongoing geopolitical tensions, and shifts in environmental fuel regulations have all contributed to elevated bunker fuel prices. The transition toward low-sulfur fuels under international environmental standards has added another layer of cost that carriers are increasingly unwilling to absorb. As a result, fuel-related surcharges are climbing steadily, adding hundreds of dollars per container to what importers budgeted at the start of contract season.
Peak Season Surcharges Are Soaring
Compounding the fuel cost challenge is the surge in peak season surcharges. Peak season surcharges, commonly referred to as PSS, are additional fees that carriers impose during periods of high cargo demand — typically from late spring through the fall, coinciding with holiday inventory build-ups and back-to-school shipping cycles.
This year, peak season surcharges are running significantly higher than historical norms. Carriers are capitalizing on strong import demand driven by front-loading activity, as retailers rush to move goods ahead of potential tariff increases, trade policy changes, and ongoing uncertainty in global supply chains. When demand spikes and vessel space tightens, carriers have substantial leverage to impose and increase surcharges — and they are exercising that leverage aggressively.
For importers who locked in base contract rates expecting a manageable freight year, the combination of elevated PSS fees on top of rising fuel surcharges is delivering a jarring budget shock.
What "Doubling" of All-In Rates Actually Means for Retailers
When industry analysts and logistics professionals talk about a potential doubling of all-in service contract rates, they are referring to the total cost per container, once all surcharges are factored in alongside the base rate. A shipper who budgeted, say, $2,000 per forty-foot equivalent unit (FEU) based on contracted base rates could realistically be looking at an all-in cost of $4,000 or more once fuel surcharges, peak season surcharges, port congestion fees, and other accessorials are applied.
For large retailers moving tens of thousands of containers per year, this magnitude of increase translates into tens or even hundreds of millions of dollars in unplanned freight costs. Smaller importers with tighter margins face even more acute pressure, as they typically lack the purchasing power to renegotiate mid-year or to access alternative capacity on short notice.
How Importers Are Responding
Faced with this new freight cost reality, importers and supply chain managers are exploring a range of strategies to manage their exposure.
Diversifying carrier relationships: Some importers are spreading cargo across multiple carriers rather than relying on a single contract, seeking competitive spot rates where available and reducing dependency on any one partner.
Adjusting import timing: Where inventory and cash flow allow, some retailers are pulling forward shipments to avoid peak season windows, accepting higher near-term volume in exchange for lower per-unit freight costs.
Renegotiating surcharge caps: Sophisticated shippers are working with freight forwarders and carriers to negotiate caps or ceilings on variable surcharges within their service contracts, limiting worst-case exposure.
Revisiting product sourcing geography: Longer term, some retailers are evaluating nearshoring and friendshoring options to reduce reliance on long-haul ocean freight and its associated volatility.
The Broader Supply Chain Implications
The pressure on all-in service contract rates does not exist in isolation. It is part of a broader and more turbulent freight environment shaped by geopolitical uncertainty, ongoing port infrastructure challenges, shifting trade policies, and the lingering structural changes wrought by post-pandemic supply chain disruptions. Carriers, having weathered a period of softened rates, are now better positioned to defend yield — and they are doing so effectively.
For the retail industry, these freight cost increases add yet another variable to an already complex margin equation. With consumers remaining price-sensitive and competition from e-commerce intensifying, passing higher logistics costs through to shelf prices is increasingly difficult.
Looking Ahead: Planning for a More Expensive Freight Environment
The lesson being learned — or relearned — by US retailers and importers this shipping season is that a contract rate is only the starting point of the freight cost conversation. All-in cost discipline, surcharge awareness, and dynamic logistics planning are no longer optional sophistications; they are essential competencies for any business that moves goods across oceans.
As carriers continue to leverage tight capacity and elevated demand, and as fuel markets remain unpredictable, importers should plan their freight budgets conservatively, build surcharge contingencies into their financial models, and engage supply chain advisors who can help navigate an environment where the all-in cost can look very different from the contracted base rate. The retailers who act proactively now will be far better positioned to protect their margins as the peak season unfolds.