Jul 10

Challenging Start to VGM in China

JOC.com

Half of all the verified gross mass declarations of containerized exports being received in China by giant forwarderKuehne + Nagel are missing the required data as shippers grapple with the new regulation that came into effect on July 1.

The VGMs being submitted either via the forwarder’s online portal or in VGM forms contain incomplete information 50 percent of the time, such as not having the weight properly declared or missing a shipper signature, said Otto Schacht, executive vice president, global sea freight for Kuehne + Nagel International.

“That means for each single container, a Kuehne + Nagel operator must call up the shipper or vendor in China to ask them for the missing information otherwise we cannot process the data,” he told JOC.com.

The new VGM rule is an amendment to the International Maritime Organisation’s Safety of Life at Sea convention that requires shippers to verify the weight of every export container across the world. However, the IMO in May urged the maritime agencies around the world to exercise leniency in enforcing the rule. A regularly updated Q&A can be found here.

In the build up to the implementation date, container lines were pounding home the “no VGM, no load” message as concern mounted that compliance in many jurisdictions would be a problem. As the source of much of the world’s exports, China was high on the concern list, and rightly so as it turned out.

On the first sailing weekend after the rule went live on Friday, July 1, 30 percent of all export containers entering the port of Shanghai were missing VGMs, said Markus Johannsen, senior vice president of sea freight for the North Asia Pacific Region for Kuehne + Nagel. “And that was not incomplete data, the VGMs were completely missing,” he said.

No delays were reported as the various parties in the container supply chain worked out the problems in Shanghai, but following up the missing data — and the software  that Kuehne + Nagel created to process VGM data — was given as an explanation for the forwarder’s VGM fee of $12.75 per container for submission via its online portal and $25 for manual data entry.

This charge for handling the container weights has become a bone of contention among shippers who have been vocal in their opposition to the various VGM fees being charged by forwarders. The Hong Kong Shippers Council called on forwarders to withdraw the VGM charges in the run up to July 1 and this week the Global Shippers’ Forum Secretary General Chris Welsh said some carriers and other service providers were exploiting the introduction of the new VGM rules.

“Shippers worldwide support the safety goals of the container weighing requirements and are committed to fulfilling their regulatory requirements, but this should not be used by supply chain partners as an excuse to impose unjustified fees,” Welsh said.

Schacht said Kuehne + Nagel fully supported the SOLAS regulation because it is all about safety, which has to get an even higher priority in container transportation.

“But safety is not for free. If you buy a bicycle helmet it will cost you money. The whole industry now has to have far more accurate weight data, and as a forwarder we want to provide efficient solutions and not handle all this data manually,” he said.

“For the sake of efficiency we reprogrammed our global operating software for the VGM and Inttra provided a connection solution. We had to create the portal and programmed an app so people can key in the weight and name and the electronic signature via a mobile phone from a container station. All this resulted in extra cost.”

Johannsen said Kuehne + Nagel did not simply pass on data received from the shipper to the carrier. “We have provided the market with a stable solution that is working. But this is only the start and we manage the many exceptions,” he said.

The need to chase shippers for the correct data was also highlighted by Joerg Hoppe, DB Schenker director and head of ocean freight for North and Central China. He said last week that providing the VGM certification added an additional cost and time element to the shipping process for all parties.

Hoppe said that although 100 percent trade compliance was something customers have come to expect, it did not always come free. “A VGM processing fee has almost no impact on overall merchandise costing if broken down to line item level,” he said.

“We believe shippers should be, and in fact are already, far more concerned about early VGM submission deadlines negatively impacting their current production lead times. This then comes back full circle to the already described ‘late’ VGM submission with the freight forwarder being relied upon by shippers to fix things.”

In China, although some ports provide weighing services, much of the container weighing is being done by independent companies that are charging 50 Chinese yuan ($7.50) per twenty-foot-equivalent unit and 100 yuan per forty-foot-equivalent unit for the service. However, JOC.com has learned that cargo agents are being relied onto get the boxes weighed and they are not happy with the arrangement.

Contact Greg Knowler at greg.knowler@ihs.com and follow him on Twitter: @greg_knowler.

Jun 29

VGM Submission Fee by Forwarder: Is there a justifiable cost?

JOC.com  June 28, 2016

The verified gross mass (VGM) processing fee being imposed by freight forwarders has come under fire from the Hong Kong Shippers’ Council that has called on its members to reject what it regards as an unjustified charge.

With just days to go before the 1 July implementation of the International Maritime Organization’s Safety of Life at Sea (SOLAS) rule requiring shippers to verify the weight of all their export containers, shippers are beginning to gain a clearer picture of what VGM compliance will cost and not everyone is happy.

“There is so little extra work that freight forwarders must perform so there is no justification at all for them to produce a new charge,” said Sunny Ho, executive director at the Hong Kong Shippers’ Council.

The charges vary. Kuehne + Nagel said shippers that submit the VGM verifications via the forwarder’s portal will be charged USD12.75 for each shipment, while submission by other means, such as in an e-mail, will accrue a USD25 charge.

DB Schenker will charge a VGM processing fee of USD25 per container for full container load (FCL) shipments and USD15 per less than container load (LCL) shipment. Ho said figures he had seen ranged from USD6 per LCL shipments and up to USD25 per FCL.
“Forwarders are taking advantage of the unclear situation to increase revenue. The shipper must provide the VGM and the lines and terminals do not have to check that it is accurate, so there is no risk to the forwarders. If a container is checked and its weight is found to be inaccurate it is the shipper who will pay when the container cannot be loaded.”

