Keeping abreast of current worldwide economic conditions and forecasting are essential traits for businesses involved in far-reaching shipping and operations. In the wake of the Hanjin bankruptcy, what changes have arisen, and how will they affect global supply chain management? Given that international shipping is the powerhouse behind multinational economics, what are the broader, more pervasive results of this dynamic shift in the industry?
On August 31st of this year, Hanjin Shipping, a South Korean company with over 200 cargo ships, suddenly declared bankruptcy, stranding 90 of those ships, holding $14 billion in cargo. As the seventh largest shipping company on the planet, this is being seen by many analysts as a bellwether, the first in a series of financial dominos to fall. The causes of the failure of Hanjin range from numerous EU bailouts, the collapse of the Chinese economic bubble, to as far as the US student loan debt crisis. All these factors and more weakened global market confidence and, as investors pulled back, businesses like Hanjin were left without enough capital to continue to operate.
Short Term Effects
The first concern of the worldwide shipping industry is to finance the stranded ships so they can be docked and offloaded. The primary merchandise involved is appliances and technology, but even those items can suffer depreciation if they sit in transit too long. Given the upcoming holiday season, supply chain management systems are actively seeking other logistics solutions and workarounds to move products from production to the hands of retailers and consumers.
Long Range Results
It seems facetious to call the $14 billion in stranded merchandise minor but, compared to the more encompassing losses the industry can expect, the $14 billion dollar loss is just that. This is not an isolated incident. The G20 countries have long been warned of the potential for disaster from the failure of any of a number of financial sectors; but the consistent global expansion for years seemed to belie that truth. When Hanjin applied for financial assistance at the final crucial moment, they exposed a long-standing lack of economic soundness that had gone at the very least undetected, if not outright ignored, for years. The impact of the fall of Hanjin will be felt far beyond the shipping and retail industries. It has been the first to fail, but is unlikely to be the last. Of the 12 shipping companies, 11 have published major losses in the last quarter. As a result, many of them have created alliances to shore up resources. However, with 90% of the world’s goods traveling by ship, any weakness is certain to have widespread and nefarious effects on consumer confidence, banking rates, and even international relations.
Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described by the legal term act of God (hurricane, flood, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party’s non-performance entirely, but only suspend it for the duration of the force majeure.
The typical carrier bill of lading contains a clause stating even if the carrier declared force majeure, the carrier is entitled to collect all the freight charges due. You can quickly imagine the messiness paying third parties rather than Hanjin directly is going to cause should the bankruptcy trustee come to collect.
Hanjin will be declaring force majeure with respect to its contractual obligations to provide transportation services. It is possible that Hanjin will exercise the provisions of the “Hindrance” clause in its bill of lading to declare that the transportation services have been terminated, that it is entitled to full freight, and that the merchant now needs to make any necessary arrangements to complete the transportation services to destination.
Consequently, whether or not any of its vessels are seized, it may well be that arrangements will need to be made to make sure that goods in Hanjin’s possession or control are released and then moved to final destination.
How are US Ports dealing with Hanjin’s loads?
On the West Coast, terminal operators in Los Angeles and Long Beach are unloading all of the containers from the vessels. Containers that do not belong to Hanjin are processed according to normal procedures and terminals are holding onto import loads in Hanjin containers and will deliver the containers to truckers only if the beneficial cargo owners pay the terminal cargo-handling charges upfront. The terminals are not accepting Hanjin export loads and empty containers.
At the Northwest Seaport Alliance of Seattle and Tacoma, Terminal 46 is now accepting import containers, but is not accepting export loads and empties. Olympic Container Terminal in Tacoma is not accepting any Hanjin deliveries for now and the Husky Terminal is not accepting exports or empties, but is unloading imports and is encouraging truckers to bring their own chassis.
In Vancouver, Global Container Terminal said it will no longer receive Hanjin ships.
On the East Coast, the largest terminal in the Port of New York and New Jersey, Maher Terminals, has made no statement on if, or how much, shippers must pay to get Hanjin containers. Maher is the only New York-New Jersey terminal that receives Hanjin ships, and APM Terminals, Port Newark Container Terminal, and Global Container Terminals didn’t disclose how they are handling Hanjin containers.
Philadelphia reported no impact from Hanjin ships or containers. Boston does not receive Hanjin ships.
Baltimore, Ports America Chesapeake, which operates the Seagirt Terminal in Baltimore didn’t disclose how it’s handling already received Hanjin containers. The terminal did say it will not accept any inbound Hanjin cargo, and they will continue receiving but not delivering Hanjin empty containers.
At the Port of Virginia, Hanjin export containers may be picked-up at the terminals by the original shipper only with authorization from Hanjin.
The South Carolina Ports Authority has waived the non-vessel delivery fee for export loads out-gated and all import loads discharged on or after September 1 will be placed on hold until such time as all SCPA charges are settled.
The Georgia Ports Authority, which oversees the second-largest port on the East Coast, Savannah, wasn’t available to comment, nor was Port Miami. The Port of Jacksonville said it does not have any calls from Hanjin or other CKYHE Alliance members.
