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.

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