Under the SOLAS rule, there is no obligation for carriers or terminals to verify that the VGM provided by the shipper is accurate, but maritime agencies will conduct random checks on containers and if the declared weight is outside the established tolerance in that jurisdiction, the box will not be loaded on a vessel.

But forwarders were quick to defend their need to levy the VGM container processing fee.

Joerg Hoppe, director and head of ocean freight for North and Central China, said providing the VGM certification added an additional cost and time element to the shipping process for all parties. He compared the rule to the security regulations such as the 24-hour advanced manifest system for US cargo and Europe’s entry summary declaration.

“It’s similar to AMS, ENS or AFR regulations for example as it requires additional information to be formally collected, checked, processed, stored and passed on timely in a specific format to other parties in the supply chain,” he told IHS Fairplay.

Hoppe said 100% trade compliance was something customers had come to expect, but unfortunately it did not always come free.

“A VGM processing fee has almost no impact on overall merchandise costing if broken down to line item level. We believe shippers should be, and in fact are already, far more concerned about early VGM submission deadlines negatively impacting their current production lead times. This then comes back full circle to the already described ‘late’ VGM submission with the freight forwarder being relied upon by shippers to fix things,” he said.

The Shanghai-based DB Schenker executive said there was also a considerable, and as yet unexplored, financial risk and legal angle to the SOLAS rule.

“It starts with the cost of simple exception management in cases of VGM discrepancies or the inevitable late submission of VGM’s, such as making sure containers don’t roll, amending manifests, customs declarations,” Hoppe said.

“And it ends with the VGM further firming up the chain of legal responsibility and custody in case of accidents involving containers. After all, NVOCCs, such as DB Schenker, are legally acting as shipper of record having to provide a correct VGM as shippers to the carriers.”

A Hong Kong-based forwarder with offices across China said for almost every export shipment he handled, his company consolidated the cargo and was indicated as the shipper on the bill of lading.

“That means we are responsible for ensuring the container has a VGM and must get that data to the carriers and terminals. We must combine the weight of cargo from, say, 10 different customers and add that to the tare. That is an additional administrative process that we do not need to care about today,” he said.

“At the end of this week that will all change and it will become a burden for us. Not a huge one, I admit, but it adds to our workload and for that I believe a small charge per container is completely justified.”

Contact Greg Knowler at greg.knowler@ihs.com and follow him on Twitter: @greg_knowler.

Jun 21

Container lines back using current weighing process to meet SOLAS

| Jun 20, 2016 2:57PM EDT  JOC.com

U.S. exporters finally achieved the carrier uniformity they were seeking on the SOLAS container weighing requirement when 19 major container serving the U.S. gave their support for the use of on-terminal scales to comply with the international rule that takes effect on July 1.

The Ocean Carrier Equipment Management Association, which represents 19 of the largest container lines in the U.S. trades, stated that it “strongly supports the use of on-terminal scales to obtain the verified gross mass of containers, as required by the Convention on Safety of Life at Sea.”

The OCEMA announcement is significant because it should allay the concerns of exporters that each line would attempt to impose its own requirements on customers for submitting a VGM. Furthermore, since U.S. ports and terminal operators for years have been using on-terminal truck scales to weigh containers in order to meet Occupational Safety and Health Administration safety requirements, exporters can feel comfortable in knowing that there will be no process changes or delays in the loading of their containerized shipments onto vessels.

“While this is expected to alleviate much of the confusion surrounding VGM and simplify the process for most stakeholders, there may be operational constraints that require different processes for determining and transmitting VGM,” OCEMA said in a statement. “In cases where the Terminal Weighing Approach is not feasible, OCEMA will continue to evaluate ways to achieve VGM compliance.”

Under the International Maritime Organization’s Safety of Life at Sea amendment, passed in May 2014, container lines are obliged to only load containers with a VGM onto a ship. The rule is aimed at cracking down on misdeclared container weights, which have contributed to maritime accidents.

Agricultural exporters meeting in Long Beach at the weekend, three days before the OCEMA terminal-weighing approach was announced, had expressed concerns about a lack of uniformity among the almost two-dozen major container lines in the U.S. trades.

Peter Friedmann, executive director of the Agriculture Transportation Coalition, said as recently as last week AgTCmember companies had been receiving disparate messages from individual carriers as to whether the use of terminal scales was acceptable, or whether the exporters had to sign off on the weights that had been provided by the ports or terminal operators to the shipping lines at the time of loading onto the vessel.

The South Carolina Ports Authority, which operates the marine terminals in Charleston, took the lead among port authorities back in February when Jim Newsome, president and chief executive officer, said Charleston would continue to weigh the combination truck-container units at its in-gates, as it had been doing for the past 25 years, and would provide the weight to the shipping line for use in calculating the VGM.

Newsome told the AgTC conference that exporters at the Port of Charleston will not have to sign each VGM separately. “We will file a tariff rule. The shipper using our port authorizes us to submit the VGM,” Newsome said.

Charleston is one of a half-dozen South Atlantic and Gulf Coast ports that have filed for permission from the Federal Maritime Commission to form a discussion agreement through which they will develop a uniform approach on the VGM requirements, further assuring exporters that processes will be uniform from port to port in the region.

The OCEMA announcement that carriers will accept on-terminal weighing as fulfilling the International Maritime Organization’s SOLAS requirement is important because the regulation specifically states that the shipper is responsible for assuring that the VGM is submitted to the ocean carrier. However, thanks to an “equivalency”declaration by the U.S. Coast Guard, which states that there are a variety of paths to comply with SOLAS, it became clear that a third party could submit the VGM on behalf of the exporter. The Coast Guard is the U.S. enforcement agency for the SOLAS regulation.