Along the Gulf Coast, Houston is holding containers until they receive $100 to cover the Port of Houston Authority’s terminal throughput charges, which are separate from stevedoring costs.
Stay tuned to our Blog for more information on the status of this dynamic shift in our industry. Jaguar Freight is a freight forwarder providing custom transportation solutions for a global community. The support of a dedicated team, with intuitive technology, that’s what Jaguar delivers.
As you probably already know, Hanjin Shipping filed for bankruptcy protection Aug. 31, 2016, after months of trying to raise liquidity and restructure its debt, triggering a mad scramble by shippers to locate and gain control of their containers.
This unfortunately means the inevitable increase in the cost of a wide range of goods, such as, furniture, clothing, food both frozen and fresh. The fundamental nature of economics is the driver behind the price spikes; as demand increases, supply becomes elusive yet competitive, causing freight costs to balloon.
As the the seventh largest container carrier in the world, Hanjin’s doubtful future is a pivotal moment in the shipping industry. Carriers have announced they will hike container freight rates by as much as 50 percent beginning next month as retailers scramble to secure shipping ahead of the peak year-end holiday season. $14 billion worth of cargo has been stranded, leaving many shippers struggling to find replacements.
What else is driving costs?
Port fees. Hanjin would normally pay the fees for port usage and container handling as part of its freight services. Cargo shippers have been forced to pay thousands of dollars in fees to terminal owners and truckers to reclaim their goods from Hanjin ships to prevent perishable foods from spoiling and to avoid losing sales because goods are not available when customers want them.
Is this going to last?
Not exactly, yes, but no. While billions of dollars were left stranded at sea following the bankruptcy announcement, the shipping industry is beginning to recoup. Industry analysts expect the freight increases to be short-lived as more shipping capacity comes online.
Retail markets specifically will most likely see a dip in profits this quarter, if they are to avoid drastically increasing the price of goods to the consumer. To maintain competitivity, the cost fluctuations will hit profit margins for the majority of retailers.
Container freight charges have been exponential since May, and could continue to push forward during these next few tumultuous months. With holiday season approaching, it’s not too late to get your goods to market for the holiday season, but you may need to accelerate some of your previously agreed shipping schedules. The average cost to move goods in 40-foot containers from the U.S. West Coast to Asia was quoted at $1,700 this month, up from $788 in May.
As a professional freight forwarder, our main goal is to ensure your total satisfaction. Contact us if you’d like to talk more about how Hanjin’s demise is potentially affecting your business. At Jaguar, we deliver excellence, so you can.
Traders from both developing and developed countries have long pointed to the vast amount of “red tape” that still exists in moving goods across borders, and which poses a particular burden on small and medium-sized enterprises. To address this, WTO Members concluded negotiations on a landmark Trade Facilitation Agreement (TFA) at their 2013 Bali Ministerial Conference and are now in the process of adopting measures needed to bring the Agreement into effect.
The TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building in this area. The Agreement will help improve transparency, increase possibilities to participate in global value chains, and reduce the scope for corruption.
The TFA was the first Agreement concluded at the WTO by all of its Members.
The benefits to you
Numerous studies have estimated the positive impact of the TFA on global trade and income. As trade has become more liberalized, other obstacles to trade have gained importance, and in today’s trade logistics context, facilitation has become more important than ever. The inclusion of trade facilitation in the WTO agenda reflects a number of specific trends in international trade and logistics.
The logistics experts at Jaguar Freight are here to help guide you and your company through the ever changing landscape of global freight forwarding. Get in contact with us today for more information.
Please read on for the details:
Section I contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It clarifies and improves the relevant articles (V, VIII and X) of the General Agreement on Tariffs and Trade (GATT) 1994. It also sets out provisions for customs cooperation.
More specifically, Section I covers:
Section II contains special and differential treatment (SDT) provisions that allow developing and LDC Members to determine when they will implement individual provisions of the Agreement and to identify provisions that they will only be able to implement upon the receipt of technical assistance and support for capacity building.
To benefit from SDT, a Member must categorize each provision of the Agreement, as defined below, and notify other WTO Members of these categorizations in accordance with specific timelines outlined in the Agreement (see below).
Section III contains provisions that establish a permanent committee on trade facilitation at the WTO, require members to have a national committee to facilitate domestic coordination and implementation of the provisions of the Agreement. It also sets out a few final provisions.
Trade facilitation became a topic of discussion at the WTO at the Singapore Ministerial Conference in December 1996, when Members directed the Council for Trade in Goods to undertake exploratory and analytical work on the simplification of trade procedures in order to assess the scope for WTO rules in this area.
Hundreds of proposals made by Members, individually or through groups or alliances, were submitted for consideration by the Negotiating Group. After months of painstaking streamlining and revisions, the proposals became part of the final text of the Trade Facilitation Agreement agreed by Members at the Bali Ministerial Conference in December 2013.
