US Retailers Bracing for a Likely Doubling of All-In Service Contract Rates
After a brief period of relief, American importers and retailers are now confronting a sharp and unsettling reversal of fortune. Having negotiated annual service contracts that came in slightly lower than the previous year, many were cautiously optimistic heading into the current shipping cycle. That optimism is quickly evaporating. A double-barrel combination of rising bunker fuel costs and soaring peak season surcharges is pushing all-in service contract rates toward levels that could be double what shippers originally locked in — and supply chain managers across the country are scrambling to reassess their cost models.
What Are All-In Service Contract Rates and Why Do They Matter?
For importers who rely on ocean freight to move goods from manufacturing hubs in Asia to US distribution centers and retail shelves, annual service contracts are the backbone of their logistics planning. These contracts, typically negotiated between shippers and ocean carriers in the spring, establish base freight rates for a 12-month period. The "all-in" rate refers to the total cost per container once surcharges, fees, and fuel adjustments are layered on top of the contracted base rate.
When those additional costs climb unexpectedly, the all-in rate can diverge dramatically from the base contract rate. That is precisely what is happening now. Retailers who believed they had secured predictable, budget-friendly freight costs for the year are discovering that surcharges and fuel adjustments are making the real cost of moving cargo far more expensive than anticipated.
The Bunker Fuel Problem: A Familiar Pressure Point Returns
Bunker fuel — the heavy fuel oil used to power container ships — is one of the most volatile cost components in ocean shipping. When energy markets shift, carriers respond quickly by adjusting their bunker adjustment factors (BAFs), which are passed directly to shippers on top of the base contract rate.
In recent months, bunker fuel prices have climbed considerably, driven by broader energy market pressures, geopolitical instability, and ongoing fluctuations in global oil supply. Carriers have wasted little time translating these increased operating costs into higher surcharges for their customers. For importers who signed contracts assuming stable energy prices, this has introduced a significant and largely unbudgeted expense into their freight spend.
The challenge is compounded by the fact that BAFs are typically calculated and applied on a rolling basis, meaning shippers have little ability to lock them in or hedge against sudden increases. What looked like a favorable contract in the spring can look very different by summer when fuel costs have moved sharply upward.
Peak Season Surcharges Are Soaring
Bunker fuel is only one half of the problem. The other is the aggressive application of peak season surcharges (PSS) by ocean carriers as shipping volumes climb ahead of the critical back-to-school and holiday retail seasons.
Peak season surcharges are an industry-standard mechanism that carriers use to capture additional revenue during high-demand periods. In theory, they reflect the tighter capacity and higher operational intensity of moving elevated cargo volumes. In practice, they can add hundreds of dollars per container on top of already elevated base rates and fuel surcharges.
This year, carriers have imposed peak season surcharges at levels that many shippers describe as aggressive. Routes from major Chinese and Southeast Asian ports to the US West Coast and East Coast have seen PSS announcements that are substantially higher than in recent years. When these surcharges are stacked on top of rising BAFs and the base contract rate, the resulting all-in cost is putting significant pressure on importer margins.
Retailers Caught in a Difficult Position
The timing could hardly be worse for US retailers. Many are still navigating the aftermath of post-pandemic inventory corrections, working to optimize stock levels while managing tight consumer spending environments. Freight is a major component of landed cost, and when shipping expenses rise unexpectedly, it either compresses margins or forces difficult decisions about pricing, sourcing, and supply chain strategy.
- Retailers with thin margins in highly competitive categories such as apparel, electronics, and home goods are particularly exposed, as they have limited ability to pass freight cost increases directly to consumers without risking volume losses.
- Smaller importers who lack the negotiating leverage of the largest retailers are finding it especially difficult to push back on carrier surcharge announcements or secure capacity at more favorable all-in rates.
- Companies that relied heavily on favorable 2024 contract rates as a planning assumption for 2025 budgets are now facing unplanned freight cost overruns that will need to be absorbed somewhere in the P&L.
What Importers Can Do to Manage Escalating Freight Costs
While the current environment is challenging, experienced logistics and supply chain professionals have several strategies available to mitigate the impact of rising all-in service contract rates.
Diversify Carrier Relationships
Relying on a single carrier or alliance for the bulk of import volume leaves shippers highly exposed to that carrier's surcharge decisions. Building relationships with multiple carriers and maintaining some volume flexibility can provide leverage and optionality when surcharges climb.
Adjust Shipment Timing Where Possible
Peak season surcharges are by definition tied to high-demand windows. Where inventory planning allows, pulling forward shipments to avoid the peak or pushing non-critical cargo to shoulder periods can reduce exposure to the highest PSS levels.
Engage Freight Forwarders and NVOCCs
Non-vessel operating common carriers and experienced freight forwarders often have access to capacity and rate structures that direct shippers cannot easily access on their own. In volatile markets, their market intelligence and relationships can translate into meaningful cost savings.
Revisit Supply Chain Footprint
The current spike in trans-Pacific freight costs is also accelerating longer-term conversations about nearshoring, friendshoring, and diversifying sourcing away from regions that require expensive long-haul ocean freight. While these are not short-term solutions, the current rate environment reinforces the strategic case for geographic diversification.
Looking Ahead: Will Rates Stabilize?
The outlook for the remainder of the peak shipping season remains uncertain. Carrier capacity decisions, energy market movements, and the ultimate strength of retail demand will all shape how long the current elevated rate environment persists. What is clear is that US retailers and importers who entered 2025 expecting a manageable freight cost environment are being forced to rethink their assumptions — and to act quickly to protect their supply chains and bottom lines.
In the meantime, staying closely connected to real-time market intelligence, maintaining open dialogue with logistics partners, and building cost contingency into procurement planning are essential disciplines for any importer navigating what is shaping up to be one of the more expensive peak seasons in recent memory.