Ocean carrier executives realize that in their industry, where company headquarters are scattered throughout Asia and North America, mixed messages were being delivered to U.S. exporters. Richard Craig, CEO of MOL America, said that in the U.S. trades carriers were working with OCEMA on developing a common approach. The process took some time, but exporters should now be assured that carriers all support the OCEMA terminal weighing approach. “We’re in full agreement here,” Craig said.

George Goldman, president of Zim Integrated Shipping Services America, said the common approach of carriers on the terminal-weighing process should also relieve exporters of the fear that carriers would each go their own way on SOLAS in order to seek a competitive advantage. “It is not in our best interest, or yours, to go off on a competitive binge,” Goldman said.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihs.com and follow him on Twitter: @billmongelluzzo.

May 02

China Issues SOLAS Guidelines

China will conduct random inspections on export containers at the country’s ports from July 1 as part of its enforcement of new container-weighing requirements, according to long-awaited industry guidelines issued by the Ministry of Transport.

In a consultation paper sent to all agencies of the Transport Ministry and translated by CargoSmart, the guidelines stated that vessels and terminals could not load a container for which the verified gross mass, or VGM, had not been received.

This is consistent with all other jurisdictions that have so far issued information on the amendment to the International Maritime Organization’s SOLAS convention that will become law in all 162 signatory states from July 1. Hong Kong issued its guidelines earlier this month.

The China paper outlined enforcement actions that would be conducted at its busy ports. “All marine management agencies should perform random checks on the verified gross mass of packed containers loaded onto vessels,” the guidelines stated.

Any discrepancy between the VGM declared by the shipper and the VGM obtained by maritime agencies, vessels, carriers or terminal operators must be within plus or minus 5 percent or 1 ton. Should the variance be outside that, agencies should request that the vessel carrying the box correct the weight information “after the potential risk of safety has been minimized.” This presumably means the container contents must be reduced and the box re-weighed by the terminal and loaded back on the ship.

Should marine management agencies receive a report, or are in doubt about the accuracy of VGM information, the agency can request the shipper that signed the VGM declaration again verify the container’s gross mass. The guidelines requested the shipper, the carrier and its agencies and the terminal operator cooperate in this area.

As with other jurisdictions, the China guidelines went over the SOLAS regulation governing the weighing of containers for which the shipper is responsible: Method 1, which calls for weighing the loaded and sealed export container, and Method 2, where each piece of cargo in the box was weighed and the total added to the packaging used, the pallets, the securing material and the actual weight of the box itself, known as the tare weight.

A global shipper told JOC.com that he expected most shippers in China to use Method 2 to obtain the VGM. He said the majority of containerized exports from China were regularly shipped consumer goods that were generally packed in cartons that had the weight stamped on the box.

“All it will require is a calculator to add the items in the container to the tare and the VGM will have been obtained,” he said. Although he conceded that getting the VGM was only one part of the puzzle, and first a shipper had to have in place company processes with standard operating procedures to be followed by internal and external vendors.

The China guidelines touched on this area, advising shippers to establish proper internal controls and management systems to ensure the VGM of a packed container met the required accuracy standards, and also to ensure the weighing staff were equipped with training and knowledge to perform the weighing services. The shipper must also ensure the packed container does not exceed the maximum payload, the guidelines stated.

Once obtained, the VGM data needs to be passed on to the carrier in time for the master to plan stowage, and then passed on to the terminal. It is widely accepted that with the volume of export containers involved, communicating the VGM will be most efficiently conveyed electronically, and software solution providers such as Inttra and CargoSphere will offer that service from July 1.

Still, with just two months until the SOLAS rule is applied, worrying signs are emerging of an industry that is not yet ready. The majority of shippers and logistics providers in a recent CargoSmart survey had no plans to comply with the new container weight rule and Drewry found that none of 20 non-vessel operators the analyst met during an April tender process were ready to comply.

The U.K. P&I Club also said some terminals and shippers seemed unprepared or even unaware of the SOLAS amendment, and it warned that unless practical steps were taken, chaos and commercial disputes could be expected in July.

Contact Greg Knowler at greg.knowler@ihs.com and follow him on Twitter: @greg_knowler.

Apr 30

SOLAS Alternative Weighing Methods Accepted by US

WASHINGTON — The U.S. Coast Guard Thursday gave its stamp of approval to 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 62 days before the rule takes effect July 1.

“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, the agency said in a statement Thursday.

“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.

“This practice has occurred for over 20 years and represents what can legitimately be called a ‘best practice’ in the safe loading of vessels in the U.S.,” Newsome told JOC.com.

More controversial, however, is the second method that the USGC outlined in its statement Thursday.

That method, known as the “rational” method among certain shippers, has been a matter of some debate in recent months.

Under the so-called “rational” method proposed by the Agriculture Transportation Coalition, U.S. exporters would certify the weight of their cargo and packing materials, while container lines would certify the weight of the containers that they own, control and manage. The liners would then combine the two weights to create a VGM that is submitted to the terminal operator before loading.

AgTC has argued that the method takes into consideration that shippers cannot and should not be heldliable for the weight of the container itself, which they neither own, lease nor operate.

But the group and its proposed method have met pushback, from the likes of APL and the Ocean Carrier Equipment Management Association, which has explicitly said it will not accept VGMs obtained via the “rational” method.