The Agreement has not yet officially entered into force, yet. The Trade Facilitation Agreement will enter into force once two-thirds of Members have domestically ratified a Protocol of Amendment and notified the WTO of their acceptance of this Protocol. This charts shows a regional breakdown of the Ratifications received so far (protocol of acceptance deposited). So far 91 countries have completed the ratification process.
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Jaguar can help you find ways to optimize your supply chain logistics, more conveniently, with fewer soft costs and disruptions. Our proprietary TMS tools will push real-time, SKU-level transparency out to your front-line colleagues. They’ll receive reports with actionable information, which will free you to focus on priority tasks. Stay tuned to our blog for more information about implementing technology to further your supply chain.
This year has been quite the whirlwind with changes in our industry. From the expansion of the Panama Canal, to new SOLAS regulations, and now the Brexit transition. Per usual, change is the only constant when it comes to global freight movement. We see advancements in technology almost daily, and international politics contribute to the constant influx of change, but what about massive change, such that as Brexit?
Wanting to get a deeper understanding of how Brexit is affecting the logistics industry, we interviewed Jaguar Freight’s CEO, Simon Kaye, a native Londoner. Simon’s experience with international trade is rooted in UK and US logistics. Having studied accountancy and finance at the City of London University, Simon founded Jaguar Freight Services with his father, Percy Kaye, in both London and New York in 1993. Simon moved permanently to the United States to establish Jaguar’s New York headquarters in 2002.
Some people are suggesting Brexit is the biggest step backward since World War II, what do you have to say about this?
Backwards or forwards no one really knows, but it’s certainly the most significant change in Britain’s relationship with mainland Europe, as well as its global trading partners, in decades.
Post-Brexit UK needs a new trade deal with the European Union, what do you think that will look like?
Britain is the second strongest economy in Europe and the largest single destination for Germany’s auto industry, as well as many other European manufacturers, so whatever the outcome, Britain will be going into the negotiations in a strong position. It is in no one’s interest, Britain or the EU, to try and impose a punitive trade deal on the other..
There is word about trade negotiations taking place on a country-by-country basis, what countries do you think will be most affected by Brexit, why?
Germany’s position will become even more significant after Brexit. Due to its strong and successful manufacturing economy, many countries will be looking to Germany to “steady the ship”. On the other hand, countries like; Austria, Greece, Poland as well as France and Italy will have to tackle their own political rumblings for an in/out vote. There are many who think that Britain is just the first domino to fall.
Brexit affects every E.U. member and those wanting to join it. Free-market economies rely heavily on open trade, as a logistics expert, how do you think limiting a free-market economy will change the logistics of goods and services internationally?
The flow of goods and services will not stop due to Brexit. Britain and the other European nations trade freely with almost everyone other country around the world and are only limited by the regulations imposed as part of bilateral trade agreements. The negotiations that will occur over the next 2 years will be instrumental in how easily trade will flow between global trading partners. What bureaucratic barriers will be imposed and what tariffs will be agreed will go a long way in determining the impact on global trade.
What, in your opinion, will happen in the short-term?
My opinion is that the British economy and currency will suffer in the short-term due to uncertainty and concern around negotiations with the EU. However, ultimately I believe that due to Britain’s strong economy and history of international trade and political prowess, it will emerge even stronger than it currently stands as a global trading nation.
Continue to follow the Jaguar Freight blog for more information on the Brexit transition. Our team members at Jaguar Freight are always ready to answer your questions about the ever-changing shipping landscape. Clear supply chain leadership, expertly coordinated around the globe, backed by an exceptional degree of customer care, that’s what we deliver.
On June 23, 2016 the UK electorate voted for Brexit, and consequently started the beginning process of leaving the European Union. The UK will be the first Member State to do so since the creation of the first European “Community” in 1952.
Post-Brexit UK, what might change?
Laws of particular importance to the shipping industry are likely to be those regarding trade, insurance, environmental regulation, international sanctions, contract terms, competition law, employment, dispute resolution and trade treaties with non-EU states. We discuss some of these below.
Competition Law: EU competition law applies to agreements and market conduct that affect trade between Member States, and the EU Commission has primary jurisdiction to enforce EU competition law, including granting clearance to mergers and investigating cartel activity. Where the effects of an agreement or market conduct are confined to a single Member State, national laws apply. Brexit would likely lead to a separate competition regime applying to the UK and to competition enforcement in the remaining 27 Member States, leading to the need for dual clearances in the case of mergers and exposure to regulatory investigation under two parallel, but distinct, regimes. Brexit would likely mean that compliance with both UK and EU competition rules would become more complex and burdensome.
Contract Terms: Many shipping contracts (for example voyage and time charters) provide for trading to certain countries or geographical regions. Since Brexit, there may be uncertainty as to whether a contract signed pre-Brexit (which contains such a clause) which refers to the EU will continue to include the UK. If existing contracts are drafted in a way that presumes the existence of an EU containing the UK, or makes a reference to the EU without specifically defining what that is, such contracts may give rise to disputes as to the meaning or ambit of the contract. Care will need to be taken in the event that an existing contract is renewed, as the court would likely apply the definition of EU as at the time the (renewed) contract is entered into, which might be different from the original or intended definition. The impact of Brexit on any related contracts will need to be assessed, including those intended to be on ‘back to back’ terms, in which relevant clauses may not be similarly defined.
