Is The Freight Industry Ready For SOLAS?
Impending SOLAS legislation will make verification of the gross mass of packed containers a requirement by July 1st 2016, in effort to reduce incidents involving containers on ships. But Freightos research has found that accurate measurements are going to be a significant challenge; only about one third (36%) of FCL freight quotes included reported weights at the procurement and quoting stage.
Analysis: How Bad Is It?
By and large, logistics providers and shippers avoid getting accurate weights for FCL shipments at the freight quoting and procurement stage. And soon after, when forwarders need a weight to book the ocean slot, shippers often provides an estimate.
But even at that first stage, it seems that available weights – even estimates – are lacking. Freightos measured the percentage of freight quotes with weights from dozens of freight forwarders currently using Freightos AcceleRate‘s rate management platform.
Over the past year, only one third (36%) of FCL freight quotes were saved with a weight. This is consistent by company size – the combined percentage for top 20 global forwarders is about the same as that of mid-sized forwarders.
But the range expands across different companies. For forwarders averaging more than 4,000 quotes per month, the lowest weight reporting frequency is 16%, compared to the highest of 100%. There is also a marked range between countries. For example, in France a full 70% of FCL quotes include weights, but in the Netherlands it’s only 20%.
So current freight quote weight reporting earlier in the process remains low, despite growing media attention to SOLAS, and despite the looming deadline. What’s more, without much real accountability so far, it seems likely that many of the weights may be estimates, rather than hard data.
The IMO’s recent recommendation to relax enforcement for three months, to allow time for new processes to bed down, will be well received – because Freightos research reinforces concerns from other sources that many forwarders, importers, and exporters are not yet ready.
The WSJ’s Loretta Chao, summed up the multiple impacts on shippers back in December 2015. That is, for shippers that already weigh cargo, the only direct change will be paperwork. And those shippers that don’t already will need to purchase weighing products or services, adding cost and time to an industry already under pressure to speedily deliver goods.
Also of concern to shippers is whether other players will be ready in time. Reliable data flows may not be in place. Surging demand for weighing services and products may cause bottlenecks. Terminals may become congested with unloaded cargo, as frantic companies try to arrange weight verification or arrange for removal.
IMO guidelines need to be broken down at the national level. But the collaboration characteristic of some countries is distinctly lacking in the US. This leaves shippers as the liable party feeling exposed, and they have asked congress to intercede on their behalf.
For many forwarders, their only FCL weight reporting requirement to date has been with road weight regulations. As Freightos research indicates, there looks to be a lot of work left to ensure that systems capture and report on verified weight, and that new information flow processes are bedded down.
Once bedded in, Logistics Providers do not stand to lose. Firstly, their terms and conditions already contain typical protections, such as a disclaimer of any responsibility for packing, and an indemnity that they are acting on the shipper’s instruction. But in some cases they may also benefit. They are the players best placed to help unprepared shippers, for instance by providing storage for unloaded cargo, or by providing trucking to alternative ports to avoid congestion.
They also stand to benefit too from a bumpy take-off. Senior freight exces have told Logistics Trends & Insights’ Cathy Roberson that they are encouraging some shippers to consider switching to air freight over July.
Ocean cargo is hazardous enough as it is, so carriers have been prime movers in this SOLAS rule change, to reduce loss and damage to both cargo and ships. The World Shipping Council estimates an average of nearly 1,700 containers were lost at sea annually between 2008 and 2013. And although the new super-sized ships have generally decreased cost, they have conversely increased the potential cost of accidents.
Ocean carriers are already protected by standard carrier T&Cs, which place responsibility on the shipper for accuracy of weight, compliance with all applicable laws, damage to /contamination of cargo, and any resultant expenses and charges.
Their umbrella organisation, the World Shipping Council and the carriers themselves are unconvinced by shipper concerns, and intend to enforce the change. One consequence will be that unverified, unmeasured or incorrectly measured containers will be left the docks.
Recently, some carriers have been adopting a more conciliatory tone. Last month, Ocean Carrier Equipment Management Association (OCEMA), an industry group representing ocean carriers, announced that they will work with six major ports in the U.S. to develop a common solution that would help exporters comply with a new container-weighing safety measure.
Ports are obligated to enforce the new SOLAS rules. Some ports overseas are sympathetic to the shippers’ plight, and, for instance, are offering weighing services. But until recently at least, US ports played hardball. Cathy Roberson thinks this has a lot to do with the industrial situation. “Ports could be taking on responsibility, but they aren’t. In New York/New Jersey there’s currently a lot of construction to improve intermodal transport that’s causing enough distraction. But more fundamental is the tense situation of a heavily unionised labor force. For an industry characterised by wildcat strikes and walkouts, the ports have caved in to the pressure.”
But if push comes to shove, other ports will be looking to accommodate disgruntled shippers. For New York this might be Montreal, or ambitious and cheaper ports further down the coast.
And, as previously mentioned, some US terminals have recently shown some more flexibility with the new rules in their approach to shippers.
For most jurisdictions, SOLAS changes will not require any new legislation. But international conventions usually need some breaking down at the national level, and changes to SOLAS is no exception. For a whole host of reasons, the role the regulator played has varied dramatically by country.
The US Coast Guard stance has been late in coming, and is at arm’s length, further exacerbating shippers’ qualms.
Contrast that with the British regulator who issued its SOLAS marine guidance pack back in June 2015. In it, they provided a guiding hand, for instance, on documentation guidelines, on penalties for mis-declarations on authorised weighers, and recommended an enforcement threshold for verified gross mass. Or with Maritime Australia, who worked collaboratively in considering their approach, joining with peak industry bodies, and others, in a series of forums held in Australia’s largest cities.
But perhaps, the US Coast Guard sees a pattern in other regulatory changes requiring digitising in a freight process, most recently the US Customs’ ACE. That pattern would be of a lot of dust being raised beforehand, that subsequently settles soon after implementation.
Amongst other affected parties marine insurers have a vested interest in reducing risk, and are literally counting down the days. Then, there’s a whole industry of freight tech software companies that automate information flows, now touting verified weight capabilities. Companies providing weighing products or services clearly stand to gain. As with any new regulations, lawyers will no doubt have a field day.
And then, there is the logistics media, which until very recently, have been uncharacteristically quiet. The WSJ delivered some great background pieces starting late last year (mostly linked above), and the JOC has recently taken up arms on behalf of their readers with several cutting advocacy and insight pieces.
So, Is The Industry Ready For SOLAS?
In a change which is ostensibly protecting shippers goods, shippers feel that they have the most to lose. As a result, they have been scrambling for solutions.
Some players and jurisdictions faced up early on to SOLAS changes. For others, the looming implementation has acted as a wakeup call. And the recent three month stay of execution will definitely help new behaviors and new processes bed down.
But a lot of the panic is symptomatic of the need for increased digitisation in freight. As Zvi Schreiber, Freightos CEO observes, “Too many freight processes are still haphazard, leaving important data uncaptured or at risk of being lost. Manual processes, repeat entries and rampant estimations are the things of the past, and are not the future of freight.”
*This article was modified shortly after publication to reflect that forwarders do likely report on non-VGM weights further down the data stream but that at earlier procurement stages, that weight likely does not exist.