In a handbook released just last week, APL said the IMO law does not allow the carrier to add the tare weight of the container to cargo weights provided by shippers to obtain a VGM.

The USCG’s statement Thursday does not have any effect on the guidance provided by either APL or OCEMA. The U.S. agency has said itself that the IMO regulation should be handled as a “business practice” instead of through regulatory enforcement.

That being so, individual carriers can stipulate in their business agreements with shippers that they will or will not accept a certain method. However, the USCG’s position simply states that carriers are allowed to permit any of the multiple acceptable methods for providing VGMs to carriers that have been proposed — so long as a VGM is provided using certified scales.

And the agency does say in its statement that all presently certified container-weighing equipment now in use in the states should allow U.S. exporters to comply with the SOLAS regulation.

“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,” the agency said.

It was this detail that the WSC said may spark future debate in the shipping industry.

WSC’s Butler said the announcement itself “is consistent with the Coast Guard’s prior statements and does not break any new ground. What is of interest is the Coast Guard’s statement that container weighing equipment being used today to meet other regulatory requirements is acceptable for SOLAS purposes.”

The council, which represents 90 percent of global container ship capacity and was a key player in the drafting of the SOLAS amendment, did not say how it felt the industry would respond.

AgTC Friday applauded the USCG’s announcement, saying in a statement that the news “frees individual ocean carriers to develop, in concert with their customers, means of compliance that make economic and operational sense for both.”

The group did point out that the agency’s statement does not require carriers to act independently in their own interests. “However, the AgTC strongly encourages them to do so, and remains available to facilitate such dialogue.”

Contact Reynolds Hutchins at reynolds.hutchins@ihs.com and follow him on Twitter: @Hutchins_JOC.

Mar 01

US Coast Guard: SOLAS container weight guidelines not mandatory

 

Source:  JOC.com

LONG BEACH, California — The SOLAS guidelines on container weight verification that will be implemented from July 1 are not mandatory, U.S. Coast Guard Rear Adm. Paul Thomas told a packed TPM Conference here Tuesday.

“They are not mandatory under SOLAS, they are not mandatory under any U.S. regulation. It says that right on top — these are non-mandatory guidelines,” he said in a panel discussion on the verified gross mass rule.

As far as the Coast Guard was concerned, complying with the VGM rule was a business procedure issue. “SOLAS places no legal obligation on the shipper. It places a legal obligation only on the vessel subject to SOLAS. So if you need to meet that obligation by working on a better business practice with your partners, that’s where you need to focus,” Thomas said.

This was not well received by Christopher Koch, senior advisor and former CEO of the World Shipping Council, who said there was a distinction between commercial practice and regulatory compliance.

“The decision of what is required is not a matter for business discussion, it is not a business practice issue,” he said. “The Coast Guard’s position is that SOLAS regulation does not apply to shippers and require them to provide a signed VGM, and terminals are not required to enforce what the SOLAS regulation says.”

Koch called the Admiral’s comments a “stunning revelation,” considering the IMO guidelines were submitted by a working group shared by the U.S. Coast Guard, and in a paper co-sponsored by the U.S.

“It would have been far better if the U.S. Coast Guard had said this was their view at the time we were all working on this,” he said.

On July 1, a new international rule under the Safety of Life at Sea convention will come into effect, requiring shippers to present a signed cargo weight verification to ocean carriers prior to the containers being loaded a vessel. The rule has created huge uncertainty around the world with the governments of 162 signatories to SOLAS struggling to draw up guidelines on how their respective jurisdictions will police the rule.

It has become an increasingly acrimonious issue in the U.S. with shipper groups such as the Agriculture Transportation Coalition saying they are already in compliance and don’t plan to change the way they operate.

Donna Lemm, vice president of global sales for Mallory Alexander International Logistics and chairman of the AgTC SOLAS working group, said the SOLAS rule did not make a whole lot of sense.

“If the amendment goes ahead as we see it, including tare and no variance, this means total disruption to our agricultural activity,” she said. “But we are going to continue to do what we have been doing. We are going to our carriers to ask how we can work together.

“What we are talking about is continuing to build upon best practices on what we have been doing. As a shipping community, we are saying we are providing gross and net weights today, accurately and to our best ability. What we can’t afford is another VGM field, another EDI (electronic data interchange) program, another database, for information we are already providing,” she said.

One of the concerns Lemm raised was that shippers will be held responsible for the weight of the actual container, something the shipper had no control over. She said the carrier needed to provide the tare weight, not the shipper.

But Marc Bourdon, president of CMA CGM (Americas), said the shipper was not required to certify the weight of the container. “They are required to certify their cargo and the packing around the cargo, but will not have any liability for the tare,” he said.

Bourdon said any variability in the weight of the box would be insignificant, and it would be okay if a container was within a ton of the weight provided. Variations found were usually way above that. “So I don’t think the tare should be a focus to the extent that I am hearing.”

What was clear from the panel discussion is that complying with the SOLAS rule will be achieved through dialogue between the main players in the supply chain and through creativity, rather than trying to stick to the letter of the law.

For instance, Peter Friedman, executive director of AgTC, said the exporter was responsible for the cargo and the carrier for the container, so the carrier could marry those weights themselves without having the exporter weigh the container and provide the VGM.

Contact Greg Knowler at greg.knowler@ihs.com and follow him on Twitter: @greg_knowler.