Insurance: Any insurer in the EU is automatically entitled to write insurance business in other member states. This means that, for example, German insurers can write business in the UK, and London underwriters can write shipping risk in Germany (and indeed all other EU states). This is known as “passporting” and the idea is that the insurer’s “home” regulator regulates that insurer’s activities, removing the need for the insurer to be regulated in each Member State. Brexit would undermine this and, unless alternative measures were introduced, may restrict the ability of insurers (and those buying insurance) to shop around and get the best price and terms for their business.
Sanctions: As a member of the EU, Britain is party to, and therefore must comply with, the sanctions regime imposed by the EU. Those sanctions are currently against states such as Russia, North Korea, Belarus, Syria, and Yemen. The situation regarding Iran is currently, as widely reported, in a state of change. It remains to be seen whether the UK would implement mirror legislation, or even harsher or less strict sanctions. Regardless of whether it were to impose any replacement sanctions regime, the UK would not be ‘sanctions-free’, as it would still be a party to, and therefore have to comply with, the sanctions imposed by the United Nations against several regimes.
Trade: Under EU law, trade within the Union is liberalised as between Member States, allowing goods and services to be traded within the EU without internal customs barriers or tariffs. In addition, EU citizens can move freely, establish themselves commercially or as residents and can trade without restrictions (except for certain professional qualification rules). EU membership therefore gives UK businesses access to the EU “Single Market”. As to external trade with non-EU countries, the EU benefits from a wide range of bilateral and multilateral trade treaties, allowing preferential access to EU goods and services in these countries, as well as reducing or eliminating customs or tariffs.
Now that the UK has voted to cease its EU Membership, UK businesses will no longer benefit from EU internal trade access without a bilateral agreement between the UK and the EU. Although it is possible to be a member of the European Economic Area (EEA) as an associate state of the EU, it is not clear whether the UK is seeking to do this or seeking to enter into an entirely new free trade or association agreement with the EU. Operating within the EU market may become increasingly complex and consequently potentially more expensive for UK operators, as might operating in the UK market for EU operators. Those operating in the UK and also in the rest of the EU would face the burden of having to comply with both EU and UK laws on trade, rather than complying with the current harmonised EU system.
The key issues for U.K. shipping are visas and work permits, fiscal arrangements including tonnage tax, and border controls at ferry terminals.
The impact of the UK exit could also affect exporters from a variety of EU nations. The U.K. is the leading destination for exports from Norway with the value of that export trade sometimes double the nearest runner up in recent years. Ireland, Turkey and Poland are the U.K.’s second-largest sources of imports. Ireland sends largely pharmaceuticals and meat, Turkey sends auto parts and apparel, while Poland exports machinery, automobiles and electronics, according to GTA.
One of the cargo sectors likely to be hit particularly hard by a reintroduction of customs and duties is the automotive sector. Germany is the third-largest source of U.K. imports and automobiles make up a third of the value of those imports. Other key exports to the U.K. from Germany include machinery and pharmaceuticals.
All of the above mentioned implications assume the EU structure remains status quo. However, further fallout from the Brexit vote may be that the future of the EU, as we currently know it, is now in question.
Continue to follow our blog for more information on the Brexit transition. Our team members at Jaguar Freight are always ready to answer your questions about the ever-changing shipping landscape. Clear supply chain leadership, expertly coordinated around the globe, backed by an exceptional degree of customer care, that’s what we deliver.
The Boston Consulting Group and Local Logistics provider have released new research that is being heralded as the most comprehensive public study of the effects of the Panama Canal’s recent expansion, and comes as good news to US ports. According to their most recent research, the opening of the recently expanded Panama Canal could result in an increase of up to 10 percent in shareholding of the container traffic from East Asia to the United States. Supply chain management analysts explain more here.
According to this study, the United States will see a significant shift from west coast ports to east coast ports. This shift is predicted to result in a nearly 10 percent increase in the United State’s share of East Asia markets and forever alter the competitive balance between east and west coast ports in our country. Experts believe that the difference will not necessarily be seen in the amount of traffic handled by the respective coasts, but in the levels of growth seen in their ports. The west coast will likely continue to see a higher level of traffic, but the east coast is where we will see significant growth rates (along with a reduced market share) in the industry.
How will it work? At the current time, goods from East Asia are shipped into west coast ports and then transported as far as the Ohio River Valley. The Panama Canal project, which boasts an estimated cost of 5 billion dollars, will construct a third lane of traffic designed to allow larger ships to pass through its ports. With this expansion, larger ships will be able to reach east coast ports, thereby lowering the cost of maritime shipping. This reduction of cost will even out the competitive landscape between the coasts and make shipping more cost effective. Shippers will have more options, and carriers will compete with one another to provide these services.
