In the ever-changing shipping and transportation industry, the last thing we tend to expect is the return of old-school terms and rules. However, given our industry, we ought to know better than to expect things. Archaic shipping terms are being exhumed from the depths, leaving many consignors lost at sea and blindsided by unexpected fees.
When international shipping got its start, the industry grew faster than the need for it. Shippers had so many options for getting their cargo from point A to point B, that over time, carriers got rid of fees and penalties to attract customers. Since then, global commerce has become the norm, allowing the international shipping industry to grow to be an imperative part of nearly every manufacturer and retailer’s supply chain. The business, however, hasn’t grown to be much more profitable than it was back then. Prices have remained low, and the fight for customers has allowed shippers to get sloppy and take advantage of the power they’ve been given. Often, this means booking ships they don’t need, not informing carriers when they won’t make it or when they won’t have as much cargo as they thought, or cancelling at the last possible minute. Now, ships aren’t as hard-pressed to find cargo, and it seems they’ve had enough. Recent trends have shown a surge in overbooking—shippers have been booking ships far beyond capacity with the expectation of no-shows and last-minute cancellations. This move has made it slightly easier for carriers to fill their ships, however, they often find themselves leaving cargo waiting at the port when their full loads do show.
There seems to be a realization that overbooking isn’t sustainable, which has signaled a shift towards penalties for those who cause a ship to sail at less than capacity. Some of the recent rules resurging will make it much more expensive for charterers to leave carriers hanging, and we’re yet to understand what impact this will have on the industry. We’ve seen a sudden increase in cancellation fees and restrictions like those from CMA CGM, which stated in June that it “has been facing a large number of shortfalls due to late cancellations, preventing us from accepting bookings on behalf of other valued customers.” These shortfalls led the company to apply a $150 per TEU cancellation fee on nearly all equipment types if cancellations were made fewer than seven days before sailing date. CMA CGM made this move following in the footsteps of A.P. Moller-Maersk, who implemented similar rules in April of this year. We’ve also spotted a resurgence of dead freight, relating to the fee charged when freight doesn’t meet promised quantities, leaving empty space on a vessel.
Many of the changes we’ve seen are coming out of Asia, and many are forced upon carriers by their governments. In some countries and regions, government regulations force carrier to close bookings as early as 5 days before sailing, while others can sell space up until the last minute. These differences often force carriers to set sail without filling to capacity, as they are unable to refill space from late cancellations. This has been especially impactful in LTL shipments, with carriers charging shippers as much as $50 per cubic meter of empty space in a container.
What this means for those in the transportation industry, is a shift towards caution. Many carriers are now expected to report their cargo accurately and in advance, requiring more thorough planning with consequences for shippers. However, this may also signal a shift towards holding carriers more accountable as well. The European Shippers Council, or ESC, has announced their support for these rules, while insisting that carriers are held responsible for rolled cargo as a means to balance the scales. They have called for carriers to compensate shippers that have had cargo rolled over at loading ports, making price and demand manipulations less feasible for carriers.
So, what do we learn here? The industry is constantly changing, and rules, just like bell-bottom jeans, can be dredged from the depths and brought back to popularity. This is where companies like ours fit in. At Navegate, we partner with clients and transform their supply chain through technology that offers true visibility and transparency, allowing them to be flexible, adaptable, and well-connected.
Illustration by Jordan Lundquist