 

 

Feb 19

USA Won’t Delay SOLAS

Source:  JOC.com

WASHINGTON — The U.S. Coast Guard Thursday said it will not consider delaying the International Maritime Organization’s controversial new container weight rule and the agency cannot, and will not, hold shippers responsible for not providing container weight documentation to carriers.

Carriers, however, will be required by their flag state to hold shippers responsible, and no container without Verified Gross Mass documentation will be allowed to board a vessel. How carriers enforce this is a “business practice solution” not under the jurisdiction of the Coast Guard, agency officials said.

“Delayed implementation is not an option,” the Coast Guard’s Rear Adm. Paul Thomas said at a public listening session Thursday on the Safety of Life at Sea, or SOLAS, amendment, which goes into effect July 1.

Moreover, Thomas said, despite shippers’ concerns over how the Coast Guard will go about enforcing the new regulation, the U.S. agency will not be holding shippers accountable. Only carriers and vessels are party to the SOLAS amendment, not shippers, he said.

“There is not authority under SOLAS that requires shippers to do anything,” said Thomas. “I cannot require shippers to do anything.”

Thomas listed two mechanisms of enforcement at Thursday’s hearing. If a container arrives at a terminal without a VGM after July 1, the Coast Guard will declare the box “manifestly unsafe” and the agency would put a hold on the container until a gross mass is known and documented. If, for whatever reason, a container is weighed at a terminal and the VGM does not match the container weight, Thomas said the container would need to be reweighed and a new VGM registered.

“There would be no action taken against the shipper because, again, we have no authority,” Thomas said.

According to the SOLAS amendment, the gross mass of the container “shall be verified by the shipper,” either using one of two methods. Acccording to the Coast Guard, because it’s the carrier that will be the target of enforcement, then it’s up to the carrier to “enforce” the rule on its customers by somehow ensuring that the VGM submitted by the shipper is accurate.

As far as the Coast Guard is concerned, Thomas said, the agency will not be enacting fees or fines on shippers. Any fiscal punishment for failing to provide a VGM or providing an inaccurate VGM will be in the carriers’ hands, he said. That’s different than Canada’s take, which will level fines on shippers without VGMs.

The Coast Guard’s confirmation that it won’t seek to delay SOLAS is a blow to U.S. exporters that have been pressing the agency to defer the SOLAS mandate’s July 1 deadline until it can be amended and determined that they won’t face a competitive disadvantage against foreign exporters. The regulation may not mean fees or fines, they say, but it will mean added costs in the form of longer wait times at terminals, expensive weighing equipment and still-unknown carrier enforcement policies.

U.S. exporters want to see the issue handled in much the same way the Secretary of Homeland Security delayed implementation of the 100 percent scanning requirement for all inbound containers as mandated under the 2006 Safe Ports Act. Congress repeatedly has given the department the go-ahead to delay the scanning mandate.

“There is absolutely no industry standard that is available for this information flow for VGM,” Donna Lemm, director of business development at Mallory Alexander International Logistics, said at Thursday’s session. “The U.S. is simply just not ready.”

The Agriculture Transportation Coalition, which represents agriculture exporters, has called for a congressional inquiry into the matter.

The AgTc and other shippers contend that the verification requirement is a dramatic change from current practice and there is a lack of details on implementation, from the sending of verification to shippers to the acceptable weight variance, despite the rule taking force in less than five months. Ultimately, the transportation costs of U.S. exports will rise, the AgTc argues.

Perry Bourne, director international transportation and rail operations at Tyson Fresh Meats, said his company “guesstimates” it could add $250 per box in extra non-value added services that Tyson won’t be able to recover from its customers.

The new regulation is a major commercial risk for the agriculture trade, Lemm said. “Our margins are thin. We’ve just added hundreds of dollars of cost to the U.S. export supply chain.”

It’s more than a financial cost, she added. It’s time.

“It is complicated enough with VSAs, vessel-sharing agreements, to get those trains to arrive on time for loading,” Lemm said. “The addition of one more variable could cause us to miss a vessel.”

Truck drivers are already waiting in hours-long lines at terminal gates due to other documentation requirements and general congestion, added Cathy Nagin, general manager of New Orleans Cold Storage Transport. It sometimes takes up to three hours for some drivers to wait on terminal operators to resolve discrepancies.

“It would be the same if VGMs were not updated in the terminal systems,” she said. “This could discourage drivers from remaining in the transportation industry, adding to the driver shortage.”

But, delaying implementation is not an option, Thomas repeated multiple times Thursday.

“The thing about SOLAS is it applies to ships,” he said. “Those ships, for the most part, are foreign-flag ships. Those flag states are going to implement this requirement.”

Even if the U.S. were to delay implementation, other states would still be enforcing the mandate on U.S. goods. Rather than deferring enforcement, delaying implementation stateside would ultimately send a message — the wrong message — to the world, Thomas said. “Delayed implementation sends the word around the world that you cannot load U.S. cargo safely.”

Contact Reynolds Hutchins at reynolds.hutchins@ihs.com and follow him on Twitter: @Hutchins_JOC.

Feb 05

SOLAS Delay Requested By US Exporters

Source:  JOC.com

Saying it will be impossible to implement the SOLAS container weight rule by July 1 without severely disrupting trade, U.S. exporters are calling on the Coast Guard to delay the rule until it can be amended and determined that they won’t face a competitive disadvantage against foreign exporters.

Following a Wednesday meeting in Atlanta attended by 60 exporters and the U.S. head of a large container line, the head of an agriculture shippers group said it was clear it would be impossible not to disrupt trade while meeting the rule’s requirement that a shipper-signed weight, the verified gross mass, is given to the carrier and marine terminal sufficiently in advance of vessel stowage to allow stowage plans to be created.