Logistics solutions experts have reviewed the data and estimate that by the year 2020, up to 40 percent of container traffic from East Asia to the United States will arrive at east coast ports, even without the Panama Canal expansion. With the upcoming expansion, however, that percentage could easily reach 50 percent.
To learn more about how this change will affect your company’s shipping, call Jaguar Freight at 516-239-1900 to speak with a shipping logistics specialist today.
The livelihood of your business relies on delay free, efficient, and cost effective domestic and international shipping. Changes in policies, regulations, and taxation can have a significant impact on your business’s ability to get your goods where they need to be on time. To better understand the effect that the government plays in transportation logistics, let’s turn to a recent article from the Wall Street Journal.
According to the Wall Street Journal, “more than 40 government agencies, including the EPA, the Department of Agriculture and the Department of Commerce are involved in trade shipments” and more than a dozen agencies have “release and hold” authority that surpasses that of border control and customs. Furthermore, a recent Market Watch article spotlights the fact that, “once containers clear the ports, the US Consumer Product and Safety Commission, Food and Drug Administration, Environmental Protection Agency, and the United States Department of Agriculture are also required to put their stamp of approval on imported products.” All of this points to the tremendous power the United States government has over global supply chain services and sparks fear in the hearts of transportation management systems analysts nationwide.
There are two critical ways in which the incoming government administration and presidency can affect the logistics industry. These include:
When considering your pick for the next President of the United States, pay attention to his or her attitudes regarding zoning, permit, and taxation regulation for international and domestic shipping. When it comes to your business’s ability to continue to compete in the international shipping world, your success will likely boil down to these factors. To understand more about how the government policies and regulations will affect your business, call the shipping logistics experts at Jaguar Freight. Call us today at 516-239-1900 to speak with an expert about your concerns.
Shipping Industry Emissions Remain Unchecked by International Oversight
The detrimental impact of greenhouse gas emissions is now recognized on a global scale. Regulations have been imposed across a variety of industries in an effort to mitigate the harmful effects of these emissions. Curiously, the International Maritime Organization (IMO), the United Nations’ agency responsible for maritime transport, has yet to take a definitive stance on global industry regulation standards.
According to the IMO, maritime shipping accounts for approximately two and a half percent of greenhouse gas emissions worldwide. Although sea vessels, on average, emit fewer greenhouse gasses than air or ground transport, the impact of maritime shipping is considerable due to the frequent and abundant use of this form of transport in the ever-growing industry of global supply chain management.
Of course, the lack of standard regulations allows for the environmental and health consequences resulting from maritime transport to continue to go unchecked. But it also presents a difficulty for the industry if individual regions or countries take it upon themselves to develop their own standards. This could potentially create a situation in which, because of the variety in regulations, companies that do adhere to best practices around emissions and environmental protection would be at a disadvantage compared to those who pollute freely.
The European Union, for example, has taken a step in the direction of developing its own regulations, requiring that after 2018, large ships must report annual carbon dioxide emissions to regulating government body. The EU points out that many of the operational measures and innovative technologies that could curtail emissions are actually cost effective for the shipping industry, in addition to being environmentally beneficial.
Still, in the absence of uniform global standards, well-meaning siloed requirements could disrupt business as usual for supply chain managers, shipping companies, and the industry as a whole. Stakeholders should stay abreast of any developments, both globally and in their specific geographic areas of business, to ensure compliance with all regulations.
Continue to follow the Jaguar Freight Blog for the latest news and information ranging from logistics to regulatory changes, and so much more!
Starting on the first of July, 2016, all shipping containers departing from any port in the world will be required to be accompanied by a document signed by the shipper which fully lists and accounts for the verified gross mass (VGM) of the container before it may be loaded onto any ship. This mandate from the International Maritime Organization (IMO) of the Safety of Life at Sea (SOLAS) agreement comes as an emergency response to many mis-declared weights which, in numerous cases, have contributed to casualties and damage at sea and in port. One example is the breakup and beaching of the MSC Napoli on the U.K. southern coastline in 2007. Another well-known example is that of a feeder ship capsizing the port of Algeciras, Spain in 2015.
According to the new rule, the weighing must be completed in one of two ways which SOLAS calls “Method 1 and 2.” The weighing must be done on scales that are both calibrated and certified according to local standards established by the country wherein the weighing is to be done.
Transportation Logistics Points of the New SOLAS rule;
Many of stipulations of the regulation are not yet finalized. How the rule is to be enforced is yet to be announced. What is to be done with containers found in violation of the rule, without the required documents, or bearing inaccurate documents, is also yet to be announced.
The U.S. Coast Guard approved two alternative methods for obtaining certified container weights to comply with new international regulations: one proposed by agricultural shippers and another proposed by the South Carolina Ports Authority.
The move paves an easier path for exporters, particularly agriculture shippers, but it’s not yet certain how container terminals and carriers will respond individually. The announcement from the USCG, the U.S. agency tasked with implementing the SOLAS amendment, comes just a few weeks before the new requirements making container weight verification a condition for vessel loading legally binding on July 1, 2016.
