Shippers and forwarders highlight concerns over ocean freight no-show fees
Customers link new late-cancellation charges to ‘exceptional’ recent capacity crisis, claiming carriers must also compensate cargo owners for ‘roll-overs’ and void sailings.
Shippers and forwarders have highlighted their concerns and expressed mixed feelings on the growing practice among ocean freight carriers to charge customers no-show fees or late-cancellation penalties, claiming carriers must also compensate cargo owners when lines fail to deliver services as promised.
Representatives from the European Shippers’ Council (ESC) and freight forwarding bodies Clecat and Fiata accept in principle the idea that no-show fees are fair – and may benefit the ocean freight sector as a whole – but only if customers are also compensated where their cargo is ‘rolled over’ by lines.
However, both associations also linked the recent implementation of no-show and late-cancellation fees by shipping lines, including Maersk, CMA CGM, and Hapag-Lloyd, to Europe-Asia capacity shortages experienced by customers in April and May in particular. They questioned whether the implementation of late-cancellation fees was appropriate under what they regard as those exceptional circumstances that were caused, at least in part, by the lines themselves.
Fabien Becquelin, Maritime Transport Council policy manager at the European Shippers’ Council (ESC) and director of international transport at France’s AUTF, told Lloyd’s Loading List: “We have seen several announcements of implementation of this kind surcharges that were already existing in the market under the name of ‘dead freight’. As every time in the maritime industry, when a player starts a ‘new’ practice, it is always followed by several other carriers.”
In terms of whether it was acceptable or fair, he responded: “The practice of charging shippers for no-show could be acceptable under one condition: it must be balanced. We could accept to pay for no-show fees if there is a real commitment of carriers to transport the goods from the contracted point of departure to the contracted arrival location at the correct date.
“I mean that if there is no-show fee, there must be a ‘blank sailing penalty’ or ‘roll-over fee’ on the side of the carrier. Only under these conditions, no-show fee can be swallowed by shippers.”
He said more and more shippers were aware of the industrial and commercial characteristics and realities of the container transport business. “In this respect, they could understand that it may cause problems not to show up with your containers,” he added.
“But on the other hand, carriers must understand that the shippers are also bound with other parties in the supply chain and if the sailing is skipped then, someone at the other side of the voyage is injured.”
Those cancellations by carriers had significant and often costly implications for shippers. “If they want to avoid stock failure or customers’ claims, the shippers have to go on the spot market – or even change the mode of transport – with higher cost. This is not acceptable any more.”
Speaking on behalf of both Clecat and Fiata, Clecat director general Nicolette van der Jagt told Lloyd’s Loading List: “Forwarders and shippers have suffered heavy delays in shipping goods to Asia over the last three months, with waits of several weeks for goods to be loaded, as well as blank sailings, uncertainty over which goods will eventually be loaded, and a need to find alternative carriage options at short notice. Capacity shortages led carriers to stop taking bookings and shippers had to wait up to eight weeks to load cargo.”
Although that capacity situation had normalised since then, van der Jagt said there are various explanations for the causes of that crisis. Forwarding representatives see it as a mix of the impact of the alliance schedule reshuffle and normal seasonal effects – the usual capacity shortage of about six weeks after Chinese New Year for European exports, because the voyage cancellations from Asia to Europe during Chinese new year impact Europe exports for the back haul.
“The re-arrangement of the alliance amplified this effect this year, because more service anomalies than normal and growth in Europe was stronger than anticipated by most carriers, and demand very quickly created a big backlog,” van der Jagt noted.
“Carriers also started to ‘prioritize customers’, deciding what they load, leading to a lot of chaos.” She said spot rates increased significantly in line with these developments, sometimes in dramatic proportions, claiming that carriers also “misused” this situation to “overcompensate” themselves with excessive rate levels.
“As a reaction to this situation, many shippers and forwarders started booking longer ahead just to ensure bookings,” van der Jagt explained. “As a consequence, some failed to deliver and bookings were cancelled. So, due to the situation, cancellations seem to have increased, but it was a reaction to this exceptional situation.”
She continued: “In Clecat’s view, cancellation fees should not be raised as a consequence of the recent situation, simply due to the fact that it was exceptional and should hopefully not re-occur. We are now witnessing more and more carriers raising no-show fees and support the argument from ESC that the same should be valid for the shipping lines in case of rolled containers.”
Despite the more-normal capacity situation now in the market, she continues to be concerned by “the unreliable feeder connections and services with very different vessel sizes” at certain ports, claiming the lack of predictability these cause usually leads to cargo being ‘rolled’, either at origin or at transhipment points.
She said there have been huge problems recently in Antwerp and Rotterdam with regard to barge services, where terminals were apparently not capable of providing a reliable barge service because of last-minute decisions to appoint the terminals for the new alliances. “In addition to substantial delays, the cargo interest is forced to even pay for extra charges that they are not responsible for.”
Clecat believes that better forecasting and proper planning by all ocean freight stakeholders involved is a solution to these problems, something that improvements in technology can facilitate. “With digitalisation, block chain etc., this should become more professional,” she noted.
These views were echoed by Jens Roemer, chairman of Fiata’s Sea Freight Working Group and also a regional managing director for freight forwarder A. Hartrodt. “Fiata fully supports the comments made,” he said, adding: “Unfortunately, problems related to container shipping lines, higher peaks due to the size of their vessels, and the aligning of the alliances continue to put serious strains on the supply chains.
“Various terminals in Europe are not able to cope with the peaks, leading to delays in the terminals,” Roemer continued. “The cargo interest does not only face a delay, but is expected to pay for additional charges that are caused by a delay (that is) beyond their control. These are challenging times, to say the least.”
Becquilin agreed that the introduction of the new late-cancellation fees was related to the exceptional capacity shortages to Asia that European shippers had faced in recent months.
“In my opinion, the two are indeed closely linked. The problem is that during the ‘capacity crunch’ out of Europe, shippers were invited by carriers and forwarders to overbook just to be sure to have some room inside ships. On the one hand we have some people inviting to overbook and in the other hands people invoicing for no-show – sometimes the same people.
“For ESC, the overbooking practice should be stopped, from both side of the table, as quick as possible because it is only destabilising the market and prolonging the scarcity of space.”
Becquilin said discussions about this kind of balanced approach could be helpful to all concerned if applied to a variety of contractual and operational arrangements within ocean freight transport. He said this was something that ESC had been proposing for around two years now – “since the start of the new alliances’ real development. But carriers are still living in their bubble and take action for their competitiveness – which is good, but without having any consideration for their customers, which is very bad.”
He continued: “As there is less and less competition inside the maritime market with bigger and bigger alliances, and as there is no competition outside the market with no real alternative that can cover the needs of shippers (in terms of volume available, for example), shippers and carriers are bound to work hand in hand to make maritime transport great again.”
Source: Lloyds Loading List