“We cannot put U.S. exporters at a greater competitive disadvantage than they already are due to the high price of the U.S.  dollar,” Peter Friedmann, executive director of the group, the Washington-based Agriculture Transportation Coalition, told JOC.com.

Friedmann said the group was calling on the Coast Guard to delay implementation much the same way the Secretary of Homeland Security delayed implementation of the 100 percent scanning requirement for all inbound containers as mandated under the 2006 Safe Ports Act. He said the rule should not be implemented in the U.S. until it is determined that implementation would put U.S. exporters on a level playing field with other exporters. At the very least the rule should be put off until July 1, 2017, he said.

Under the amendment to the Safety of Life at Sea, or SOLAS, convention originally approved in 2014, individual nations that are party to SOLAS will implement the rule according to their own guidelines, ensuring that the core requirements that shippers provide a VGM based on actual weighing of the cargo, and that carriers and terminals do not load a container for which no weight has been provided — are met. (An extensive and up to date Q&A about the rule is available on JOC.com here. A link to the JOC’s complete coverage of this issue is here.)

“We believe the U.S. Coast Guard should decree that it will not implement this and instruct the terminals not to implement it until such time that all the stakeholders are satisfied that this will not to disrupt export commerce,” Friedmann said.

The issue has been raised by Friedmann’s group on Capitol Hill and members of Congress are starting to look into the issue. “There’s growing interest in global container weight and it’s something that both Representative Hunter and the subcommittee will continue evaluating. With the competing interests involved, it’s important to fully understand all the arguments to determine the best way ahead. And that’s something we’re in the process of doing,” said Joe Kasper, chief of staff to Duncan Hunter, R-Calif, chairman of the Coast Guard and Maritime Transportation Subcommittee.

“The Commerce Committee is making inquiries about the impact of the mandate,” said Frederick Hill, communications director for Sen. John Thune, R-S.D., chairman of the Commerce, Science and Transportation Committee. Thune has been a strong supporter of agricultural exporters, having pushed for faster responses to shippers’ rail complaints via a Surface Transportation Board reform bill and highlighting late last year how U.S. West Coast port congestion was crippling outbound shipments. He was also instrumental in pushing the Department of Transportation to create metrics on port productivity.

The U.S. Coast Guard is expected this month to issue guidelines on how the rule will be implemented, but it’s unclear how far they will go in addressing the range of outstanding logistics issues. But the World Shipping Council, the Washington-based trade group representing container lines globally, said unlike in the Safe Ports Act, which authorizes the Homeland Security secretary to postpone the scanning rule, nothing in the law behind the container weight mandate allows for a delay in implementation.

“The Secretary of (the Department of Homeland Security) is authorized to postpone implementation of the 100 percent scanning provision if he/she determines that it cannot be successfully implemented. There is no similar provision in the SOLAS amendments,” John Butler, CEO of the World Shipping Council, told JOC.com in an email on Thursday. “More to the point, nobody can seriously make the case that in 2016 it is unreasonable to require a shipper to accurately describe the weight of a loaded container that it introduces into international commerce. We don’t know of any other shippers that are making such a claim.”

To the point that the rule shouldn’t be implemented in the U.S. until other countries have implemented it, Butler said: “SOLAS is a safety convention; it does not allow member countries to ignore safety on the grounds of economic considerations.”

Having recently called the SOLAS rule a “fiasco,” Friedmann stepped up criticism of the rule and the process that led to its adoption by the Maritime Safety Committee of the International Maritime Organization, the London-based United Nations agency. He said U.S. shippers and terminals had no role in the development of the rule, which will impact container supply chains back to the origin hundreds or thousands of miles from the seaport from which the container left.

The rule requires the shipper named on the bill of lading to physically weigh the cargo — or have a designated representative do it — using one of two methods (either weighing the contents of the container and adding it to the unladen weight of the container, or weighing the sealed container and its contents as one), and to submit a signed VGM to the carrier. The rule makes it illegal for the carrier and terminal to load a container onto a ship for which no VGM has been received and requires they use the VGM in building the vessel stowage plan.

Among the key emerging issues is the time it will take to obtain the VGM and get it to the carrier with enough advanced notice for it to be used in the stowage plan. Other issues include how the VGM will get into the hands of the carrier given that manual documentation is used for an estimated half of the roughly 300,000 containers shipped daily on a global basis, according to the online container portal Inttra. Still further issues surround the question of whether terminals will allow containers unaccompanied by a VGM into their facilities.

“There were many parties who were never engaged in the development of this rule, including the marine terminals — they were never part of this discussion — and the shippers were never part of the discussions,” Friedmann said.

Prior press releases indicated that a few different non-governmental groups other than the World Shipping Council were involved in discussions at the IMO over five years leading to the adoption of the container weight rule. One group, the Global Shippers Forum, has the head of the U.S.-based National Industrial Transportation League on its board. Another group that was involved, International Cargo Handlers Association, has some terminals as members.

But that said, based on the large and growing number of questions from shippers, carriers, terminals and other parties about how the rule will get implemented with less than a half a year before it takes effect, it seems clear that the preparation was inadequate. As time has gone on, the confusion and the list of questions only seems to grow, with only bits and pieces of clarity coming from carriers or other parties.