“That statement may trigger some further consideration by terminal operators about their policies on providing SOLAS-compliant container weights using their existing scales,” John Butler, president and CEO of the World Shipping Council, said in a statement Friday.
In a letter sent to the International Maritime Organization, the USCG repeated its stance that there are multiple ways to meet the IMO’s new SOLAS rule mandating no container shall be allowed to board a vessel without an accompanying verified gross mass, or VGM. Shippers, carriers, terminals and maritime associations have outlined multiple acceptable methods for providing VGMs to carriers.
A couple examples are: (1) the terminal weighs the container, and when duly authorized, verifies the VGM on behalf of the shipper, and (2) the shipper and carrier reach agreement whereby the shipper verifies the weight of the cargo, dunnage and other securing material, and the container’s tare weight is provided and verified by the carrier.
The first method is one that was originally floated by the SCPA. The authority announced in February that it would be willing to weigh containers on site in order to help shippers comply with the new IMO rule — making the Southeast port the first and only U.S. port to do so to date.
Under the plans that Jim Newsome, SCPA president and CEO, has drawn up and circulated to customers, the Port of Charleston would offer to weigh export containers with its weigh bridges currently used to comply with existing Occupational Health and Safety Administration rules. The cost to the shipper will be $25 per container.
Newsome has repeated on a number of occasions that the service is not significantly different from the operations and procedures already in place, due to OSHA regulations.
For the purposes of determining the VGM of a container, any equipment currently being used to comply with federal or state laws, including the Intermodal Safe Container Transportation Act and the container weight requirements are acceptable for the purpose of complying with SOLAS.
Stay tuned to our blog for more information about SOLAS requirements and the upcoming changes in 2016.
We are The Freight Architects™. Custom transportation solutions for a global community. The support of a dedicated team, with intuitive technology, that’s what Jaguar delivers.
Our team at Jaguar Freight visited the Maher Terminal in New Jersey. Our experience there helped us to see firsthand the inner workings of Maher Terminal. The tour was very informative and impressive to see how the containers are moved around the terminal.
Maher Terminals is one of the largest multi user container terminal operators in the world. As a vital link in the container cargo movement chain, they are responsible for helping customers effectively compete in the global marketplace by handling their cargo as expeditiously and economically as possible. Maher takes this responsibility very seriously and has developed North America’s largest marine container terminal in the Port of New York and New Jersey.
This highly efficient container terminal operation strategically located in the heart of one of the world’s most affluent consumer markets provides ample container throughput capacity to efficiently meet and exceed the current and longer term operating requirements of their ocean carrier customers. The scope and flexibility of their highly automated multi user marine terminal operation truly makes their facilities a “Port within a Port.” This is best supported by the many ocean carriers that have been utilizing Maher’s facilities for decades, ranging from single trade lane operators to the world’s largest global alliances.
Founded in 1993 in New York and London, our roots are in logistics. As we’ve grown with our customers, we’ve developed state-of-the-art technology expertise that transforms logistics and shipping services into world-class supply chain solutions.
Clear supply chain leadership, expertly coordinated around the globe, backed by an exceptional degree of customer care. That’s what Jaguar delivers.
Ports on the U.S.’ eastern coast saw a busy 2015. BIMCO reports 7.9 million TEU of loaded containers passing through the U.S. East Coast in 2015 alone, a 12% increase from 2014. Several factors contributed to the growth on the U.S. East Coast, including diverted traffic from the U.S. West Coast, higher American purchasing power, and lower commodity prices.
Teetering Coasts: Decline in the U.S. West Coast
While the U.S. East Coast ports experienced historically high traffic, complications with labor unions and subsequent port congestions stifled the U.S. West Coast.
The beginning of 2015 saw a flurry of contract negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). Continued negotiations, and the inability to reach a negotiation halted traffic at ports on the western coast. Dozens of ships were subjected to delays and had to anchor to wait for berths to open.
In efforts to ease the congestion as negotiations and delays on the U.S. West Coast continued, traffic began to be diverted to U.S. East Coast ports. To the benefit of the U.S. East Coast ports, on top of the acceptance of the diverted traffic, something else was taking place in the U.S. – a rise in personal consumption of goods.
Lower Oil Prices Surge American Purchasing Power
A basic Economics 101 class explores the dynamic relationship between supply/demand and how it relates to the pricing of goods, services, and commodities. The game changer in this scenario has been the decline of commodity prices, particularly the price of oil. The average American consumer suddenly found themselves with a little extra disposable income, or purchasing power, in 2015.
This increase in purchasing power led to a boost in the consumption of personal goods – which together go hand-in-hand with the increase of inbound containers destined to the U.S. A sharp and dramatic decline in commodity prices, especially oil, spiked the purchasing of the average U.S. consumer, which then drove demand for consumable goods, and consequently the need for them to be transported to the country of consumption. This phenomena, combined with complications on the U.S. West Coast, drove the 12% increase of container traffic to the U.S. East Coast in 2015.