In an interview with JOC.com on Wednesday, Friedmann went further, suggesting that given the hurdles to get it implemented, there was no compelling rationale for the rule to begin with. He said scant evidence of problems associated with overweight containers has been presented and he said there was just one vessel casualty, that of the MSC Napoli, which was scuttled in the English Channel in 2007, that has been cited as rationale for the rule. Though the U.K. coast guard found many containers to be overweight and noted in its report that “…The stresses acting upon a container ship’s hull cannot be accurately controlled unless containers are weighed before embarkation,” Friedmann said it was “inconclusive” that overweight containers were the actual cause of the accident.

“The creation of this rule was done without any problem identified. Why do we have this rule?” Friedmann said.

“Representatives of over 160 governments who carefully considered the issue for the last five years disagree,” Butler said. “The decision by the SOLAS parties to adopt the rule was based on multiple sources of information indicating that misdeclared containers are prevalent and dangerous. That decision was made two years ago after extensive discussion.”

“It is not open for reconsideration,” Butler said. “This is now the law, and the job at hand is to make sure it is implemented.”

Some say the issue of overweight containers has long been an issue for carriers. Even the founder of containerization, Malcom McLean, understood the danger. According to William Gotimer, McLean’s personal and business attorney and general counsel for all his transportation companies from 1991 until McLean’s passing in 2001, overweight containers were a big issue for the Sea-Land Service Inc. founder.

“Malcom McLean had a visceral sentiment on the issue of overweight containers. He strongly believed they were dangerous on the road and in the port,” Gotimer said. “I believe it stemmed from an accident he either once had or knew of where the driver was unable to control the load due to its weight. He had me speak with each of the various transportation departments of the states up and down the eastern seaboard to seek their support to limit overweight containers citing the constant damage overweight loads were doing on the roads.”

Gotimer said McLean refused to accept even legally overweight containers on his Trailer Bridge barge service to Puerto Rico. He was concerned not just about a container being overstuffed, but those handling it, including the truckers and dockworkers, not knowing it was overweight and being put in harm’s way as a result. He said the issue stemmed from the switch from commodity pricing for containers to container pricing, i.e. the rate became based on the container irrespective of what was inside it. That created “a great incentive to overstuff it, and an incentive to lie about what was in it.”

Contact Peter Tirschwell at peter.tirschwell@ihs.com and follow him on Twitter: @petertirschwell.

 

Jan 27

SOLAS Container Weighing Rule Update 2016-1-27

Source:  JOC.com

When a container without a signed weight declaration shows up at a marine terminal as of July 1, when a new SOLAS rule takes effect, what happens next? Will the terminal allow the container in, hoping that the weight will arrive in time for the container to be handled and loaded without having to be pulled aside? Or does the terminal avoid the risk, telling the carrier and its customer that containers without the Verified Gross Mass won’t be allowed in under any circumstances?

That and many other unresolved issues are raising anxiety levels among shippers, carriers and terminals as the implementation date is just a few months away.

U.S. exporters say the amendment to the SOLAS convention requiring shippers to provide a signed, certified weight to the ocean carrier and terminal is unworkable. They are asking how a shipper can be held responsible for the weight of a container whose tare weight, or unloaded weight, may be inaccurate, especially if the shipper never sees the container in cases where it’s loaded at a transload facility, possibly thousands of miles away from the exporter’s point of origin.

“It’s a fiasco,” said Peter Friedmann, executive director of the Agriculture Transportation Coalition, a group representing roughly 2,000 shippers. “Everyone who knows about how cargo moves from the origin and onto a ship knows that this thing is absolutely unworkable and will create unbelievable congestion unless minds who are familiar with how cargo moves are allowed to intercede.”

Friedmann said the SOLAS issue was a bigger issue than merging container lines and shipping alliances, noting that virtually all agricultural exports — 75 percent to 80 percent of all U.S. outbound container shipments — would be affected.

Key to the discussion of how the SOLAS rule will be implemented involves what will happen at the terminal gate when containers arrive. If terminals bar entry to containers for which a VGM hasn’t been provided, there could be significant disruption to trade flows. All parties appear to be waiting on the U.S. Coast Guard to issue guidelines, which are expected to be published in February.

Eleven U.S. terminals have told one of the large container lines that they will refuse to admit containers that arrive at the gate unaccompanied by a signed VGM provided by the shipper. Thus it would appear that a number of terminals are adapting, or at least hoping to adapt, the position statedby Maher Terminals at New York-New Jersey in December, which was that after July 1 it won’t admit any container for which a VGM has not already been received via electronic means. That position puts the onus on the carrier to obtain the VGM from the shipper earlier in the process, which could create difficulties for carriers in facilitating the flow of its customers’ cargo and amounted to a stake in the ground that one carrier executive said “doesn’t appear to be consultative.”

The story is likely far from over, as the carrier that was told by the 11 terminals that containers would get turned away said, “we as a carrier will probably ask” the terminals to be flexible. Flexibility in essence means allowing containers into the terminal without the VGM. And given that the carriers are the main customers of the terminals, it remains an open question whether those terminals will be uncompromising in sticking to the position of no-VGM, no entry. Indeed, three other U.S. terminals told the carrier that they would accept containers without the VGM with the understanding that such containers can’t be loaded as that would be a violation of U.S. law under the SOLAS rule.

“What does a terminal operator do when a box shows up and doesn’t have the right information in order to validate the weight? That is where a lot of the discussion takes place,” Ron Widdows, the former APL CEO who is now a consultant and chairman of the World Shipping Council, the trade group representing container lines, told JOC.com in an interview this month. “Is a terminal going to take the box and then seek to get the information? Or are they going to reject the box at the gate for the lack of the information? There seem to be different views on how the terminal operators are going to behave in that regard.”

The terminals’ position stems in part from their fear of congestion stemming from having to pull out and sequester containers for which a VGM has not been received, which would require additional storage space and handling costs that the terminal might have to absorb, and perhaps more importantly, interfere with the increasingly difficult task of handling the surges of containers coming moving on and off mega-ships. Anything that could create exceptions, that is, situations where containers can’t be loaded and where documentation or other issues need to get resolved, is a red flag for terminals. One senior carrier executive suggested that some terminals will take a wait and see approach, possibly allowing in some containers without the VGM, but watching carefully to see the number of exceptions and additional handling that is created.

Also, few terminals so far seem to believe there is a viable business model in conducting weighing on behalf of shippers and charging them a fee, given the requirement to invest in weighing equipment and find space for the weighing process and associated storage. In its announcement in December, Maher said it would not offer weighing services and one senior carrier executive told JOC.com this week that he “is not seeing terminals lining up” to provide weighing services even if it would create an additional revenue steam. One senior terminal executive said his company fears that what starts as a revenue generating service could end up creating no revenue gains as a result of tough negotiations with carriers that could end up with terminals swallowing the associated costs.

A terminal’s refusal to admit a container arriving without a VGM places the burden on the carrier to ensure that its shipper provides the VGM sufficiently in advance to avoid the container being turned away at the gate. The burden is especially heavy given that only some shippers submit documentation electronically, while many others submit documentation via fax or in hard copy form. According to the ocean container portal Inttra, approximately 300,000 container weights will need to be certified each day globally, and roughly half of all booking requests and shipping instruction submissions each day are non-digital currently.

Indeed, sensing an impending disruption to trade once the rule takes effect, some are saying that implementation of the VGM rule needs to serve as a catalyst globally to convert more documentation to electronic form.

“The carriers themselves, and their IT linkages, their EDI connections to their customers, becomes the most efficient means” of conveying the VGM information, Widdows said. “Not all customers interact electronically, you still have customers that send information by fax or a variety of different ways, but the most efficient system is getting that electronic, EDI connectivity to be a much more significant percentage of the business. That is going to ensure a more timely movement of the information and provide some consistency.”

One carrier serving the U.S. market said that all VGMs will need to be sent by shippers to the carrier electronically, thus indicating — if that carrier and others hold to that in practice — that the rule may already be having an effect on converting shipper-carrier interactions to electronic means.

Under the SOLAS rule, the VGM needs to be used for stowage planning and the carrier and terminal operator are barred from loading a container for which a VGM hasn’t been received. Normally there is a two to three day cutoff in advance of vessel loading for containers to arrive at the terminal. But the ocean carrier compiles the load list one day after the cargo in-gate cutoff, so that theoretically leaves a day after a container arrives at the terminal for the VGM to be received. If it’s not received by the time of loading, one carrier said, the terminals would have the ability to assess fees for any re-handling and storage of the container until the VGM is received, thus creating an additional revenue stream.

But for agriculture shippers, the issues in some cases go back further into the supply chain. For example, given that the shipper is legally responsible for providing the verified gross mass, how can the shipper know what the weight is if its cargo is loaded at a transload facility near the port by a third party?

Exporters are asking, for example, what variances to the declared VGM will the U.S. Coast Guard, the agency implementing the rule in the U.S., accept for inspections? Exporters say that the tare weight, or unloaded weight of the container, which is stenciled on the side of every container, can vary significantly from the actual weight of the container. Thus shippers should not have to be responsible for certifying the tare weight of the container under Method 2 of SOLAS, which allows the VGM to be calculated from the contents of the container weighed separately, and added to the tare weight of the container. Export transload facilities, which take cotton, soybeans, grain, or other agricultural commodities that arrive by rail or truck and transfer them to containers, are high volume operations where the containers are picked, packed and sent to the marine terminal in rapid succession. Agricultural shipper representatives said this makes it almost impossible for the VGM to be provided soon enough in the process to avoid disruption at the ports.

Friedmann said the AgTC has raised the issue with the Federal Maritime Commission and with members of Congress, describing why it feels the rule is unworkable but also expressing the fear that other exporting nations may not enforce the rule to the degree the U.S. does, creating a competitive disadvantage for U.S. exporters.

“If you want to see ports gummed up as they were two years ago, with the West Coast labor issue, just wait until the end of June when this new container weight certification goes into place and carriers begin to reject cargo.”

Contact Peter Tirschwell at peter.tirschwell@ihs.com and follow him on Twitter: @petertirschwell.

Jan 23

Container Weighing Rules for 2016: Background

Source:  JOC

Background:

Effective July 1, 2016, any container leaving from any port in the world must be accompanied by a shipping document signed either electronically or in hard copy by the shipper on the bill of lading listing the verified gross mass of a container in order to be loaded onto a ship. The mandate from the International Maritime Organization under the Safety of Life at Sea (SOLAS) convention comes after misdeclared weights contributed to maritime casualties such as the breakup and subsequent beaching of the MSC Napoli on the southern U.K. coast in 2007 and the partial capsizing a feeder ship in the Spanish port of Algeciras in June, 2015.

The weighing must be done in one of two approved ways, called Option 1 and Option 2, on scales calibrated and certified to the national standards of the country where the weighing was performed. Many of finer points of the new regulation have not yet been finalized, such as enforcement, and what happens to a container that arrives at a port without the necessary documentation or if the VGM (verified gross mass) declaration for a container turns out to be false or incorrect.