Cultivating Growth on the U.S. East Coast
Looking ahead, leaders in the transport industry are questioning whether or not the U.S. East Coast ports can sustain the new business.
The Port of New York and New Jersey (PANYNJ) sees the majority of the container trade on the U.S. East Coast. Loaded containers headed into The PANYNJ increased by 9.2% in 2015, but they’re not alone in these waters. The entire U.S. East Coast port community benefitted from strong growth in 2015. For example, in Savannah, Georgia, The Port of Savannah experienced the highest growth rate, rising by 20.4% from 2014.
The hasty peak of diverted traffic from the U.S. West Coast last year seems to be a proverbial test for what is on the horizon for the ports on the U.S. East Coast. With the expansion of the Panama Canal, ports on the U.S. East Coast have already been preparing to cater for their larger visitors – and if 2015 is a testament of growth on the U.S. East Coast, well it seems like they’re ready.
Founded in 1993 in New York and London, our roots are in logistics. As we’ve grown with our customers, we’ve developed state-of-the-art technology expertise that transforms logistics and shipping services into world-class supply chain solutions. Clear supply chain leadership, expertly coordinated around the globe, backed by an exceptional degree of customer care. That’s what Jaguar delivers.
About the Expansion
The expansion of the Panama Canal will offer new business opportunities to shipping ports located in the southeastern United States. Set to be completed in early 2016, the $5.25 billion expansion of the Panama Canal is aimed to the boost East and Gulf Coast container trade. The Panama Canal expansion consists of much larger locks, opening up trade for larger Pacific-Atlantic cargo ships. The larger locks are already boosting prospects for more exports to Asia from U.S. Gulf ports and vice versa, coal and grain amongst the commodities transported. Larger hauls are expected to increase efficiency with shipping cargo, ultimately maintaining the affordability of many critical goods for the public.
Doubling in Size
The connector between the Atlantic and Pacific oceans will be doubled in size, and once completed, will change the global routes for many of the world’s shipping lines. The canal will soon be able handle double the capacity in size of shipping containers, allowing for shippers to bring Asian goods to the East and Gulf Coasts of the United States for less money.
Bypassing Smaller Ports
While still passing through the Panama Canal, the shippers will now be able to bypass smaller port stops in lieu of a streamlined route with bigger hauls. In conjunction to the expansion of the canal, many key shipping ports have begun to expand their ship docking capacity to accommodate the larger ships now passing through the Panama Canal’s bigger lock system. The new locks will be able to handle larger vessels that can carry nearly three times as many containers.
Panama as a Global Shipping Leader
The project is expected to bolster Panama’s strategic position as a global shipping hub and business center for much of Central and South America. The capacity to process larger freighter ships through the canal, has sparked the interest of companies in the Southeast U.S., who have already begun seeking business opportunities in Panama or other parts of Latin America. Southern and Central America could benefit greatly from the expansion, as increased exports and imports expand job opportunities. Economists are hoping to see the quality of life increase for many Southern and Central Americans, as many citizens in the regions struggle to meet their basic needs.
West Coast vs East Coast
With the expansion of the Panama Canal, and the subsequent expansions of trade ports along the Southeastern United States and Caribbean, ships from the Far East can now ship directly to the Gulf regions without having to stop on the West coast of the United States. Ships from the Far East used to arrive on the U.S. West coast, then transport the cargo via railroad line to the East coast. Shippers can soon take advantage of the expansions on all ends as the ports in the Caribbean accommodate the larger ships.
The US East and West coasts are in constant competition for business from the Far East. The $5 billion expansion will permanently alter the competitive balance between the ports of the US East and West coasts. According to industry analysts, despite the changes taking place in the Panama Canal, the market share of imports of East, West and Gulf Coast ports this year is set look a lot like it did during the second half of 2015.
Change Could Take Time
The completion of the Panama Canal expansion is a hefty project that will inevitably have a huge impact on the international shipping and trade sector.
Our team members at Jaguar Freight are always ready to answer your questions about the ever-changing shipping landscape. Clear supply chain leadership, expertly coordinated around the globe, backed by an exceptional degree of customer care, that’s what we deliver.
The celebration of Chinese New Year is fast approaching. The holiday essentially shuts down the world’s production hub for a one to two week period. Take precautions to avoid a Chinese New Year 2016 shipping delay.
Chinese New Year marks the start of the Lunar New Year and, for 2016, we will be entering the Year of the Monkey. The official start of the holiday is Monday, February 8th, with the national observance of Chinese New Year running from the 7th through the following Friday, February 13th. However, the holiday is typically celebrated for two weeks or longer. In addition to China, Chinese New Year is celebrated throughout the Asian region, creating possible shipment delays from countries like Vietnam, Thailand, Cambodia, the Philippines, Japan, and more.
During the Chinese New Year celebration, tens of thousands of migrant workers from all across China will return to their homes for what will likely be the only time they spend with their families all year. These workers are the backbone of the global production giant and, without them, the world’s workshop comes to a screeching halt. Most businesses and factories will be completely shut down for a period of fifteen consecutive days, though some remain closed for as long as a month. Additionally, many companies resume operations without their full workforce returning on time, further lengthening this period of limited production.
While it may appear excessively generous of Chinese businesses to grant these extensive leave periods for the holiday and to accept such a sustained period of nonproduction, there is more than just altruism fueling this custom. To begin with, China’s factory workforce is not large enough to meet the country’s production demands. A worker in the Chinese manufacturing economy need not be concerned about being fired from a job because they can easily find work elsewhere. Although the challenging conditions of factory work in China tend to be uniform among the various manufacturing companies, denying workers their Chinese New Year leave would exacerbate existing staffing challenges.
This massive shutdown in global production of all variety of products–from clothing to toys, to cosmetics, and more–can give rise to a number of logistical struggles for distributors and retailers. Some of these include:
These challenges and others associated with the Chinese New Year bottleneck can be alleviated or avoided altogether with a bit of foresight and strategy. Consider the following tactics to maintain your competitive edge in the Chinese New Year season.
Support in shipping and receiving logistics can assuage some of the challenges associated with keeping supply chains out of Asia operating smoothly before, during, and after the Chinese New Year. Having access to up to the minute details of your shipments is essential to ensuring your clients receive their goods when they need and expect to. Jaguar Freight’s CyberTrax software gives you real-time access to your shipments through our state of the art transportation management system while providing insight into the most cost-effective strategies for your specific needs.
Do not underestimate the impact Chinese New Year will likely have on your supply chain. Maintain the professional identity of your business and minimize elevated shipping expenses by enlisting the support of a world-class supply chain logistics expert today.
The global supply chain market will be subject to new regulations in maritime transport, effective July 1, 2016. The Maritime Safety Committee of the International Maritime Organization (IMO) has approved amendments to the Safety of Life at Sea (SOLAS) convention of 1974. These amendments require that shippers provide a verified gross mass (VGM) for all containers, either electronically or in hard copy. After the mandate is in effect, failure to provide the VGM for each container will result in the container not being loaded onto the vessel.
US regulations already require that all export containers be weighed and verified prior to shipment. The container weight mandate 2016 will provide international accountability for proper weight declaration. Other IMO affiliated countries may have existing regulations in place regarding verification of carrier weights that must be adhered to in addition to the international mandate.
Purpose of the Mandate
The new international requirement is intended to reduce safety hazards and operational issues that result from inaccurate and unstable loading. Some of the results of improper loading can include:
It has been estimated that $12.8 million in losses was attributed to mis-declaration of cargo between 2006 and 2011. Additionally, several recent fire and sinking incidents, including the MSC Napoli in 2007 and the MSC Flaminia in 2012, have been connected to cargo mis-declaration and subsequent improper loading.
Steps for Compliance
Under the mandate, the VGM for each container is required to account for the following:
This weight can be determined in two ways. First, shippers can weigh each item individually before loading and add the weight of the container and dunnage. The second option is to pass the carrier over a weigh station scale while loaded to a truck and then subtracting the weight of the truck, chassis, and fuel from the scale reading. The mandate specifies that all measurement instruments used must adhere to accuracy standards of the State in which the container is loaded.
The new regulations place responsibility for ensuring the VGM is provided accurately on the shipper. Due to the somewhat unclear definition of “shipper,” this could potentially hold liable a number of entities, including the client that packs the carrier, the logistics company, or the freight forwarder. In the event of an accident, if any or all of these parties were aware of a misrepresentation of the reported VGM, they could be held responsible, fully or partially.
Failure to accurately report the weight of the container could result in the following penalties:
Implications of the Mandate
As shippers prepare for this mandate to go into effect, the supply chain industry could be effected in a number of ways. To date, a number of questions about the rollout, implementation, and enforcement of the mandate still exist.
For example, it is unclear how containers deemed mis-declared at the terminal should be dealt with–whether the shipper should be responsible for returning and re-declaring the container or the transporter. Additionally, training may be required for various stakeholders in order for the mandate to roll out effectively.
Weighing technology must also be acquired by the shippers responsible for declaring the VGM. This type of technology, in the past, was not a necessary part of their operations. The need for new and additional technology will likely raise costs. The burden of these cost increases will either fall on shippers or consumers.
The mandate does not require that weighing entities be verified or accredited, only that the technology employed be calibrated and in compliance with national accuracy standards. It is at the discretion of the individual States as to whether or not they will require a “verified weigher” status for the party weighing the container.
Support for Implementation
Global supply chain systems are complex and may involve any number of state and international regulations. To avoid violating any obligations or requirements, businesses can turn to Jaguar Freight, a world-class supply chain logistics management company. Our CyberChain technology will ensure that all aspects of your supply transport are in compliance with both international standards and those specific to any state your goods travel through en route to their destination.
Contact us today to learn more about how Jaguar Freight can support you in adhering to the container weight mandate.